Take a moment to consider your current financial position. What do you think your biggest asset is?
Most people answer in the same way – their home, their 401(k), a business. They think in terms of the statements they get in the mail. And they get it wrong.
If you answered like most people, you’re likely missing:
- Your most valuable asset
- The asset you have most control over
- The source of all your other wealth
What’s the answer? Your ability to earn an income.
Your income is your most valuable asset.
What is your ability to earn actually worth? Take your current annual income. Multiply it by how many more years you expect to work. Write down your number. This is an approximation of the total value of dollars you have left to earn in your working career. Next to your remaining future income, does the value of any other single asset compare?
Of course this is a crude estimate. We’ve thrown out inflation, raises, promotions, and all the other jargon that obscures your understanding. But for those in the first half of their earning careers these adjustments aren’t all that critical. Your savings are still small. Your working years ahead are numerous. (And your probably going to get a raise at some point).
You have the most control over your income.
Now that you can see your income as an asset, think about how it compares to your other assets. It is the one you have the most authority over. You can choose to work (or not). You choose the work to do (or not to do). You choose the ways in which you seek to grow (or not to grow).
Do you have the same control over your other assets? Can you, by dint of effort, change the course of the stock market? Drive up your local property market? Change the price of precious metals? Or convince the Fed to move interest rates? There are things you can do of course on your own and within your portfolio. But these are small adjustments on small balances.
By focusing your attention on your income, you are able to make the best use of your time and effort – making bigger impact on a greater value.
Your income is the source of all future wealth.
Remember that investment returns only apply to the wealth you’ve accumulated. Those funds need to come from somewhere first. For most people, they come from income.
Your time is finite.
We like to believe that our ability to earn an income is infinite. After all, we are surrounded by stories of late successes and windfalls. We are biased to believe in a rosy future. If we didn’t, there’s no way we would sleep at night. (We would also buy more insurance).
But while our income doesn’t have a limit, our time often does. Time that must be spent- at home, at work, with friends, with family, awake, asleep. There are only so many hours in the day. And our days are numbered.
What begins as your most valuable asset fades over time. Because each year makes its own withdrawal. We cannot replace our years. At some point the value of what remains is outgrown by the resources you’ve accumulated. This change is hard to see. And some realize it too late. Learning to pay attention and invest in yourself early, pays rich dividends in later years.
Your income isn’t selfish.
It’s easy to see income as entirely self-serving. It is. And it isn’t.
Think about what has to happen for you to earn an income. You need to offer value (provide a good, service, etc.). Someone else will decide whether they will part with their money in exchange. If they value what you offer more than the price you’ve asked, a exchange happens. You’ve received income. They’ve received value. Both of you have received more than you began with.
Investing in yourself is learning how to make yourself more valuable to the world. Maybe it’s education. Maybe it’s a skill. It entirely depends on you.
Whatever the path, by focusing on creating value you are also focusing on serving the needs others have agreed are most pressing. You know because they are willing to part with their valuable resources to have you meet those needs.
Perhaps it shouldn’t need to be said, but all the above must be grounded in ethics. Honesty, work ethic, compassion. The world is a strange place, and often a broken one. Not all service is compensated. And not all value will create the wealth it’s due.
My hope is that the comments here serve only to open your eyes to an asset you may have overlooked. Quality of life cannot be measured in income. I urge you to make the best use of your time to meet the needs around you and within you, and make the world a slightly better place in the year ahead.
We all need it.
*The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.