Dislike and disdain of the wealthy has been increasing in popularity lately. Some even find the fact that millionaires exist reprehensible. But is being a millionaire really that wealthy? Especially after inflation has eaten away at the value over the years. Around 30 - 40% of Canadian will become millionaires in their lifetime. That is a minority but hardly an improbable feat.
Home Ownership
Just looking at the average house price would get most people almost there since homes are on average $700,000 as of 2023 in Canada. Being a millionaire does not mean you have a million dollars in cash or even investments, it means your net worth is over a million dollars taking in account everything you own, even your house. The vast majority of millionaires own their own home. It would stand to reason if you want to me a millionaire buying a home would be a good step.
Luckily there are many programs to help young potential home owners. The government knows owning a home is important to building wealth so they try to make it a little bit easier.
- First-Time Home Buyer Incentive (FTHBI): A shared-equity mortgage program that helps reduce monthly mortgage payments by offering a government contribution in exchange for a share of the property's future value.
- Home Buyers’ Plan (HBP): Allows you to withdraw up to $35,000 from your RRSP (per person) to use as a down payment, with the requirement to repay the amount over 15 years.
The great thing about owning a home is you get to keep around half of your living expense. Each mortgage payment you get to keep some of it which builds up your wealth. After 25 years you are living mortgage free saving all the extra money that would have been going toward your mortgage. Sure it may take some saving for a downpayment, but once you buy a house the price is locked in. Homes appreciate in value year over year but your mortgage debt is constant. Think of your parents homes, probably cost around $200,000 but now go for $500,000 or more. Houses grow in value around 5% to 6% each year.
Investing
Another common theme with millionaires is they invest a good portion of their income around 10% - 15%. The average Canadian nets around 1.2 million to 2.4 million after taxes. Assuming 15% investment rate on 1.2 million to be conservative that is $180,000 saved over the course of ones life time. When you invest it, the big numbers start coming up. For example:
- $50,000 Annual Income
- 15% savings = $7,500/year
- Invested at 7% for 40 years
- Final amount: ≈ $1.6 million
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That alone would make you a millionaire even at a modest salary of $50,000 for 40 years. Between home ownership and investing their is really no excuse for not becoming a millionaire in the current climate. Becoming a millionaire is about keeping as much as your wealth as possible, through your housing costs with your mortgage and investing in assist that appreciate in value with stocks and bonds. Put your money in things that appreciate not things that depreciate.
If you found this helpful and would like help budgeting or investing please email me at BudgettoWealthTM@Gmail.com
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