Learn the Secrets of Canada's Rich

Sandra Williams

Filed under: Budgeting & Planning, Family Finances, New Year New Start

Have you ever taken a drive into the ritziest neighbourhood in your city and wondered what people must have been doing to be able to afford a $20 million home? I have. And I've come to the following conclusions: It could be old money, it could be that someone took a good idea and turned it into a cash cow, or they could be street pharmacists. The truth is if you want to be wealthy, it doesn't matter how much money you earn, it's how much you keep that counts.

But why is no one saving anymore?

Sky-high student loan debt and easy access to high-interest credit cards are only part of the problem. At the other end of the spectrum, Canadians are struggling with the rising cost of living and low-paying jobs. Statistics Canada says that household net-worth has dropped 2.1 per cent to $180,100 in the third quarter from $184,700 in the second quarter.

Liked this article? Don't miss another one. Follow us on Twitter or Facebook.

While visiting my banker, I happened to overhear a conversation about how an octogenarian of modest means managed to save what adds up to be an annual income of $30,000 a year for the rest of her retirement years. This amount doesn't include her company pension or money received from her Canada Pension Plan. That's pretty incredible for a single debt-free senior. Is she The Bionic Penny Pinching Woman? Nope. She's incredibly prudent with her finances and doesn't rely on credit.

Related links:

Financial experts recommend that you save 80 per cent of your working salary for each year of your retirement. Are you on track? If not, follow the lead of high net-worth individuals. Here's how:

1. Have a plan

Unless they won the lottery, most millionaires and billionaires didn't become rich by chance. They developed a plan and a timeline to gradually grow their net worth. Part of this plan includes debt reduction and becoming asset rich. An important part of planning is dreaming. Visualize when you want to retire and the life you want to lead. Ask yourself how much money you will need to save to get there, and actively focus on that plan. To ensure that your plans come to fruition set out SMART objectives: Specific, Measureable, Attainable, Realistic, and Timely.

2. Create a budget

I know it's not exciting stuff, but budgets can work. Wealthy people are very disciplined about following their budgets. Check out (non-Canadian) actress Zooey Deschanel's monthly financial breakdown. Budgets weren't created to spoil your fun; they're a blueprint for tracking your income and expenses so you can reach your short- and long-term goals. If you're part of a couple or a family unit, include their input when creating your budget. Remember to pay yourself first and set aside cash for emergencies, fun and charitable donations. The goal is to minimize your credit dependency, save for purchases, and prepare yourself for life events.

3. Get good advice

The fact is wealthy people almost always use a financial advisor. Working with an advisor doesn't mean you are lazy or are financially impaired. Au contraire. Rich people hire financial advisors because they want to be successful, just like top athletes, corporate executives and entertainers do.

But don't just hire anyone. Look for professional distinctions, such as certified or chartered financial planner. Ask for references and referrals from family and friends. You need to get a sense of their experience, service level and availability. Lastly, don't underestimate the value of personal compatibility. You want to work with someone you can trust and who will become a true financial confidant.

Liked this article? Don't miss another one. Follow us on Twitter or Facebook.