7 habits of wealthy Canadians
Far too often we are lured by the thought that there may be a shortcut to wealth. We all dream about winning the lottery, or investing in the next great investment, or starting a wonder business that becomes a license to print money. I was up late this week and I had the TV running in the background only to hear an infomercial about a stock trading system guaranteed to make your rich. Our society is filled with schemes to go from rags to riches in less time than you think. If it is really so easy, why is 80% of the wealth in Canada in the hands of 20% of the people?
What are these 20% doing right to accumulate the majority of the wealth in Canada? Numerous books and studies have tried to answer this question so here are my seven habits of wealthy Canadians.
They save regularly.
Wealth is not built by accident and contrary to popular belief wealth is not inherited. 80% of the wealthy are first generation and they built their wealth one step at a time. One of the key habits wealthy people possess is a systematic disciplined savings plan. The best way for anyone to develop this habit is to start an automatic monthly savings plan where money comes off your paycheck or out of your bank account before any other expenses or deductions. Studies suggest that wealthy Canadians save about 20% of their income.
Related article: Principles of saving money
They live below their means.
According to the book the Millionaire Next Door by Thomas Stanley and William Danko, you may be surprised at what a wealthy person looks like. According to their research, the typical wealthy person might not be the one that drives the nice new Mercedes, living in the biggest house, wearing the top designer clothes. Rather, the millionaire next door is the person living in the same bungalow they have lived in for the past 20 years, they may drive a nice car but it is an older well taken care of car with lower mileage.
Related article: What is your net worth?
They know where their money is going.
Most wealthy people not only live below their means but they also are very conscious of where they spend their money. In fact, studies suggest that about two thirds of wealthy people know exactly where they are spending their money. If you want to become wealthy, you should develop a habit of tracking where you are spending your money on a monthly basis. Budgeting can be a very intimidating word but the fact remains, it is an essential habit for wealth accumulation.
Related article: Know your spending
They use debt prudently.
Wealthy Canadians make a very conscious effort to avoid, minimize and pay off debts. It is so easy in our society to access debt. Every week, I get mail offering lines of credit, credit cards and access to other forms of debt. “No Money down”, “Don’t pay till 2008”, “interest free” are all common ploys to get you to spend money you don’t have. It is so enticing but, one of the habits you’ll need to build wealth is to avoid spending money you don’t have.
Related article: Conquering the debt mountain
They maximize income.
In a study by Statistics Canada, there is a correlation between wealth and income. The more money people make the more likely they are to build wealth faster. While this makes intuitive sense, it may not always be easy to just go out and increase your income. That being said, it is an important habit to building wealth. Take time to train your mind to think outside the box about ways you might be able to increase your earning power. This might mean getting more education or starting a business or getting a part time job, etc. No one said building wealth did not take some effort.
Related article: The importance of earning more money
They own appreciating assets.
The majority of wealthy people own their own home. Owning your personal residence develops some productive wealth mindsets. Ownership gives you a better appreciation for the value of goods. In addition, most wealthy Canadians have equity in other appreciating assets like business, stocks and real estate. The next time you put your money into something, ask yourself if it is an appreciating asset or a depreciating asset.
Related article: Financial success from financial assets
They get professional advice.
Wealthy people typically have a team of professionals to help them accumulate, manage and protect their wealth. This might include accountants, lawyers and financial advisors. Studies suggest that although they use professional advisors, they ultimately make the final decisions themselves. If you want to become wealthy, you must seek help but ultimately retain control over key decisions.
Related article: Online guide to working with financial advisors
Just like Stephen Covey feels that there are some key habits to become effective, I think there are some key habits to build, manage and retain wealth. Good luck!
A excellent article. I could of used this advice earlier in life.
All the best
I agree. Excellent article! Where was THIS advice when I started working full-time in 1999? 🙂
Great article! Everyone should read this, especially those who are in their mid-20s. 🙂
I think one of the mistakes I made in my twenties was switching jobs prior to my company sponsored pension becoming vested.
I worked for a firm for 3 years and left. Leaving at 3 years I only got my portion of the matching defined contribution pension. If I’d stayed for 5 years I would have got the company’s share too.
Second thing I’d notice of the rich people in my area. They were government workers that worked for the government their whole life. So they are getting great pensions. Get into government, and don’t leave.
If all you’re looking for in life is a pension, then go to the government. If, however, you want to keep your brain alive with challenging and rewarding work, forget the government! Been there, done that. And while you’re working in a job that bores you to death, you might as well forget the satisfaction you get from learning the self-discipline required to achieve your own goals. Plan your goals early, implement the plan NOW and be in a job that you love. Just think of how many years you could be in that brain dead gov’t job vs one that makes you happy to go in in the morning and home in the evening knowing you’re accomplished something worthwhile and its value is recognized.
I agree with Nancy, with the exception of doing a job you love, I would say, do a job you’re good at and pays you the income you need to accomplish your financial goals. Some industries do not pay well, or even a living wage; staying in a low-paying job, even a government one isn’t always the answer to a happy retirement. I was in a government agency job and after 2years of wage freezes, followed by 2 years of 1-1.5% salary increases, enough was enough. I made the commitment to educate myself and find a job and company that suited my skills and philosophy. I was lucky to find a company which offered flexible work hours but also offered it’s employees an annual bonus, a DC pension plan and company shares. While the job isn’t a job I love, I am good at my job and now I am in control of accomplishing my retirement goals.