Human Capital

From a financial perspective, we are more than our (paper) net worth.  We also possess something economists call “human capital”.  I’d call it expected earnings potential.  Whatever you call it, it is an asset and is worthy of upkeep and proper maintenance.

So lets say you’ve learned some valuable skills and have a desk job with a comfy office chair… and free juice and soda.  Well, cool — until your age surpasses your waste line.  Your waste line gets jealous and tries to catch up.  This is not cool.  It is time to start exercising your human capital — literally.  (Or swear off the soda.)

Some financial advisers would say its time to think about insurance, especially life insurance.  Possibly.  I’m thinking the best returning investments are exercise and diet.  One’s a four-letter word and the other is even more unpleasant.  Both, however, pay dividends.  Benefits include longer life expectancy, better wellness, healthier appearance, and often improved mental function.  Yes, your mileage and results may very, and please consult your doctor.  Keeping yourself fit and healthy is a good investment.  It is often challenging and frustrating, but many investments in the self are.

Another investment to consider is education and training.  I’ve read articles saying that a master’s degree beats a bachelor’s degree, even after educational expenses and a ~2 year delay in entering the workforce.  I’ve also read publications claiming the opposite.  I think its a toss up and depends on many factors including major.  What I strongly believe is that a four-year college education is both financially desirable as well as rewarding for many people, and that in general state colleges and universities provide a better overall return on investment than expensive private colleges.

I also believe that there is such a thing as too much school, from a financial standpoint.  In many fields, a Ph.D. is no more valuable than an M.S., and is sometimes even a liability.

Some folks are not that into traditional classroom-based learning.  I love the classroom, but if I had the talent (aka a better arm, better glove, better hitting, and better speed) I’d be a professional baseball player.  Right fielder for the San Diego Padres sounds perfect.  Sorry, Will Venable, I want your job.

The long and short of this financial blog post is that an important component in investing in your financial future involves investing in yourself.  For me that takes a lot more emotional effort.  Nonetheless, I am making that effort.

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