Invest in Your Most Important Income-Producing Asset
Your net worth is based not only on how much moolah you have in the bank, but also on your human capital — that is, your ability to earn income. “We can think of human capital as assets specific to each person, such as intelligence, education, specialized skills, work ethic, and social skills in the workplace,” wrote Motley Fool contributor Doug Short (who has turned his own human capital into an investing website that's popped up as far away as an Australian business TV show — it's amazing what smart, retired people can do in their spare time).
These days, jobs are few and far between — and unemployment is poised to rise and stay high for a very long time. At a town hall meeting last year, Federal Reserve Chairman Ben Bernanke said gross domestic product growth would have to exceed 2.5% for the unemployment rate to fall. Unfortunately, consulting firm McKinsey says that newly-thrifty baby boomers, who are now saving at rates not seen in decades, will reduce GDP growth to just 2.4% annually for the next 30 years.
So to survive in a world of long-term high unemployment, we can't take our jobs — or our human capital — for granted. Ask yourself these ten questions to make sure you're investing in your most important money-making asset: You!
What's going on in your industry and location?
Employment and wage trends aren't the same across the country. The unemployment rate is in the mid-single digits for business and financial managers, but almost 20% for those in the construction industry. North Dakotans have the lowest unemployment rate, while Michiganders have the highest. Stay up on the news to know who's being hired, fired, promoted, and downsized in your area. It could help you land a job — or know when it's time to leave one.
How does your company make most of its money?
Most companies have more than one source of income, but not all of those revenue streams are of equal importance. Determine your company's essential sources of income, and become an integral player in those parts of the business.
What can you do to protect your job and salary?
Pretend you're your boss and you have to decide who gets a raise and who gets a pink slip. What qualities would you look for? What makes someone indispensable at your company?
If you own a business, how can you make yourself essential to your customers?
Even if you're self-employed, you have bosses. They're your customers, and they can fire you as easily as Donald Trump can. What can you do to make that hard for them?
Which skills could you acquire that would make you more valuable or diversify your human capital?
Your value in the workplace depends on your abilities. How many things can you do, and how well do you do them? Consider working toward a degree or starting a late-night self-study regimen that expands your human capital. Keep it focused on efforts that will really pay off. Simply getting an extra degree in the sociology of Star Trek could be a waste of money.
What would you do if you were fired today?
You'd probably: (1) apply at a few other places, or (2) change careers. If you'd apply elsewhere, ask yourself, “What can I add to my résumé to make them want to hire me?” If you want to begin a new career, ask yourself, “What should I be doing in my spare time to prepare?”
What can you do that you're currently paying someone else for?
Expanding your human capital includes learning how to do things so you don't have to pay someone else to do them. This pays off even for retirees. Think about doing your own home repairs, taxes, or (ahem) financial planning (though not until you know what you're doing).
Can you pick up side jobs to earn extra income?
In our Rule Your Retirement service, we pay a team of retired financial professionals to answer subscribers' questions. The previously mentioned Doug Short makes a tidy little income from advertisements on his website. Dabbling in extracurricular part-time work can pad your cash flow, expand your skill set, and could lead to a whole new career.
Can you sharpen your people skills?
I believe it was columnist Ben Stein who said your career depends on your affability as well as your ability. (Unfortunately for Stein, that didn't spare him from being dropped by The New York Times after showing up in commercials for a credit-score company, violating a corporate policy.) Your career depends at least partially on how pleasant, cooperative, collegial, and fun you are. So play nice!
What do you want to do with the rest of your life?
You'll probably do your best work if you're doing what you enjoy most. This economy might not provide the greatest opportunities for you to pursue your dream job, but you can start preparing now so you're ready when the market is.
Live long and prosper!