How Did the Wealthy Get Wealthy — and Can I Copy Them? (Canadian Financial Summit 2025)

In a recent video for the Canadian Financial Summit I talk about who the poor and wealthy are and how they got there.

Today, we’re diving deeper into one crucial aspect: how the wealthy became wealthy? 

Can their strategies work for you?

Over the years, I’ve seen the full financial picture of thousands of Canadians and read countless studies on wealth building. 

While my clients are generally higher-income, growth-focused individuals who work with a financial plan, I’ve also spoken to countless others—through my blog, in-person, and within my network of wealthy individuals. 

These insights have given me a clear understanding of who achieves financial success and the steps they took to get there.

You will learn:

• How much do you need to be “wealthy”?
• What types of people have high net worth?
• What is a “productive growth asset”?
• How much do you need to save to become wealthy?
• Do you have to borrow to invest to become wealthy?
• What does the Lifecycle Investing study tell us about growing wealth?
• How can you become wealthy?

How much do you need to be “wealthy”?

• “Wealthy” is having investments that will provide comfortably more than your desired lifestyle if you choose not to work. It is financial independence, plus a very large cushion.
• 20% more than your financial independence goal is the margin of safety. Let’s say “wealthy” is 50-100+% ahead of your goal. Enough that you don’t have to worry about money.
• For most people, this is $2.5 to $5 million in investments (excluding your home). Many are higher or lower.

What types of people have high net worth?

• Wealthy are mostly older people that saved & invested effectively through their life.
• Very few inherited it. 13% of Forbes 400 richest. Most inheritances are received in your 60s or 70s, which is likely too late to grow it enough to be wealthy. Most parents want to enjoy their life and not leave a huge inheritance, so most inheritances are not huge.
• Almost nobody won it in the lottery. (Odds are against you.)
• Almost all millionaires and billionaires made it all themselves.
• Wealthy people grow it through investments or a business.
• High income is helpful, but not essential. “It’s not what you make. It’s what you keep.”
• High income comes from learning a valuable skill. Some (not nearly all) university degrees teach you a valuable skill, such as STEM fields (like IT or engineering) or sales or the trades. Or skill as an entrepreneur.
• Wealth builds with age. The wealthy are mostly older people, say 50+, who saved & invested over the years.

Great news! You can do this! Just save a good amount & invest for growth for the long-term.

What is a “productive growth asset”?

To become wealthy, your investments should be productive growth assets – Good return that is reliable long-term, significantly more than inflation, in assets you can use for your lifestyle in the future.

The top 20% of people (not top 1%) in net worth mostly have it in their house for many people. Your house is not a productive asset, unless you will use it for your retirement income in some way:

1.      Sell it & downsize to much lower cost home or rent a home.

2.      Borrow against it to invest. E.g. Smith Manoeuvre.

3.      Borrow against it to spend.

·        To become wealthy, build your net worth of productive growth assets – excluding your home.

·        The wealthy are growth investors: Stock market (equity) investors, business owners or investors in leveraged real estate (with a large mortgage). Real estate with a large mortgage can be a good investment, but paid off rental properties are usually low return & high tax.

·        Equities (stock market or businesses) are the highest growth asset class. Equity investors & business owners both invest in businesses.·        The chart shows wealth over 40 years in stocks vs. fixed income (bonds) vs. real estate. Growth of $52,800 (average house in Toronto) in 1974 is just over $1 million now in real estate, $825,000 in fixed income, but almost $14 million in global stocks:

·        The stock market has been reliable in history over long periods of time. It is an investment in businesses that tend to grow their profits over time. Note the worst 25-year calendar gain in the modern stock market (since 1930) has been 8%/year.

How much do you need to save to become wealthy?

To become wealthy:

·        Save & invest for growth for the long-term.

·        Save a healthy amount & get a decent return on your investments.

·        For long periods, like 30 years, include inflation. You need purchasing power to afford your lifestyle.

·        How much do you need to invest? $1,000/month could get you to $1.5-2 million in 30 years – probably not wealthy. The cost of living doubles every 30 years or less, so $2 million in 30 years is like $1 million today. If you retire and withdraw 4%/year based on the 4% Rule, that is only $40,000/year, which is not wealthy!

• $2,500/month could get you to $3-5 million after 30 years – which could be “wealthy”. The cost of living doubles every 30 years or less, so $5 million in 30 years is like $2.5 million today. If you retire and withdraw 4%/year based on the 4% Rule, that is $100,000/year. Having enough to support $100,000/year for life without working might be considered “wealthy”.

• $2,500/month ($30,000/year) is the RRSP limit for people with a higher income.·       

• Higher income people can get a tax refund of 40-50% on RRSP contributions, so the after-tax contribution is only $15-18,000/year. Most higher income people should be able to do this, or more.

Do you have to borrow to invest to become wealthy?

·        No. Saving & investing for growth over the long term can make you wealthy.

·        However, borrowing to invest helps a lot for wealthy building.

·        The highest net worth people usually did significant borrowing to invest. Nearly all very wealthy people borrowed to invest in investments or their business. For example, the Smith Manoeuvre or investment loans (e.g., 3:1 investment loans) for investors, a business with a large loan, or real estate with a huge mortgage.

·        Borrowing to invest makes it far easier to become wealthy.

·        Let’s look at an example of wealth for people that leveraged vs. no leverage:

o Invest $2,500/month for 30 years at 10%/year growth: Investments $5,791,000.

o Borrow $1 million to invest for 30 years at 10%/year growth with a 5% loan and a 40% tax rate. Pay $2,500/month interest after tax: Investments $16,449,000 (after paying off loan).o Investments are almost 3 times as much with the same annual cash flow.

What does the Lifecycle Investing study tell us about growing wealth?

• “Lifecycle Investing” is a study by 2 Yale professors about saving for retirement the same way you buy your home. Borrow as much as possible when you are young and pay it off by your mid-50s and move to your target asset allocation by retirement.
• The study showed that 100% of the time this created more wealth than the normal bit-by-bit savings most people do.
• It works because you start with a large investment portfolio when you are young, so you grow more wealth.·       
• It gives you more reliable long-term growth because it reduces “last decade risk”. If you invest for 40 years from age 25-65 and your investment returns are low in the last decade from age 55-65, then your 40-year return is low, because nearly all your investments are held in the last decade. Your rate of return the first decade from age 25-35 is almost irrelevant, because you have hardly any investments then.
• Conclusion: When you are young, having a large investment portfolio is what matters much more than your rate of return. To build wealth, try to get as much money invested as possible when you are young and it can grow for 40 years – even if you have to borrow it.·       
• Note: This is not for everyone. Only for growth-focused people that want to focus on being wealthy and who will stay invested for the long term through the bear markets.

How can you become wealthy?

·        The wealthy are mostly older people that saved & invested effectively through their life.

·        Great news! You can do this! Just save a good amount & invest for growth for the long-term.

·        Here are 4 steps to become wealthy:

1.   Get a Financial Plan, so you know what “wealthy” means for you. Possibly $2.5-5 million.

• Know how much you need to save & the rate of return you need to make. Possibly $2,500+/month with a return of 8%+/year.
• Your Financial Plan is the GPS for your life. It keeps you focused on the long-term. It helps you avoid short-term mistakes.

2.   Wealth builds with age. Invest as much as possible when you are young (even if you borrow it). Save & invest early. Benefit from 40 years of compounding.

3.   Invest in equities (stock market investments), a business, or real estate with a large mortgage.

4.   Borrowing to invest (leverage) into equities is the most effective growth strategy if done by the right people in the right way over the long term. The Lifecycle Investing study is an example of how this can work over decades. It provided a more comfortable retirement and higher wealth 100% of the time in the study.

Ed