How to Get Richer than 99% of all Canadians

Do you want to know what it takes to get richer than 99% of Canadians? In this article, we’ll go over exactly how much wealth the top 1% has and give you four realistic ways on how to join this elite group.

Top 1% Income in Canada

To find out how to get richer than 99% of Canadians, let’s first figure out what exactly are the top 1% in Canada actually earning. Let’s find out by taking a look at our friendly neighbourhood data provider, Stats Canada

As of 2021, the median income of the top 1% in Canada is $378,900 per year. But that is the median income of the top 1%, so that is the incorrect number. 

What we actually want is the threshold value, which is much lower at $271,300 per year! 

If you’re confused by this, think of the median income being the middle point of the top 1%, making it, in reality, the top 0.5%, and the threshold value as being the bottom point of the top 1%. 

If you cross this threshold of $271,300 of income per year, you are officially in the top 1% of income earners in Canada

Some other interesting points about this data are that around 80% of individuals in the top 1% are married or in common-law relationships. 

Wages and salaries account for  63.1% of the income for the top 1% in 2021, slightly higher than 62.7% in 2017, which means that about one-third of their income comes from something outside of their jobs.  

This tells me that to to get to be in the top 1% of income earners, it’s better to be married or common law, and also to diversify your income sources, which I’ll go into more ideas for this later. 

Top 1% Net Worth in Canada

Net worth is different than income, and to me it is the true measure of being in the top 1% in Canada. Net worth is your total assets minus any liabilities. 

This 2021 report from the Parliamentary Budget Officer (PBO) has some interesting findings. The threshold for being in the top 1% of net worth is having assets of at least $6.3 million. There are about 160,600 families in Canada that fall within this group.

$6 million might seem like a daunting number, but it’s possible because over 160,000 families in Canada have done it. 

How did those families earn that massive amount of wealth of over $6 million? Let’s take a look at some of the ways. 

1. High-paying salary

First up, is having a Very High-Paying Profession. Remember, the threshold for income for the top 1% in Canada is about $271,300 per year. If you can earn somewhat close to that with your profession, you stand a good chance of amassing the $6 million it will take by the end of your career to crack the top 1% in net worth. 

What jobs will get you to that $270K amount in Canada? Well, it’s a short list of professions. Here are some of the options:

On this list, you have professions such as C-Suite Executives, which includes positions such as CEO, CFO, CTO, and CISO, Medical Specialists, such as Cardiologists and Orthopedic Surgeons, Partners in Law Firms and Accounting firm, Investment Bankers, Principal Software Engineers, Senior Data Scientists, Specialized Dentists, Senior Software Architects, and more.

The problem with having salary being your main method to becoming the top 1%  is that if you’re not on the right career path, you don’t have much of a chance of getting a job like this. If you’ll notice, all these jobs take many years of specialized education and work experience. If you’re well into your career already and your ceiling for your job doesn’t come even close to these numbers, don’t worry, there is another path. 

2. Starting a business

One of the primary ways the top 1% earn their wealth is through business ownership. 

Anyone can start a business and scale to become rich. I’m not saying that it is easy to start a successful business, merely that it is possible for anyone to do it. If you look at a list of the richest Canadians by Net Worth, you’ll see that they all started businesses. 

None of them because the richest Canadians by working a 9-5. These are the media, retail, finance and technology tycoons of Canada

Shopify, a leading e-commerce platform founded by Tobias Lütke, has propelled its founder into the elite of Canadian wealth. 

The company’s success has not only made e-commerce more accessible to countless businesses worldwide but also significantly increased Lütke’s net worth, making him one of Canada’s richest people.

Business ownership allows for significant financial rewards through various channels, such as capital appreciation, profit margins, and potential exits like selling the business or going public. 

One word that is the secret to why business owners get so rich, is SCALING. With a business, you can scale to reach hundreds, thousands, or even millions of customers. 

You don’t need to start the next Shopify, but think about business ideas where you can truly scale and grow and leverage your time and knowledge to provide a product or service to people who need it.

Sales Roles – Hybrid of salary and role

I also want to highlight that certain sales roles, such as real estate agents, mortgage brokers, or pharmaceutical sales reps, can achieve a top 1% income and that sales are often a hybrid of salary and business. Sales is often seen as a challenging field, but it’s also one of the most financially rewarding. High-performing sales professionals can earn significant incomes through commissions, bonuses, and other incentives.

Mark Cuban has said that “The most important thing in any business is sales. You have to get revenue in the door.” Cultivating the superpower of sales will help you in any business or job that you try in the future.

Speaking of sales, i’m going to shamelessly plug the new channel here by reminding you to like and subscribe if you’re finding the content useful!

3. Investing

What you invest in will be crucial to you reaching the top 1% net worth in Canada. Even if you earn a very high income, if you save a lot of money but then invest it foolishly, you likely won’t reach that 1%.

Investing is crucial because it allows your money to compound and grow over time. 

Anne Scheiber is a remarkable example of how this can work. Anne was an IRS auditor who retired with modest savings. She invested her savings in stocks, particularly focusing on blue-chip companies with solid dividends. By the time of her death, she had built a fortune of $22 million. Anne’s strategy of buying and holding high-quality stocks for the long term paid off huge.

Where should you start investing? If you’re not an expert investor, diversification is a good choice. You can spread your investments across different asset classes.

A powerful strategy is to invest in the stock market. If you’re looking for a more hands-off approach, consider investing in index funds or ETFs. These funds track a market index and offer broad diversification at a low cost. If you want to be more involved with your investing, learn how to pick individual stocks. 

To reduce risk, consider investing in fixed income or bonds to complement your stocks. Investing in a mix of Canadian stocks and bonds can provide steady growth while protecting you from market volatility.

Real estate is another avenue worth exploring, especially in Canada. Real estate is one of the biggest and most popular wealth builders for Canadians, and is something that most millionaires have in their portfolio. Investing in rental properties can provide you with a steady income stream and the potential for property value appreciation. 

Also, take full advantage of tax-advantaged accounts like RRSPs, TFSAs, and FHSAs. These accounts offer tax benefits that can greatly enhance your investment returns. With an RRSP, your contributions are tax-deductible, and your investments grow tax-free until withdrawal. With a TFSA, your investments grow tax-free, and withdrawals are also tax-free.

4.Be Frugal and Save Most of Your Income

Another way to get rich, is to save wisely. 

Ronald Read was a janitor and gas station attendant from Vermont who quietly amassed an $8 million fortune. How did he do it? Ronald lived frugally and consistently invested in blue-chip stocks over several decades. His portfolio included shares in companies like Procter & Gamble, JP Morgan Chase, and General Electric. By living below his means and reinvesting dividends, Ronald demonstrated the power of long-term investing.

This shows that it is possible to amass a huge fortune even with a low income, if you can follow two powerful principles, of saving a lot of your income, and investing wisely. 

Be careful not to go into what I like to call extreme frugality, to the point where it is affecting your quality of life and relationships though, as this can possibly happen. 

Combine these methods

We went over four different ways you can get richer than 99% of all Canadians. There’s having a high-paying job, starting a business, investing wisely, or being frugal.

You don’t have to choose just one of the methods, most people choose a combination of the four ways. Ask yourself what would be the best suited for you?

For example, if you know you’re not a big risk taker and don’t want to start a business but have a good-paying job, you can choose a combination of investing wisely and being frugal. 

Or, if you don’t like the idea of having to be too frugal and like to take risks, you can try starting a business that you can potentially scale to a really high income, and invest it wisely. 

Or maybe you have kids and you can’t be frugal with all the bills you have to pay, and you can’t take huge risks, you can focus on levelling up your salary by seeking promotions or additional training at work, and investing whatever excess you have.

For me personally, I would say i have a nice balance between all four of these methods. I have some clients that I do regular work for which can be viewed as a job, I’ve started some businesses, invest wisely, and also save a good portion of my income, all while living the lifestyle that I want to live. 

Find out what is the best approach for you, that can suit your lifestyle and needs and go from there.

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AUTHOR

Christopher Liew, CFA

Christopher Liew is a CFA Charterholder with over 15 years of Canadian finance experience.