Editor's note: This article appears in Kiplinger's special issue Success With Your Money.
"In my gut, I knew I could do this"
When Nina Vaca came to Los Angeles from Quito, Ecuador, at the age of 2, her parents' goal was to build a family business that all of their children could be involved in. "My father believed that the key to the American dream was through entrepreneurship," says Vaca. But never in his wildest dreams did Hernan Alfredo Vaca think that at the age of 35 his daughter would be the sole owner of Pinnacle Technical Resources, an IT business projected to generate $60 million in revenues in 2006.
Hernan had a much more modest goal: He opened a travel agency, expanded to a chain of three and hoped eventually to have five agencies, one for Nina and each of her brothers and sisters. When they were kids, the siblings took the bus downtown after school to work in the family business. But shortly after Nina graduated from high school, her father was killed during a robbery at his travel agency. Devastated, Nina and her older sister, Jessica, ran the business for a year and prepared it for sale.
Nina majored in business at Texas State University, graduated in three and a half years, and headed for New York City to work for a technology company. She returned to Texas to head up its Dallas office. But when the charismatic Vaca discovered she "had a talent for attracting clients," she jumped into business herself (find out how to start your own business). In 1996, at the age of 25, she and a partner started Pinnacle to recruit IT talent for companies that needed technical personnel to administer their computer systems. "Because of my upbringing, I always took matters into my own hands," says Vaca. "In my gut, I knew I could do this."
When the tech industry tanked in 2001, her company "was almost down to a liquidation plan." Her partner offered to sell, and "I scratched up as much money as I could to buy the business, paying him a little more than the book value of his share." She changed Pinnacle's focus to provide IT consultants to businesses that had been laying off their tech staffs, charging a fixed price per project rather than an hourly fee. She landed as clients PepsiCo and Verizon, among others. Revenues soared to $10 million in 2003 and are predicted to reach as high as $60 million this year.
Vaca reinvests most of her money in the business, which she hopes to build into a family legacy, as her father would have wished. Pinnacle employs more than 600 people in 23 cities -- including three of her siblings and her husband, Jim Humrichouse, who left his job as a management consultant to join the company four years ago. Even her children -- now ages 6, 5, 1 and five months -- came to work with her for the first few months of their lives.
Besides focusing on family and business, Vaca led a college scholarship fund-raising drive for the Greater Dallas Hispanic Chamber of Commerce. She speaks frequently to college students about entrepreneurship and twice was named National Hispanic Businesswoman of the Year. To juggle all those balls, she logs on to her wireless network from bed at 11:30 p.m., she says, and "I do without lots of things most people take for granted," such as eating breakfast, getting eight hours of sleep or reading a book. Says Vaca, "I get fueled by inspiring other people."
"I tend to say less and do more"
In 1998, when he was 37 years old, Jeong Kim sold his telecommunications company to Lucent Technologies for $1.1 billion. It was a classic rags-to-very-great-riches story for the Korean immigrant, who lived in subsidized housing after he arrived in Maryland with his family at age 14, barely able to speak English.
By age 16 he was living in his high school math teacher's basement and supporting himself by working several jobs -- including the night shift at a 7-Eleven -- while attending school during the day. He graduated from high school a semester early but delayed going to college because he didn't have the money. He saved, applied for financial aid and went to Johns Hopkins University a year later to study engineering.
While at Hopkins, Kim worked full-time for a technology start-up founded by fellow students and professors. But after graduation he decided to join the Navy. "I wanted to pay back society," says Kim. "Maybe that's idealistic, but it felt right."
Serving for seven years on a nuclear submarine taught Kim about leadership, integrity and teamwork, he says. "When you're surrounded 24/7 by 120 other people, you learn to appreciate other views."
Not incidentally, he also picked up strategies that have become central to his business philosophy. "I tend to say less and do more," says the soft-spoken Kim. "In a nuclear submarine, we call it silent service. A show of force is not our mission. Our job is to be very effective." When he started his business, "I stayed in stealth mode for as long as possible so that when I came out, we were far ahead of our competitors."
His Navy experience also introduced him to a telecommunications switching problem that eventually became the basis for his business. Kim got an MBA from Hopkins while still in the Navy and a PhD in engineering from the University of Maryland while working full-time for AlliedSignal.
In 1992 he ventured out on his own as a consultant and gave himself three years to change his mind. It took more than a year to land his first contract. When he eventually scored a $75,000 job to perform a nuclear-safety assessment, it gave him the cushion he needed to continue working on his switching technology.
Finally ready to break out of stealth mode, Kim introduced his technology and sold thousands of switches to ATT, Verizon and other big companies. His own company, Yurie Systems, landed on the cover of BusinessWeek when it went public in 1997.
Even after the business was sold a year later, Kim didn't slow down. He managed Lucent's optical-networking business and doubled its revenue.
Kim, his wife, Cindy, and their two daughters live in Potomac, Md., in a sleek and airy home that's stunning but not showy. He has given millions of dollars to both Johns Hopkins and the University of Maryland, where he returned as an engineering professor and where a building bears his name. He's a major supporter of Venture Philanthropy Partners, which helps low-income children in the Washington, D.C., area.
Last year Kim left teaching to become president of Bell Labs, and he commutes to New Jersey each week. "I don't know how to take time off," he says. "But I was never focused on the money. You work hard to have good times with your family." And Kim has a bit of fun himself: He's a co-owner of several professional sports teams. Displayed prominently in his office is a picture of himself with Michael Jordan, once a fellow owner of the Washington Wizards.
"I could not ask for more"
You may not have heard of Diane Warren, but you have probably hummed a few of her tunes. About 90 of Warren's songs have climbed the charts to the top ten, including "If I Could Turn Back Time" (performed by Cher), "How Do I Live" (LeAnn Rimes), "Un-break My Heart" (Toni Braxton) and, fittingly, "I Could Not Ask for More" (Sara Evans). Warren collects royalty checks averaging about $10 million a year.
Warren whistles a happy tune now because she protected her right to maximum royalties. To understand her story, you need to understand how the music business works. Publishers buy pop tunes from writers for a song and then sell them to record companies for a lot more. In 1983, after publishers had rejected her pieces for a decade, Warren landed a job as a writer with publisher Jack White Productions, which paid her a salary in exchange for the royalties on her melodies and lyrics.
When a few of her ballads, such as "Rhythm of the Night," became hits, it was Jack White Productions that profited. Says Warren, "It was the difference between earning $350 a week and making millions of dollars a year."
In 1986 Warren severed her relationship with Jack White and launched her own publishing company to cut out the middleman and collect full publishing royalties. She ponied up several thousand dollars for an office and an assistant, taking a risk because she wasn't yet established as a hit songwriter and Grammy winner. But her company, Realsongs, received a payment each time someone bought one of her songs, a radio station played one of her songs or a movie included her music on its soundtrack. So her earnings potential became much greater than that of a salaried employee.
Within a year, Warren knew she had made the right decision -- when she framed a copy of her first $1-million check from royalties on the overseas sale of several of her songs. "Before that, the largest check I had received for my music was $500," she says.
Warren has splurged on a home in the Hollywood Hills area of Los Angeles, a beach house and an Aston Martin (see where other millionaires live). But she socks away much of her money in stock-market and real-estate investments. Her main retirement strategy is to live on the future income from the roughly 1,600 songs she has composed. Says Warren, "Music is like real estate in that its sales value goes up over time."
"Trust in the stock market"
Paul Cloud's finances got off to a rocky start after he graduated from college in 1979. Three years later, he lost his job as a chemical engineer. Soon afterward, a severe allergy attack sent Cloud to the hospital for two days. With no health insurance, he charged his $2,500 medical bill to a high-interest credit card. "Being unemployed with no savings made a big impression on me," he says.
Cloud bounced back by trimming expenses and investing in himself (find out how to invest in yourself and gain financial security). He gave up his apartment and moved in with an elderly cousin rent-free. He returned to school full-time to get his MBA and nabbed a part-time job as an accounting clerk to pay down debt. In 1984 he married his wife, Doris, who was studying to become a CPA and who shared his financial values: "Be as debt-free as possible, save consistently, and trust in the stock market."
Fast-forward to today. Paul is a vice-president with JPMorgan Chase in Houston. Doris is a project manager for the human-resources firm Hewitt Associates. Last fall the Clouds' investment portfolio passed the million-dollar mark, not counting the $64,000 they've set aside to pay for college for their two teenagers, William and Elizabeth.
The Clouds have made it a habit to save a portion of every paycheck, automatically funding their 401(k) retirement plans and adding an extra $1,000 a month to their mortgage payment. A $44,000 inheritance boosted their savings, but for the most part they owe the size of their kitty to the 1990s bull market. Their tech stocks suffered during the bear market, but they pulled through, thanks to a diversified mix of mutual funds and stocks they selected by doing their own research. About 80% of their investments are in U.S. stocks, with the rest in foreign companies.
Firm believers in living beneath their means, the Clouds budget their expenses and occasionally have friendly disagreements over such things as whether to splurge on a hotel room with an ocean view when planning a vacation in Hawaii. For the most part, though, the Clouds see eye to eye on finances. And they are passing along their values to their children by giving Elizabeth a weekly allowance and requiring William to pay for his gas, CDs and other expenses.
The Clouds plan on retiring in eight years. By that time, they hope, they'll be millionaires two times over, with assets of $2.2 million that would generate $70,000 a year in earnings and allow them to pursue their leisure interests. Paul wants to spend more time sailing, and Doris would like to donate her accounting skills to a charitable organization.
As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.
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