Your Biggest Asset

Posted by André Nosalsky :: April 10, 2008 @ 11:45 am

What is the one, biggest asset that most people have, which many people including you may not even realize is an asset? If you look at your life as a financial system, with assets causing money to “flow into” your life, you will want to pay attention, as this post will be about your biggest asset and what you can do with it.

The biggest asset that most people have, including you, is their earning ability. It is your ability to go out into the work force and be paid wages for value that you contribute to any organization. Many people do not view this as an asset, but when they are laid off or without a job for any other reason they quickly realize how much money they were earning and bringing into their lives.

According to the U.S. Census Bureau (pdf), an average person with “some college” and no college degree will earn $1.5 million in the United States. A person with a Bachelor’s degree will earn $600,000 more, for a total of $2.1 million. This is not a small amount of change; this is the biggest income producing asset for most people.

Realizing that the income you earn is coming from an asset is an important concept. This is not money that should be all spent before the next paycheck. Rather, you should convert this income into other assets. Cutting spending and putting more money into savings and investments is one way of doing this. Buying term life insurance is another way to protect your income if a family depends on that income.

The personal savings rate averaged less than one percent for the last two years across the United States, which means that if you start saving 2%, 5% or even 10% of your income, you will be better off than most everybody in this country. And the sooner you do that, the more of that income from your earning ability can be converted to other real assets.