The Joy of Financial Security covers many financial topics and many strategies for increasing one’s happiness. In Human Capital, Part 1, I described that human capital involves managing our income stream throughout our career, in a way that allows for consistent savings which can lead to financial security.
One of my long-term clients retired from a teaching career several years ago. During her working years, she routinely contributed the maximum allowed to her employer’s retirement plan. When she retired, her monthly take-home pay was higher than her teacher’s salary. How was she able to do this? There were two contributing factors: 1) She had been an employee for the same school district for many years, and her pension was substantial; and 2) once she retired, she was no longer contributing to her retirement plan, which had been reducing her take-home pay.
Managing your human capital entails thinking through what you love to do and then obtaining the necessary education to pursue that career path. It may also include researching the career paths and potential employers that may provide you with a retirement pension and excellent employee benefits (health insurance, disability insurance, vacation days, etc.). Your research may include investigating opportunities for advancement, an enjoyable work environment, and jobs close to home (with short commutes). Networking with others in your chosen field is essential.
The concept of managing your human capital applies to teenagers and college students who are just embarking on their careers. However, most college-age kids do not know where their passion lies. That comes with trial and error, experience, and wisdom. The concept also applies when someone is contemplating a career change or preparing for retirement. There are plenty of examples of professionals who were highly paid investment bankers, corporate executives, doctors, and lawyers who chose to leave the stress and high income behind. Maybe they moved to the country, to a simpler (and less expensive) lifestyle. Maybe they pursued their dream of changing careers and became farmers, raised goats, and made cheese, or devoted their talents to a charitable venture for which they were passionate. In some cases, they had saved plenty of money when they were in their highly paid profession. In other cases, they drastically simplified their lifestyle and reduced their expenses to match their new lifestyle. Clearly, these people were interested in more than just maximizing their income.
The key in managing your human capital is to determine what you love to do and to design your life around doing it. If you can find a way to be paid for doing what you love—and to create a consistent income stream throughout your working years—then you can consistently save for the future and attain financial security.
