What's Your Most Valuable Asset?

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 Originally Published on Linked In May 5, 2016.

 

The most common answers I hear to this question are usually something tangible. Your house, your car, your boat, your dog, etc... It’s often surprising to people, more specifically young people, when I tell them that their most valuable asset is most often their income.

 

And not just their present day income but their ability to earn an income in the future.

 

But why?

 

If you value your home at $300,000 and you make $50,000 every year, the assumption is that the bigger number is the bigger asset. But it’s the income you make that pays for the expenses of owning that house, including your mortgage, property taxes, utilities and insurance.

 

Not to mention, how do you buy a home and stay in it without an income?

 

Your ability to earn an income, particularly for people early in their careers, is your biggest asset.

 

If you take your income (we’ll stick with $50,000 annually) and multiply that number by the number of years you have left until retirement (say 35) we wind up with an astounding $1,750,000 of potential income over your remaining working years.

 

That number doesn’t take into account income increases to keep up with the costs of living or promotions you can receive from your employer over the course of your career.

 

So let’s look at the numbers now. Is your biggest asset a) a $300,000 home with a mortgage still owing on it, or b) your future income estimated at a value of $1.75 million?

 

Now I ask, is your home insured?

 

If your answer is no, stop reading and start shopping for home insurance now.

 

Is your income insured?

 

This might not be as easy to answer. You may be covered for part through your employer’s benefit plan or the government’s Workplace Safety & Insurance Board (WSIB) if you get hurt while at work.

 

If your answer here is “I don’t have disability insurance”, does it make sense to have your second most valuable asset insured, but not your first?

 

Either way, find out. Don’t assume your employer is covering you. Know if you have coverage, what you have coverage for, when it covers you and for how much. If you are having trouble determining such, ask for help. For employer benefits, your Human Resources department will probably have someone that can help you out.

 

If you get all the information you ask for regarding your coverage and you can’t seem to make sense of it, ask a Life Insurance licensed Financial Advisor who is familiar with disability insurance. They will be able to sort out what you have, what you still need and how to bring your whole financial picture into focus.

 

Manulife Securities related companies are 100% owned by Manufacturers Life Insurance Company (MLI) which is 100% owned by Manulife Financial Corporation, a publicly traded company.

Details regarding all affilliated companies of MLI can be found on the Manulife Securities website www.manulifesecurities.ca. Insurance products and services, unless otherwise noted by your advisor, are offered through Manulife Securities Insurance Inc. (in the province of BC operating as Manulife Securities Insurance Agency).