The Northern neighbor of the United States could hardly be more different in terms of policies. Canada veers towards socialism in terms of redistribution of wealth. The average income in Canada is about $45,000 per year, which is lower than the US and reflects a lower cost of living.
In the United States, you need half a million to be in the top one percent, Canada’s economy is so different that you need less than half that amount to be considered rich. Far from being a tax haven, like Monaco, the UAE, Singapore, and Bahrain, those in the upper-income bracket in Canada pay about one-third of their earnings in taxes.
Income inequality is the gap between the top one percent and everyone else. The top one percent tend to hold an inordinately high level of a country’s wealth. In some countries, laws favor “everyone else” by taxing the wealthiest people and using those taxes for public services. Other countries, however, tax laws favor the top one percent and, in some cases, encourage those at the top to hoard money.
While some argue that a fair economic system encourages those who “have what it takes” to get to the top, others disagree. Moreover, there are plenty of studies to show that when public services, such as schools, are not funded, an uneducated populace leads to an uneducated workforce. The result is a lower quality of life for everyone including those at the top. After all, even the wealthy fare better when those around them are educated and competent.
You can have an income of a million dollars a year, but if you spend all of it, you are not accumulating wealth. Many of the world’s wealthiest people spurn high fashion labels, such as Gucci and Louis Vuitton, and prefer to drive standard automobiles instead of Cadillacs and Rolls Royces. They understand that to build wealth you can’t just make money; you have to use and save money wisely.
Nevertheless, other forms of wealth have little to do with having a high income. Some of the world’s happiest people are middle class. They have plenty of money to provide for their own needs and some of their wants, and most of their energy is focused on the people they love instead of wealth.
Having an individual income means you have spending power, but it does not necessarily mean you’re rich. You can spend that entire income maintaining a lavish lifestyle and still be paycheck to paycheck. But then you’re no better off than someone who makes much less. Without assets, investments, and other forms of wealth in place, any economic downturn that causes you to lose your income can devastate your finances. And little things matter. If you don’t have adequate insurance and have a medical catastrophe or your house gets destroyed, you immediately lose that investment.
And no, a luxury car is not an investment. Cars lose 20% of their value the second you drive them off the lot. A vehicle has the job of getting you to where you need to be safe. It is not an investment. Make sure that when you are considering what wealth is, you are considering all factors. Income can disappear just as quickly as you can spend it. Wealth has to be built over a lifetime or over generations.
So how much do you need to be in the top one percent? We saw the answer varies from one country to the next throughout this article. In oil-rich countries, such as the United Arab Emirates, that number will remain high. In developed countries, that number may be lower but reflect generations of wealth that a family has acquired.
On a global scale, if you have $745,000 in income, assets, investments, and other things, you’re in the top one percent. So if you have a house that is worth $750,000 and is fully paid off, you are in the top one percent, whatever your income is. If your income alone is $745,000 and you have no savings, you are in the top one percent but with a thin margin.
You can request that your wealth be used to buy a fancy coffin, but you can’t take your money with you when you die. Moreover, remember that while having enough money to have a comfortable shelter, food, and clothing is certainly a component of a “good life,” the moments that make up each of the days that you live don’t consist of money but instead of memories.
Memories are created by doing meaningful things with the people that you love. Make sure that in your efforts to build up wealth and secure a good life for yourself and your posterity, you are not neglecting the most important people in your life.
The axiom says that money cannot buy happiness, and it’s true. Money can buy many things and help you have a comfortable life; after all, who wants to go through winter without adequate shelter and heating? Yet there are some things that you have to look for outside of your income.
Studies consistently show the happiest people are not necessarily those who acquire the most money but rather the ones who give it away. They support causes that they see as worthy. Some choose to donate money to charities that support the homeless, while others contribute to environmental causes. Others give towards children’s issues. Whatever they consider valuable, they find meaning in letting their money go towards something greater than themselves. In doing so, they help to build wealth for all of humanity.