Episode 132: The Four Phases of Wealth: Where Are You Stuck?

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Are you on the right track in your wealth-building journey, or are you stuck in one of the four wealth building phases and it’s holding you back from financial freedom?

Building wealth isn’t just about making money—it’s about understanding the stages of financial growth and taking the right steps at the right time. Whether you’re just starting to accumulate assets, optimizing your investments, or looking for advanced strategies to protect and maximize your wealth, knowing where you stand is key to moving forward. Many Canadians unknowingly stall in a phase that limits their ability to reach true financial independence.

In this episode, we break down the four distinct phases of wealth creation and preservation, helping you identify where you are and what steps you need to take next. From shifting your mindset to making smart investment moves and leveraging strategies that the wealthy use, you’ll gain insights that can reshape your approach to building long-term financial security.

You’ll learn:

• Learn the four stages of wealth creation and discover which one you’re currently in.
• Understand how to transition from accumulating assets to protecting and optimizing them.
• Discover advanced strategies, like corporate wealth structures and tax-efficient investing, that can accelerate your financial growth.

Don’t leave your financial future to chance—tune in now to learn how to move to the next phase of wealth creation and start optimizing your financial strategy today!

Resources:

• Discover which phase of wealth creation you are in. Take our quick assessment and you’ll receive a custom wealth-building pathway that matches your phase and learn our CRA compliant tax optimized strategies. Take that assessment here.
• Ready to take a deep dive and learn how to generate personal tax free cash flow from your corporation? Enroll in our FREE masterclass here. 
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Dig into our Ultimate Investment Book List
• Follow/Connect with us on social media for daily posts and conversations about business, finance, and investment on LinkedIn, Instagram, Facebook [Kyle’s Profile, Our Business Page], TikTok and TwitterX. 

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting cordporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

 Achieving financial independence requires smart planning, especially when it comes to growing your net worth and generating passive income. For business owners, navigating the complexities of corporate structures, tax implications, and investment strategies can feel overwhelming. From understanding capital gains rules to leveraging life insurance for wealth optimization, the right approach can transform your financial future. By aligning your strategy with tax-efficient tools, you can unlock the full potential of your business and investments, ensuring sustainable growth and long-term independence.

Transcript:

Jon Orr: Let’s talk about the four stages of wealth creation and preservation. We’re going to talk about each of those four phases and what they are and who’s in them. And I think that’s what your main takeaway needs to be here is you’re going to hear these phases and you’re going to say, where am I on my wealth building journey, my wealth creation journey? And how do I get to the next phase or what do I do to optimize the current phase?

phase I’m in. That’s what we’re talking about here in this episode is the four stages of wealth creation, the four phases. Kyle, let’s get into it. Let’s just kick it off. Let’s just name the four phases, because I also want to talk about phase zero. But basically, phase one is the awakening to asset accumulation. This is the idea of around, I need to learn and understand, and I’ve come to a…

I realize that in order for wealth creation to happen, I do need to focus on asset accumulation. Phase two is if I have already realized that and I’ve learned what is needed to learn to get to that phase, then I now am actually in the asset accumulation and growth phase. So a lot of us are in this phase right here where we’re accumulating assets and we’re building our wealth this way. And a lot of us are stuck.

in this phase in a way, or maybe will live the rest of their careers and their lifetime in this phase. Phase three is the asset protection and growth phase. This is, I’ve accumulated assets, now how do I protect them? How do I make sure that I safeguard these assets so that they’re not all of a sudden gone? it’s about, so optimizing strategies to safeguard and protect.

Phase four is what we call the true wealth creation flywheel, which is if I’ve optimized everything and I’ve accumulated, now how do I use compound interest really? It’s like, how do I really create this flywheel effect for growing my wealth? So those are the four stages. We’ll unpack each one a little bit in detail. But phase zero, Kyle, what’s all phase zero about?

Kyle Pearce: I don’t know. I was wondering why you were getting-

Jon Orr: That’s the Dave Ramsey, like I’m getting out of debt. All right, cut that.

Kyle Pearce: gotcha, gotcha. Okay, I was like, wait a second. was like, wait, what do you say? So basically,

Jon Orr: Like I’m not, yeah, you got it, you got it, go ahead.

Kyle Pearce: Yeah, okay. Yeah, John, so phase zero, we’re gonna argue that most people listening to this podcast are probably well beyond phase zero, but it’s worth mentioning, okay? Like, this is where I think a lot of, I’ll call it the average Canadian population sort of lives most of their lives, and they’re struggling with it. The phase zero is really like looking to the Dave Ramseys of the world,

Susie Ormans and you know, these, these folks that are all about, like the big, the debt snowball and making sure that, you know, you’re, you’re getting out of credit card debt and getting your head above water, like really important phase. But we’re going to argue that that phase, like folks that are listening to this podcast are probably beyond phase zero because it’s really hard to start thinking about investment strategies. If

you are really struggling with cash flow, right? If you’re struggling with debt, if you’re struggling with high interest payments and all of these things, it’s really in a way, you know, this episode or this show might actually not be great to serve you. Like I would argue that at minimum, you’re at phase one with us here and phase one is at least the place where you’ve awakened the idea to accumulating assets and that that is going to be an important part

of life. Now, some of our listeners, I think it’s fantastic, by the way, some of them are much younger than you and I, john. And it’s like, I tell these people, my goodness, how awesome it is that you are at such a such a young age, and you’ve already sort of almost as if they came out of their post secondary schooling or whatever it was they were doing, just sort of knowing that, hey, I need to start like stacking assets here. Because otherwise, this is going to be a tough

30, 40, however many years that they might have to be working. If the money is just coming in the door and out the other, that’s gonna be problematic. So we’re gonna argue like phase one is just this idea that you know that stacking assets is going to be important and that you’ve likely started doing something. And what I’d like to say here at this stage, cause I don’t wanna gloss over it is that maybe you’re at this stage, but you haven’t started something.

you should just get started because if you do, you’re actually going to put yourself in essentially by doing so it’s going to bump you up to the next stage where we start actually looking at accumulating assets and thinking about how do we grow our net worth.

Jon Orr: Yeah, phase one, the way I think about phase one is really the mindset shifts that need to happen. And it’s also about barriers that need to be dealt with so that you can start accumulating. Because if you’re listening right now and saying like, I do accumulate assets, I am say buying real estate, I am investing heavily in a good chunk of my say, hard earned dollars into my tax optimization buckets.

maybe even just other other things I’m focusing heavily on, on making sure I’m making appropriate investments for asset accumulation, then you’re in phase two, like you’re in that phase, you’ve already kind of come to the main realization, you’ve already had the barriers kind of removed around how to think about, you know, building your wealth and focusing on wealth building. You know, we’ve done many episodes in the past around how to get over some of those barriers, like, you know,

you know, should I always contribute to my RSP or or should you know, what are those barriers that reaching financial independence? These are a couple episodes you can look back and it’s like, do we have our financial plan backwards? Like, are we thinking about these things backwards? So it’s kind of like this mindset shift that needs to happen. And I think for me, Kyle, you know, like when you handed me Robert Kiyosaki’s book, you know, rich dad, poor dad, it was one of those awakening moments for me like

we all have awakening moments and that’s what phase one is really about is having those awakening moments until you take action. That’s why I said some people, and you said, you know, you said a lot of people are in phase zero, a lot of people are in phase one. Like you’re listening maybe to this podcast but haven’t taken action yet, that you’re still in phase one, right? Like you haven’t kind of taken that step to go, I am gonna start, you know, doing more asset accumulations or I’m just, I’ve been kind of doing the pension thing and.

and I’ve got my pension going and I’ve been stocking, you know, stocking RSPs and index funds, you might still be like, am I still in the asset accumulation or asset awakening or, or where do I, where do I go next? So phase two is kind of about asset accumulation and growth and thinking about building those assets and really putting a focus on, on accumulating assets so that with the idea that one day you will rely on those assets.

to, to, you know, to live, you know, to live your lifestyle, because in your probably goal with your in if you’re focusing on phase two, is that you will do this soon, you know, like you always want this like now, or you’re going to plan to do this before like your set retirement date. If you’re say a T4 employee, but phase two is also all about asset accumulation, getting those assets.

Kyle Pearce: Yeah, and you know, I would argue like there’s a lot of opportunity for inaction between these two phases, like between phase one and phase two, it’s like mindset wise, you’re shifting mindset, you’re like, I want to do these things. But then comes the analysis paralysis part, right, where it’s like, well, what, like, what bucket I just hung up the phone with a relative before we started recording. And they were asking, like, what do I do with this extra money that sort of came in that wasn’t exactly expected?

And there’s kind of this fear because you’re like, I don’t want to do the wrong thing. But the one thing that we know for certain is that as long as you’re putting it towards asset accumulation, it’s not going to be a mistake. It might not be the optimal decision, right? But we have to keep the wheels turning on this process in order for us to keep moving along. So during phase two, you’ve decided that you are going to start accumulating assets now.

you might not know what you’d like to do yet. And if that’s you, I would argue, just get into a basic mutual fund for now, because you know what ends up happening? And we’ve talked about it before is people say, well, no, I heard mutual funds are bad. Like I heard they have high MERS and that’s bad and I don’t want to do that. And now I got to learn all about ETFs and what’s an ETF and which one has the lowest MER fee and which one should I invest in? Should I invest in the TSX? Should I invest in the S and P 500? Like where should I go? And right there, that’s a problem.

Like to me, you’re actually spinning your wheels in phase one to two because you’re actually not even starting phase two because now you’re like, I gotta learn all this stuff to do it quote unquote right instead of doing it wrong. When in reality, when we’re in the growth phase, when we’re in the asset accumulation phase, your actual pile is not significant enough for that to actually have a massive impact on the longterm effect.

of you building your wealth, right? Like it’s like making these mistakes for 20 straight years or 30 straight years. Sure. That’s going to add up. It’s going to potentially be an issue, but I’ll argue most people, most Canadians start their plans by funding some random mutual fund and they might go, man, I wish I did this or I did that. Well, guess what? Now that’s after a certain amount of time where you’ve actually thought

things through, you’ve learned and you’ve done the work. But what we don’t want to see people doing is like doing the work before taking action because that time is going to be the biggest hindrance on your asset accumulation in this phase.

Jon Orr: The way I see it is you’re paying your tuition in that way, right? I would rather see you pay the tuition of the cost of that opportunity versus that opportunity versus just not being in the game, right? So it’s like, if you’re at the phase one, phase two, and you’re trying to get into phase two of like, need to start doing this, but I’m hung up on the decision-making,

pick something like you’re saying, because most people have picked something and they stuck with it for so long and they’re still okay, but it’s like pick something, contribute to it regularly, and that’s your tuition? You won’t even realize it’s tuition, but someday down the road you will, but it’s your tuition for learning. Because what’s gonna happen is you’re going to start going, what is working? What does work for me? What doesn’t work for me? I’m gonna now follow that. I’m now gonna build on this asset. I’m gonna learn about this real estate opportunity.

Like it’s your tuition to get in is by making those mistakes early on. Otherwise you just don’t get anything. And you won’t ever be in phase two of the acid accumulation. that would be say our recommendations is some of the learning that you need to do is to start. We’ve had some episodes in the past about that. So flick open the app and scroll backwards in the episodes and pick something that say resonates with you about getting started in there. phase two. Three.

Kyle Pearce: Phase three is where we’re actually starting to go, whoa, like this is working or maybe it worked because where you’re at is you’re at a place now where you’re looking at asset protection while continuing to grow. Okay, so we call this the asset protection and growth phase. know, phase two, you’re starting probably with a smaller pile. Like now we’re in phase three and we’re going like, no matter what I was doing before,

I’m now starting to look with a finer eye, like with more detail-oriented, to start to go, you know, now that this pile is bigger, that MER fee is actually starting to become problematic, right? Or now that I have this pile, I don’t know if I’m as keen on pre-construction condos anymore, given what happened over the past couple of years where the market softened significantly, right?

A lot of times we get to a place where when the actual balance of all your assets start to hit a number where it matters and I don’t want to give you the number for you because like for everyone that’s going to be a different number. Like no one wants to see 10,000 turn into 5,000. Nobody wants to see 50,000 turn into 25,000 and nobody wants to see a million turn into 500,000. But here’s the deal is that the reality is is how it hits you.

and how hard it hits you is really gonna depend on what size pile sort of matters to you. And as that pile gets to a place where it starts mattering, all of a sudden, all the things we thought we knew start to change a little bit because now you’re going, I push a significant portion into one asset class, for example, and something goes wrong,

I stand to lose a larger absolute amount of money. So proportionally it might be the same, but the overall value might change significantly enough where I go, holy smokes, this can actually like impact negatively or positively where I end up with these moves. And this is where people start to really go, maybe just investing everything into.

equity ETFs, you know, sort of blindly like maybe that’s not the answer for me, you know, like maybe I need more diversification, maybe I want to have a safety bucket going on there. Or maybe I need to start diversifying out of one asset class, like real estate or the stock market or fill in the blank of whatever you’ve been doing to get to this point, you start to see that, hmm, there’s more on the line here. And I want to make sure that I’m actually protecting the pile because I’ve gotten this far and I don’t want to have to redo it all again over the next couple of years.

Jon Orr: Right. And this is where say tax strategies fit in and different optimization strategies fit in to also protect in different ways. Like am I following this strategy appropriately to make use of the tax structure that I’m currently in? This is where sometimes people go like, hmm, maybe forming a corporation makes a lot of sense because I get this benefit and this benefit and I can protect myself this way. I can protect myself that way. So, you know,

this is the phase that you kind of start to think about and start to strategize. Sometimes, and I’m gonna throw like a kind of a monkey wrench into here is that these phases, even though they’re phases of our wealth creation, they’re also phases of like the same phases, like iterative, like phases of different asset classes. Like you could be in one asset class and go through all these phases and then all of sudden,

realize that you want to go into this asset class and you have to start again and go, okay, I need to do this learning. I need to start this way and then I need to start protecting. And it’s kind of a learning journey along that. when you get to this phase, you’re really about trying to protect what you have and learn about what structures are best to protect. Like we just released an episode around, you know, should I take a dividend or should we take salary when it’s time to pull money from, you know, the corporation?

That is a phase three move because I’m thinking about what’s optimal to save and protect the amount of money that I earned in that business and having those strategies and thoughts come when we’re at a comfort level with everything else. So when you think about phase one, phase two, and specifically phase two is you’re doing

the actual accumulation and learning what works and what doesn’t and trying this and trying that and building your strategy. But then when you’re comfortable with the strategy and you’ve mapped out goals, that’s when it’s like, okay, I can see how this is going to move forward consistently. And that’s when you have like this, all of a sudden, like this ability and the time probably to go, how do I make it better and stronger?

you know, because you get to that level. It’s like it’s like Maslow’s hierarchy of needs, you can’t, you know, you can’t be at the self actualization level without satisfying your need of hunger. Right? So so you can’t get to the asset protection phase until you have a really solid structure or really solid understanding of your strategies around phase two and your asset accumulation and growth. It just doesn’t, you know, it doesn’t work that way. Like you will, it will happen.

when you do enough phase two, like you put in the reps, you’re gonna get to this stage where it’s like, now I have like the creative freedom in my mind to start focusing on these things. And you, in a way, you’ll know it when you get there.

Yeah, absolutely. you know, I think that, you know, tightly knit our phase three and phase four, because like when you start thinking about how do you like protect what you’ve grown so far, you still want to keep growing, of course. So you don’t want to like hinder that. Like we’re not saying no, no, like let’s throw everything into GICs or you know, anything like that. We’re not talking that at all. We still want to keep growth going. We want to just become more conscientious as to

you know, what ifs that are happening out there or could happen. And then that really kind of takes you into the next place where we talk about phase four, where we say it’s like, this is the, where you’ve truly created wealth and you’re at a place now where you’re starting to look at the different assets and you’re starting to see like, if I can shift this over here like that, I might be able to keep X number of dollars more in taxation. Right? So like, it’s like, wow, if I keep more money,

That actually means I can be less risky with this pile over here because it’s like, it’s actually gonna cost me less to the CRA. Like that’s super important. That’s really, really helpful. And, you know, when we start thinking about this, usually what ends up happening is, you know, the, it’s almost like the opposite of the debt snowball. Like here we’re like the asset snowball, right? Where it’s accumulating, accumulating, accumulating. And now,

there’s kind of two modes. It’s like you can just go, I’m good. I don’t have to think about this anymore and don’t worry about efficiency. But for those who are listening to this podcast, I’m going to argue that’s not going to suit you. You’re going to go, how do I now take what I have and how do I optimize this so that I can do this better? And this is where some of these strategies now we could have talked about Smith maneuver earlier, like in phase two, some people are like, I want to do the Smith maneuver. I’d argue Smith maneuver is more of like a phase

three sort of move because it’s like you gotta like get the wheels turning before you start implementing something like the Smith maneuver. Well in phase four, we really start to look at strategies where we can use leverage similar to the Smith maneuver, but in order to help us with tax savings as well. And the one strategy that we utilize with most of our clients that are at phase four is actually building that large

early cash value permanent life insurance policy inside of their corporate structure. And then we’re able to use leverage from a third party bank outside of the structure in order to do two things. One is we get some cashflow in a nice easy way. But then the other one, which I think is most important is that we encourage investing at least the tax savings, right? And by doing so, what you’re doing is

creating like a Smith maneuver like function with your corporation. So what you’re doing is you’re going, okay, I’ve got an asset building just like your house was building for the Smith maneuver. I’ve got this like invisible house inside my corporation building growing on my balance sheet and outside of the corporate structure. I’m actually going to pull a loan and the more dollars that I use from this loan to invest at a personal level, the more tax deduction I get.

at a personal level. And if you can imagine that you’ve already been building this big asset snowball where you’ve got money coming in from different buckets all along the way, including your corporation, those tax deductions are gonna be very, very helpful. But also it will mean that we don’t have a need to rely on more income coming out of the corporate structure. The beauty is with permanent insurance and actually all life insurance,

that the net death benefit is eventually paid out through the capital dividend account tax free to shareholders. So if you can imagine that we’re gonna be leveraging against like this invisible home inside of your corporation, that while you’re alive is worth one thing. And then when you pass on is worth a larger number. It’s like the only asset I like to call it like the magic asset that actually

not only holds its value at death, but it actually grows in value at death, which helps you in so many ways, especially since that payout gets to come out to shareholders to deal with any debt from our Smith maneuver, like sort of move that we’ve been doing or any other needs so that we don’t have to engage in any sort of fire sales down the road, right? Like these are some of the things that end up happening when

a second spouse passes. A lot of times there’s a fire sale. Why? They had property, there’s capital gains taxes on it. There’s all of these things that are happening. Their RSP now has this big tax bill that’s associated with it. What we’ve managed to do is we’ve managed to get ourselves to a place where you have a significant amount of wealth and then we were able to optimize that wealth without actually taking on any additional risk. And that my friend,

Kyle Pearce: is how you can create true wealth when you’ve built this asset snowball.

Jon Orr: Phase four, phase four. So let’s just recap here phases. So we said phase zero was really about kind of, you know, getting rid of, you know, getting debt free and debt free meaning more like getting yourself to a place where you have say some income that you get to choose what to do with and not someone chooses for you. We said those are the Dave Ramsey’s like if you’re in phase zero, you’re probably not listening to this podcast, but if you are, you know, we’d

we even recommend going and checking out those seven baby steps that he offers on his website is like, follow some of those and you can get, know, you get yourself out of that place that you know you need to get out of phase one is about really learning and barriers barrier like becoming free of barriers around awakening to asset accumulation. Phase two was asset accumulation and growth, which which is a very actionable and you know, action type.

phase of actually accumulation of those assets, which then leads you into phase three, which is protecting those assets and thinking about how to protect them, which then can get you to that phase four, which Kyle just outlined is how do you really supercharge using structures and optimization structures to really grow your wealth. Now, when you think about some next steps here on these phases, you know,

We often talk a lot about mindset and different optimization strategies. We talk about those secret sauce moves here on this podcast, which really cover a lot of phase one, phase two, phase three. And specifically, a lot of phase two, phase three stuff is happening on this podcast. So if you want to strengthen more of those phases up, can keep listening to new episodes. You can go back in the catalog, listen to those episodes.

The other thing is that if you’re not sure exactly what phase you’re in, then we’re gonna encourage you to fill out our quick assessment. Like we have an assessment, a form you can fill out that will help dictate which, or not dictate, but help you identify which phase you are in. So if you head on over to canadianwellsecrets.com forward slash pathways, canadianwellsecrets.com forward slash pathways, there is a form there to fill out and it will point you to resources to help.

to help you move from one phase to another. So if it identifies you in phase one, it’s gonna help you with some resources to move from phase one to phase two, same for phase two to phase three. Now, also, if you fill that form out, if identifies you as say, hey, I’m getting close to phase four, I’m in phase three, I’m moving to phase four, it might make sense for you to take our masterclass.

Our masterclass can be found over at CanadianWealthSecrets.com forward slash masterclass, which outlines the strategies, the structures that Kyle was talking about in, you know, what he was just saying about phase four and the true wealth creation. But really, know, well, it’s phase three and phase four combined there about how to do this at a corporate level, how to kind of optimize in structure for a corporate level. So that’s…

Those are some next steps for you to take. Head on over to canyonewellsecrets.com for those pathways and you’ll be directed to the right spot for you.

Kyle Pearce: Just as a reminder, everyone, that this is not investment advice. It is entertainment and for entertainment purposes only. You should not construe any such information as legal, tax, investment, financial, or other advice. Kyle is licensed as a life and accident and sickness insurance agent and advisor, and he’s also the VP of corporate wealth management with the PanCorp team. That includes…corporate advisors, and pan financial.

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

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