This is your go-to all-in-one guide on starting your wealth journey as a Canadian. In this blog, we’re talking about how to start a business, create multiple income streams, invest in the stock market, and wealth mindset.
The wealthy do not trade their time for money.
Think about it like this: We all have the same 24 hours. Now, a full-time job requires 8 hours of your time per day.
If we traded those 8 hours for an hourly wage of $20 an hour, that LIMITS our earning potential to $160 per day. This is called earned income, and most of us start here.
Your time is the most limited resource. You can’t get back your time, but you CAN get back your money.
That’s why, to truly build wealth, you need to build a system where you can make money when you sleep, or that your money makes money for you.
Building a business starts with self-awareness.
Why are you doing what you do? What impact do I want to make in the world? What is my legacy?
That’s where building a business comes in.
Here’s a secret: most founders build sustainable businesses on the notion of legacy.
How can you create a business that leaves an impact, solves the problems that you care about, and is aligned to your legacy?
That’s what I challenge you to think about and do today.
The 4 step entrepreneurship process:
1. Establish your core values
2. Create a Business Model Canvas
3. Researching your market
4. Execute, refine, and repeat!
Even though this is 4 step process, it will have to be done over and over again.
Your business model using the Business Model Canvas
Not only is understanding the BMC amazing to know for building your own business, but it’s an incredible tool for understanding the business models of the companies that you decide to invest in. Download the free business model canvas.
Canadian business structures
When you decide to move forward with registering your business in British Columbia, there are 3 main structures that you can choose from.
- Not expensive to start
- Business by yourself
- Liable to debt and personal assets taken away from you. You are not protected when anything goes wrong.
- Business partner
- Liable to debt and personal assets taken away from you
- More expensive to start & maintain.
- Is a legal entity separate from you. You are protected from anything that goes wrong.
Building a business creates infinite earning potential while creating multiple streams of income.
Why we need to create multiple income streams
Example 1: Student loan debt in Canada
Let’s go over some stats that I’m sure many of you can relate to.
Canadian Student loan debt is at an all-time high. From 1964, there was less than $1 million dollars worth of student loans disbursed to the average student.
Student loan debt has exponentially grown to 2 billion 500 million dollars to the generations of Millennials and Gen Z. Coming out of University, the average net worth of a student is negative $60,000 with accumulated student loan debt.
Example 2: Housing: The Millennial Dilemma
KPMG recently created a survey showcasing the millennial dilemma:
- 72% of millennials say their goal is to own a home
- 46% of millennials say owning a home is unrealistic
- 38% believe that their house wont be worth as much in the future
- 46% of millennial homeowners received financial help from their parents.
Millennials take an average of 13 years to save for a 20% downpayment for their homes. their parents only took 5.
Additionally, the Debt-to-income ratio for millennials is 216%. It was only 125% for Gen X, and 80% for Baby Boomers.
How do we solve this problem? We build multiple streams of income. The average millionaire actually has 7 streams of income, but you can create way more.
The average millionaire has 7 streams of income.
Income stream examples
- Part time job
- Investments in the stocks
- Business profits
- Dividend stock investments
- Content sponsorships
- Affiliate links
- Interest from a savings account
You can’t get attached to money, a career, and material things. Only get attached to your calling, purpose, passion, and happiness.
Money is the key to time and financial freedom only if you know how to manage it.
The foundation of your wealth journey is truly your calling, purpose, passion, and happiness. Like we talked about before – why are you doing what you’re doing? Being clear of your purpose will lead you back to the path when things get hard.
Many young people settle for full-time jobs they hate, just because they’re comfortable but it pays the bills.
True wealth comes from a place of abundance, joy, and alignment.
You can’t manage what you can’t measure.
Track EVERY dollar you spend. Minimize expenses that don’t bring value and joy into your life. I use Mint to track all my accounts and expenses.
You should know where every single dollar in your account goes. Mint will give you a breakdown of your financial goals, where your money is being spent, your net worth, debts, assets, and more.
Automate your finances.
- Bill payments
- Extra debt payments
- Retirement contributions
With your bank, you can set up different automations every month to keep your financials in check.
When you get paid, set aside a percentage of that money to allocate between your debts and assets.
Have a growth plan.
- Pay off all debt by age 30
- Invest 20% – 70% of your income
- Read 1 book per month
- Exercise once per day
- Invest in people who invest in you
This is important because you can track your long and short-term financial goals. Remember that wealth is aligned with your growth.
Use your credit card, but treat it like a debit card.
The benefits of using your credit cards:
- Have insurance on everything you buy
- Will prevent money fraud
- Strengthens your credit score
Credit cards can be a whole presentation on their own, but there are endless benefits to using them. Every credit card has different benefits, I list the ones I use here.
Have 3 to 6 months worth of emergency funds stored in a high interest savings account before you invest.
I use EQ Bank, they’re the best Canadian high-interest savings account.
An emergency fund account is an account that you can pull money directly from instantly when something unexpected happens.
I use EQ bank, they have the highest savings account interest is 1.5% percent. Get $20 when you deposit $100 to your new EQ Bank account with my referral link.
Invest the majority of your money.
The more you can invest, the more interest will compound. Let me share with you a chart that outlines what this looks like.
It will grow exponentially and will keep you from spending it. Let’s go over some examples.
Cash vs. savings vs. investing
The power of compounding interest when you invest
The 50:30:20 rule when forecasting your money
Intro to investing in the Stock Market: making your money work for you
There are 3 investing accounts in Canada:
- The Tax Free Savings Account (TFSA) account
- Registered Retirement Savings Plan (RRSP) account
- Individual investing account
Average Canadian inflation rate is between 1% to 2% over the past 4 years. In 2021, it was 5%.
This is how much your money depreciates per year.
This means, if your money is sitting in a checking account, or if you have cash that is not invested, it depreciated by 1 to 3% every year because of inflation.
We beat inflation by investing.
The benefits of investing in a TFSA account
- Tax sheltered capital gains with the exception of USA dividend stocks
- Limited contribution amount that changes every January 1st starting from the year you turn 19
- Unused contribution room carries over to the following year
- Withdraw money anytime with no fees or taxes
- Penalty of 1% every month for over contributing
The benefits of investing in an RRSP account
- Tax sheltered capital gains
- Tax refundable based on RRSP contributions by deducting taxable income
- Contribution amount based on your last year’s income.
- Contribution room will increase 18% of previously earned year’s income. Unused contribution room carries over to the following year.
- Taxed every time you withdraw money
- Penalty of 1% every month for over contributing
Canadian Investing Brokerages
Here are my 2 recommendations for online brokerages to open your investment accounts with.
- Wealthsimple Trade for beginners
- Interactive Brokers for advanced and intermediate investors. Open your investing accounts using my link and get a stock worth $1000 for free.
Let’s talk about your investment options as a beginner. You choose what works best for you depending on your financial goals.
- Stocks: Shares of stock are small ownership of the company you invest in.
- Bond: A bond is a debt representing a loan made by an investor to a borrower. A typical bond will involve either a corporation or a government agency. They will issue a fixed interest rate to the lender in exchange for using their capital.
- ETF: An exchange traded fund (ETF) is a basket of stocks in one. Instead of 100% stocks, you a diverse percentage of multiple companies. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to track specific investment strategies.
- REITS: Real Estate Investment Trusts act like mutual funds wherein a group of investors pool their money together to purchase properties. They trade like stocks on the same exchange.
- GIC: A GIC (guaranteed investment certificate) is a safe and secure investment with very little risk. It GIC works like a savings account in that you deposit money into it and earn interest on that money. The difference is that you need to leave your money in a GIC account for a specified period of time. If you take it out early, you may have to pay a penalty – depending on the type of GIC you own.
- Mutual fund: A mutual fund is a type of investment where more than one investor pools their money together in order to purchase securities. Mutual funds are managed by portfolio managers who allocate and distribute the pooled investment into stocks, bonds, and other securities.
Note: There are more options than these 6 that are for more advanced investors in different markets, such as options, forex, and futures!
The 3 most talked about indexes
- S&P 500: Tracks 500 large U.S. companies across a span of industries and sectors.
- NASDAQ: Tracks the roughly 3,000 companies that are traded on the Nasdaq Exchange with a 48% focus on technology.
- Dow Jones: Tracks the 30 largest U.S. companies.
The average rate of returning investing in the S&P 500 index fund is 12% annual growth.
Now, you may be asking yourself the question:
How do I know which company to invest in? This is where you do different analyses. The first one is called fundamental.
Fundamental analysis is looking at data that is expected to impact the price or perceived value of the stock.
Ex: Cash flows, balance sheets, income statements, etc.
The second analysis that you want to do is called technical. This is used to predict future price movements providing traders with the information needed to make a profit. Technical analysis includes charts in order to identify entry and exit points for trades.
Ex: Past market performance, statistics, etc.
Book recommendations on building wealth for beginners
- Rich Dad Poor Dad by Robert Kiyosaki
- The 4-Hour Workweek by Tim Ferriss
- The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas J. Stanley
- Thinking Strategically: The Competitive Edge in Business, Politics, and Everyday Life by Avinash K. Dixit
That’s a wrap! Save and share this blog as a reference for you and your friends to come back to on your wealth journey.
This blog is a workshop I presented for Simon Fraser University students about building wealth through entrepreneurship and investing. The presentation slides can be viewed here.
Thank you for taking the time to learn and read this today.
If you have any questions or comments, I’d love to hear from you! Leave a comment below, or send a DM through Instagram.
Disclaimer: I am not a financial advisor and this is not guaranteed investment advice. This blog is for informational purposes only.