The long-term relative stability of a country like Canada, combined with no wars on home soil since the War of 1812, has provided a fertile ground for many regular people (don't need to be Bill Gates) to begin the journey to multi-generational wealth. Today, there are two mainstream ways to do it and it all depends on what you are starting with. Option number one is through real estate and RRSP. Yes, you need to maintain a house, pay property taxes, insurance and mortgage interest, but nevertheless this works perfectly well. The only rule to follow is to buy a property as early as possible in life, and to not upsize more than once. The reason not to upsize has to do with ultimate value you get out of your real estate. Every time you sell a property and buy a new one, there are costs associated with this that take down the wealth you accumulate in a property. You really do not want to repeat that again and again because a property already has enough additional costs associated with it. If you are so lucky as to buy a property and then upsize by age 30, you end up paying it off by age 55 and then live in it mortgage and rent free. At the same time, you do as close to maximum RRSP contributions as possible, and let the power of compound interest work for you. Once you hit age 55 and are mortgage free, you take as much of the money you would normally spend on mortgage payments and put it in your RRSP or another investment option. By age 65 you have your house, your RRSP and your pension. Now, about the house, let me tell you something that may or may not blow your mind. A house, or any real estate for that matter, is a depreciating asset just like a car or a laptop or any other consumer good! Don't believe me? Think again. Why is a 30 years old house not worth exactly as much as an almost exact same brand new house built right next to it?! Because it ages and depreciates even if you keep up with its maintenance. What appreciates, for anyone who does not know this, is the land that the property is on! So, the house is almost irrelevant and therefore, even if you spend 35 years living in it, it's not in the greatest shape and so on, as long as it is not completely run down you should get profit out of it because the value of land it is on rises so much and gives you that ultimate profit. But, you are not selling that house quite yet. You may be able and willing to live in it until age 75 with minimal upkeep costs if you are in good health. Meanwhile, you receive your monthly pension and, if your RRSP accumulated enough, you withdraw a certain percentage each year so that the principal can always recover and it almost never goes down! This, dearest readers, is a lot of money. The other option, for those who simply cannot afford a property (e.g. you have to be in Toronto and real estate prices are insane), you try to stay in the same apartment or house that would be subject to rent control for as long as possible, you settle in and contribute to your RRSP. By the time you retire, you may still have enough of RRSP money accumulated so you can live off of annual returns without touching the principal. Of course, there is your pension too. Now, there are a few rules here you need to understand. First, for most of us today money is hard to save and getting rich is a lifelong process for most of us, but the good thing is that you have some of the best chances of anywhere in the world to succeed at it. There are no guarantees in life, but this comes reasonably close to a guarantee. Second, if you are planning to create a strong family and make this wealth multi-generational, you have to decide you want to get married and have kids or adopt. Otherwise, you are not building multi-generational wealth and are instead planning to stick with the plan so you can retire early, which is a very real possibility. Third, you need to accept you will be budgeting carefully and spending reasonably so you can pay into your RRSP and pay your mortgage as well- you cannot pull back on these unless you really have to. Fourth, you need a good financial education and if you do not get it from a public school, you need to get it on your own so you can identify potential threats to your long term plans and dodge them instead of just rolling with the punches. Fifth, you need to start as early as you can.
What does our government need to do to allow us to pursue this kind of wealth building free and unencumbered? It has to remove any unfair, unreasonable, prejudice-based or other systemic impediments to us making this happen. In addition, the government should have more oversight in the banking system when it comes specifically to mortgage lending to make sure things go well and nobody gets unfairly turned down. Most of my friends who own a single property and are regular middle class people trying to build wealth have had to jump through many hoops to get approved for a mortgage. On the other hand, most major Canadian banks got caught a few years ago approving mortgages for foreigners as long as they have a certain percentage for downpayment and enough money in the bank for around two years of mortgage payments! No income verification, no credit score check, and no investigation where downpayment and mortgage payments money came from!!! I mean, wow. Make it easier for regular Canadians to buy a place then! More has to be done for sure.
Now, we come to the even more interesting part of this post, the concept of self selecting out. I learned about this concept in school and I love it. It is the polar opposite to the claim that the society and the system is out there to get you. It comes from the premise that the system and the society, the way they work in any given country, is pretty clear and obvious. There are very few real secrets about how to function in the system in order to succeed- you can learn most of it. So, if you make a decision that you do not like the system and the society to whatever extent, or that you do not fit into it to whatever extent, you are self selecting yourself out of it, or at least some of the things it offers. The most obvious example is if you find out you are a born entrepreneur, not an employee. Entrepreneurs are rare and a small percentage in every country on the planet, but they contribute a lot of tax revenue to their countries, they create jobs, and they offer new products and services with which they expand the resources for which we compete. Also, they help better people's lives by making them better or giving them more value, ease and so on. However, it is a difficult path and it is very risky with increased chance of total failure. Thus, entrepreneurs self select out of the straightforward mainstream path to building wealth. Other examples would include people struggling with personal problems such as having to transition- something I am very familiar with. The entire process makes you want to put on hold or delay everything else in life, you cannot perform to the fullest extent of your ability at work or at school, and for a period that may take as long as a few years. By having to deal with something like this, we self select out as well, but once we are able to we may return back to full focus on building wealth. Another way people self select out is by embracing a cause, often times activism of some sort, that puts them at odds with the society and the system they are in and this often includes the rejection of following the most straightforward path to building wealth. Finally, many highly creative and artistic people who do not manage to find adequate sponsorship, and they cannot abandon who they are, sadly also self select out of wealth building; many are ok with it. Bottom line, self selecting out of mainstream wealth building can pay off big or you can lose everything, but if you feel you cannot fit into that system no matter what you are offered, if you feel you need to do some things or everything differently, you have to do you. My idea, which I share with many people I know, is that such people should be given a chance to do what they do because that is how we get our famous artists, celebrities, that is how we get Google Facebook etc. However, since this is their own choice, they should not get special treatment versus everyone else- no extra help, no extra punishment- just outcomes that match the results of their actions, nothing less nothing more.
There you have it, dearest readers- me sharing some wealth building perspectives I have formed over the years, what the government should do and what happens if you do not fit into the system. I know this is very general and the road to wealth (or avoiding of that road) can be complex and vary from person to person. There are also different possibilities of what to do with the money you accumulate, and you may have setbacks in life. Whatever you choose, remember this. Intraday, day to day and weekly events, small things that may try to sidetrack you or hold you back are just noise. Always remember your long term plans and stick with them, adjust as necessary, and you will do well! :) If you feel like it, share with me some of your own ideas and experiences related to this topic, and I hope you still find ways to thrive and have fun in one of the most difficult years in recent memory.