You’ve heard it said that your home is your greatest asset–it’s not. And neither is your investment portfolio.
For the majority, your greatest asset is your future income. Yet to be earned, your future income is the engine that drives your ability to build wealth, live generously, and obtain financial freedom. Year after year, your hard work and skill set creates a stream of revenue that keeps up with inflation.
Since income is vital to our well-being, consider these steps to grow, replace, and protect your future earnings.
Make wise career decisions: Don’t devalue your income
Choosing a fulfilling career isn’t just about the money. However, you should be wise with your career and the ways you continue investing in yourself.
Higher education is expensive. Consider the true cost and benefit of your decision to pursue a college or advanced degree. Does it make sense to take out $200,000 of student loans for a job that pays $40,000? Our society encourages this but doesn’t value the merits of going to a trade school and earning $100,000 per year.
Be an awesome employee: Grow your income
Increase your income by earning regular raises at your job. The best way to do so is being an awesome employee!
In one of our recent Defining Stewardship podcasts, Grant talks about being an employee who sees their income grow over time:
“Where we can really make a big Kingdom impact is finding needs and filling them…adding more value to our employer…really working every day when we show up to work and giving everything that we’ve got. That is very much praiseworthy, that is very much worship and guess what? You do that consistently over days, months, weeks, and years…who isn’t gonna want to give you a raise? You will find more income if you’re doing that.”
Fill needs in your community: Start a business
Being an entrepreneur is simply finding a need in your community and filling it. You don’t need an amazing idea or to be incredibly creative. You just have to love others well.
Starting a business creates tremendous opportunity for building financial wealth. It can provide an income for you and an asset you can sell or pass on to family. You can also experience the blessing of providing income to your employees.
Give God glory in your income: be generous
God gives us the ability to build wealth.
“’Beware lest you say in your heart, ‘My power and the might of my hand have gotten me this wealth.’ You shall remember the LORD your God, for it is he who give you power to get wealth…’” Deuteronomy 8:17-18 (ESV)
And we should live generously.
“As for the rich in this present age, charge them not to be haughty, nor to set their hopes on the uncertainty of riches, but on God, who richly provides us with everything to enjoy. They are to do good, to be rich in good works, to be generous and ready to share…” 1 Timothy 6:17-18 (ESV)
Replace your diminishing human capital: Save and invest
Your ability to earn income can be considered human capital. Unlike financial capital, it’s not tangible. It is, however, diminishing.
In this article, someone making $50,000 per year for 40 years can calculate the present value of that future income at $1.1 million. However, the present value of your future income gets lower as you age. Because of this, it’s imperative you replace your human capital with other financial assets like stocks, bonds, real estate, or pensions. These will eventually produce an income when you retire or can’t work.
Protect your future income: Insure it
Think about your other financial assets. If you own a house, you have a homeowner’s policy and if you invest, you might diversify to protect against the dangers associated with being too concentrated.
So how can you protect future income?
Two risks threaten to take away your ability to earn an income for you and your family: premature death and disability. If your family depends on your income, both life and disability insurance are a must!
Think of it this way: the median value of a house in Gilbert, Arizona is $340,000. If you own a home, you don’t think twice about insuring it. We’ve already determined the present value of your future income can be over $1 million. So why would you insure a $340,000 house but leave your $1 million uninsured?
In financial planning, the first and most important asset to take care of is your income. Without a healthy inflow of regular earnings, building wealth to take care of your future is difficult.
What steps are you taking to grow your income? Do you have a plan to build your diminishing human capital? Is your future income properly insured against premature death or disability?
If you’d like help securing your future, we’d be happy to partner with you. Click below to schedule a time to meet with one of our wise advisors.