Episode 143: What We Can Learn From The National Study of Millionaires

Listen here on our website:

Or jump to this episode on your favourite platform:

Watch Now!

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 and book a call here.

Are you constantly searching for the “perfect” investment opportunity, hoping it’ll be the key to building wealth? 

What if the real secret to financial success lies not in finding the next big thing, but in something much simpler: consistent investing and strategic Canadian tax planning?

In this episode, we unpack the findings from the National Study of Millionaires, revealing what over 10,000 millionaires did to build lasting wealth. Surprisingly, the vast majority of these millionaires didn’t rely on high-risk investments or market timing. Instead, they focused on steady, regular investing and making smart Canadian tax planning decisions—key principles that can apply to you whether you’re a T4 employee or an incorporated business owner. The study also challenges the common belief that wealth is inherited or achieved through executive positions, showing that most millionaires are ordinary people who made disciplined choices over time.

For Canadian listeners, it’s crucial to understand that becoming wealthy doesn’t require chasing trends or obsessing over the perfect stock pick. It’s about keeping more of your hard-earned money through effective tax planning. By taking advantage of Canadian tax-deferred accounts like RRSPs, optimizing your business structure, or using income tax optimization strategies, you can supercharge your wealth-building efforts. In this episode, we’ll dive into how you can use these principles to create long-term financial security.

• Discover how consistent, long-term investing is the true key to building wealth, rather than timing the market.
• Learn how Canadian tax planning—whether as an employee or a business owner—can help you keep more of your money and accelerate your wealth-building strategy.
• Understand how to avoid the paralysis of overthinking investments, and focus on simple, predictable strategies that will grow your wealth over time.

Press play now to uncover the wealth-building secrets that could change your financial future forever!

Resources:

• Review The National Study of Millionaires by Ramsey Solutions
• 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!
• 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.
• 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. We explore conservative leverage strategies such as the Smith Maneuver to convert non-tax deductible interest on your primary mortgage to tax deductible interest as well as conservative leveraged life insurance strategies including immediate financing arrangements (IFA). 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:

Hey there, Canadian wealth secret seekers. You’re here today with Kyle where we’re going to be diving into the key to building lasting wealth. And specifically, we’re going to be unpacking the key takeaways from the national study of millionaires, revealing what over 10,000 millionaires did to get there and what you can do in order to get there too.

So who are these millionaires? Well, stick around because I think you might be surprised on who they are and how they got there. Whether you’re a T4 employee or an incorporated business owner, toss in those earbuds and stick your phone in your pocket so we can learn how to apply these principles to your own wealth building strategy. Here we go.

All right there, my friends, it is another wealth secrets episode and we are super excited to dig in here. This one’s been a long time coming because I came across this study quite a while ago and I’ve really wanted to take an opportunity to take a deep dive in order to look at, know, what really goes into folks becoming millionaires now.

I do want to preface, okay, becoming a millionaire nowadays is definitely not what it felt or seemed like back when I was a kid, you know, and maybe you feel the same, right? A million dollars is actually not, for many people nowadays, is not enough to, you know, have you feeling good about, retirement and so forth, unless you’re a very, very small spender, right? Nowadays in our consumer,

economy that we’re in our consumption economy. You know, there’s lots of spending going on. There’s lots of costs, inflation is high, you know, things are hard. And there’s always, of course, this like sort of trying to keep up with the Jones sort of mentality going on. So there’s a lot of folks, myself included, that actually, you know, want to make sure that we have well more than we’ll ever need in our lifetime to feel happy to feel safe and to feel secure.

So depending on who you are as a person and what your spending habits are like, just keep in mind that, you know, the idea here is not about necessarily just getting to become a millionaire, have a million dollar investment portfolio, but rather how these individuals actually got there. So I’m gonna share the screen for those who are hanging out with me on YouTube. You can head on over to YouTube and just type in Canadian wealth secrets and you’ll be able to find our channel.

And of course, make sure you subscribe, like, and all that wonderful stuff. But this document was actually put together by the Ramsey Solutions Group, which is Dave Ramsey’s group. So you probably know that there’s a lot of things that we think are amazing about what Dave Ramsey and his team do. But there’s also some parts that aren’t necessarily, we’re not in full agreeance with. For example, their average rates of return that they use when

investing in mutual funds, for example, they often throw around this number of 12%. That’s like massively high to use as an average rate of return simply because the SMP itself is is less than that. And then also over different, you know, 10 and 20 year periods, you know, it can be as low as even, you know, 80 % as well. So, you know, with fees and all these other things, it’s definitely not

good to necessarily blindly follow some of these other tactics. They’re also not big on ever utilizing debt, which I think is also good for many people, right? Because you have to be responsible with that, but not necessarily the best foot forward for everyone. So as we go through here, let’s chat a little bit about what they did here. So they studied.

and they found and interviewed over 10,000 millionaires. So these are people that have investment portfolios, investments of over a million dollars and are deemed to be millionaires. Now I wish that we had more detail as to what that cutoff looked like because again, I don’t think anyone here is listening to this podcast hoping to just get to a million and then stop. It’s probably a lot greater. But what you’ll find from some of the study,

is that eight out of 10 millionaires that they surveyed invested in their company’s investment plan. Now this is in the US, so they call that a 401k. But here in Canada, if you have any sort of match option or opportunity with your company, definitely be taking advantage of that. But then something else that’s really important is that three out of four of those surveyed also invested outside of company plans.

So why I say this is, as a former high school math teacher and having a great pension that goes along with it, there’s many educators out there that have this awesome pension and everyone’s jealous of this pension and then they choose not to do any other type of outside investing. However, the better option would be to also be investing outside of your pension or other opportunities that you might have. So this is really.

important and key. So that’s a really important piece here. Now one three out of four million millionaires stated that regular consistent investing over long periods of time led them to their success. So basically what this means is they weren’t relying on high risk investments or timing the market.

They weren’t going out there and trying to, you know, squeeze out the extra like half a percent or the 1 % or this or that, or ever, you know, there’s so much noise out there about MER fees and you know, don’t do this because of that fee and you’ll be better doing this and be better doing that. What I find is people that get too hyper-focused on that, it actually holds them back. They get into an analysis paralysis and they actually get held back from doing the thing they need to do, which is being consistent.

and consistently investing. So there is no perfect investment. So keep that in mind, like you shouldn’t be sort of waiting and sitting on the sidelines, sort of waiting for this perfect opportunity. You want to diversify and you want to get some sort of consistency going. Now for those people that are interested in eager to get into say real estate investing, this one’s a hard one because when you’re getting into real estate investing, there’s a lot of learning to be done.

And what I don’t want to see anybody doing is sort of waiting on the sidelines doing nothing while their money is sort of sitting there under the mattress, sort of losing value due to inflation. having some sort of consistent investment opportunity or a consistent investment program going is really important. So even if you are trying to sock away, say, that down payment for an investment property,

utilizing tools like permanent insurance, for example, to sort of get that fund going is one thing that you can do. Other people are putting them into say, GICs, shorter term GICs, keeping in mind that, you know, interest rates may not stay as high as they have been lately. So that might not be as favorable. But at the same time, I would argue you don’t want to stop investing in other vehicles like say the stock market, right? Doing a set and forget sort of

mutual fund or ETF strategy is going to add up over time. Now for some people they might say, that’s money that I could be putting into my real estate project or whatever it might be that they want to do. However, remember that time it takes for you to find that perfect real estate opportunity might actually take so long that you might now be behind the curve. So don’t stop investing.

investing even if you are going to try to branch out and do other more unique strategies along the way. So that is one of the big pieces here. Here’s another fact that was really interesting is that out of those 10,000 millionaires the overwhelming majority about 79 % of the millionaires did not receive any inheritance at all from parents or other family members and it said one in five millionaires about 21 % received some inheritance

but only 3 % received an inheritance of a million dollars or more. So this is really important, I think, for people to sort of get this thought out of their mind that, you know, the rich get richer and, you know, that’s why certain people are doing much better than say others. Having this mindset that you can take control and you can do this work yourself is so key. Now for those people who might be early in the journey, you might have a low amount of income. This is where sacrifice,

sort of, you know, has to take precedent, right? If you are driving that new car, you have, you know, a lease or these high payments, and you’re looking at that and going, Hmm, is that really worth it for me when I could be taking some of that money and putting it towards investing? So you’re essentially putting off your delaying gratification by doing that, so that you’re not necessarily living the dream now. But hopefully what that’ll do is put you in a place where you can live the dream.

for longer over your lifetime, right? So this is a really important thing. And actually, was chatting with a good friend and colleague, Paul. And last night, he just said to my son, he said, and he’s a farmer, and he said, you know, he’s like, they were talking about on the farm. says, you don’t buy the new pickup truck.

He’s like, used to be, that pickup truck payment used to be enough to buy X number of acres of land to grow the farm, right? So, you know, that’s something that, you know, we have to be thinking more about is this extra money that we’re spending. What could I be doing with that money instead without necessarily, you know, scrimping to get by, but just being smarter about the money that is going out the door. kind of tidying up the household on that front.

So inheritance is not going to be the reason that you get there. Here’s the other thing that’s important to note. They said that only 15 % of millionaires were in senior leadership roles, which might be surprising, but it’s actually not that surprising to me. And the reason why is that I work with a lot of high income individuals, many of which who actually listened to this podcast and their lifestyle creep has actually gotten to a point where

They earn a significant amount of income and most of it’s going out the door. So really being cautious about that when you have that high income or that dream job, oftentimes you can run into more problems because not only does your lifestyle creep increase, it also means that you want to maintain that lifestyle while you’re retired. And that can be really, really challenging. And I’m gonna tell you a story about an individual who

is in a, we’ll call it a prominent position and was earning about $400,000, in their corporation. However, every single year for the past five years, they were taking all $400,000 out part as a salary part as a dividend. And they were only walking away with about 60 % of it, or so it was actually a little less because they were taking a much higher salary. And the challenge was

is that they had nothing left for investment. So this individual was earning $400,000 per year, but yet didn’t have any real assets to show for it except for their primary residence. They had fancy cars. They had great lifestyle. They did lots of travel. But they didn’t have that investment going on. And they were in desperate need of tax planning, which is what we tried to help them with, is how can we restructure what they’re doing?

But also one of the big nudges I had for them was how can you cut back on some of this lifestyle creep? Because trying to keep a $400,000 income while you eventually are retired requires a much larger pile, right, in order to create that sort of income. Either that or they’re going to have to work for into perpetuity, which means essentially until they’re ready to leave this place.

So be very cautious about that. Very, very cautious and clear about that. So over here, the top five careers for millionaires in this survey were engineer, accountant, teacher, management, and attorney. So some of these are definitely very high income jobs, but some of them are not. Right. So a teacher, especially in the United States, teachers are not very well compensated yet. They are finding their way onto this list.

And in some ways it might simply be living and lifestyle choices that they’ve made, right? To budget and to reinvest. So be very cautious about that. Oftentimes what I find is the more money we make, the less money we tend, I shouldn’t say the less money, but as a percentage, the less percentage of that income we end up investing.

Right, so it’s really important that you start thinking about things and going, hey, listen, if the more money I make and the more money I’m spending now, the more money I’m going to need to invest now in order to do this well. Now, one of the other pieces that I want to share and doesn’t come up in this actual in this actual document here, I will be sharing it with you.

in the show notes so you can head on over to the Canadian well secrets website or in your podcast app or in YouTube you can actually click the link and go to the show notes page so you can actually fully read this you know this full study which is fantastic however one thing that doesn’t come up that I think is really easy for us to implement in order to help give you more access to capital for investment

not talking about doing this for spending, we’re doing this for investment is better tax planning, right? So understanding, it doesn’t matter if you’re a T four employee, if you are a T four employee, you have to understand how is your employers match payment or match retirement plan working? Is there one, you have to understand your RSPs and when does it make sense for you to utilize some of that are RSP room and when does it not?

Right? The tax-free savings account is still helpful for future tax planning as well. Right? You’re not going to get any money back now from tax savings, but it can be really helpful. And specifically, for our incorporated business owners, understanding what and how you are being taxed inside of your corporation is so key in order to take care or take advantage of tax deferral opportunities, which is why many people leave money in the corporation.

whether there’s some income splitting through who’s the shareholders of the companies, but then also utilizing retained earnings in ways so that you don’t have to take as much money out as a salary or dividend, and you can repurpose those dollars for investments, right? And we can do this corporately and personally in some cases. So these are big pieces. imagine a world where if you could keep more of every dollar that comes in the door,

Instead of seeing 30, 40, some cases 50 % of those dollars going out the window to unnecessary taxes due to simply not understanding the income tax act. That is a massive head start, right? Someone who loses 50 % in tax to someone who’s keeping 100 % of that dollar, that person now has to get 100 % return on their 50 cents in order to get back to where you are.

So that is a really important piece here is that tax planning as much as we don’t wanna learn about it, it’s complex, we don’t wanna think about it, getting a team on your side to help you understand where those dollars are going and how we might be able to structure things differently in order to maximize this situation, that is super important. So ultimately, some closing thoughts here on today’s episode. The Ramsey study is a fantastic,

place for you to go check it out. This is called the National Study of Millionaires. You can definitely go and take a look at it. We scrolled through it on YouTube if you’re listening right now, but definitely head over to the show notes page in order to have a closer look yourself. But the big goals here, some of the big things that I want you to understand is that wealth isn’t built by trying to time the market, by finding the perfect investment, by getting your M.E.R. fee down by 0.25%.

Don’t get me wrong, those can be helpful along the journey, but the more important piece is consistent investment and smart tax planning. So whether you’re contributing to an RRSP, whether you’re leveraging tax advantage accounts or optimizing your business structure, keeping more of what you earn is the key to supercharging your wealth building efforts. So take action today, set up that automatic investment plan and start making tax smart moves to compound your wealth.

For those of you who are in need of setting up a volatility buffer for the fixed income portion of your portfolio, or if you’re aiming to set up a tax optimization strategy, if you have retained earnings, let’s say pent up in your corporation, you should reach out and book a call at CanadianWealthSecrets.com forward slash discovery, where we can review your situation and determine if a high early cash value participating life insurance strategy makes sense for you. As always,

If you are an incorporated business owner and you want to better understand the tax challenge that you’re up against and how you can solve it, head on over to our masterclass at canadianwealthsecrets.com forward slash mastermind. So you can learn how a permanent insurance strategy can open many doors to increased wealth and tax efficiency for you and your estate. All right, my friends, we will see you next time.

And just as a reminder, this content is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. And as you know, I am a life licensed and accident and sickness insurance agent and VP of corporate wealth management with the Pan Corp team that includes corporate advisors and pan financial. And we are here to help you with all of your personal and corporate insurance and leveraged insurance needs.

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.

OPTIMIZE YOUR FINANCIAL FUTURE