How (and why) to manage your career as an asset

By Christopher Peck

Address your weak links first...

What’s your most valuable asset? Your home, your retirement portfolio, your brokerage account? When I talk with clients about their balance sheets and we’re talking about assets, these are the usual answers. My guess is that for most of you it’s actually something you didn’t mention: your career. Yes, your career. Hopefully you have a career; maybe you simply have a job, or worse, and my condolences, you’re out of work.

As a part of my ongoing series on building wealth by focusing on cash flow, let’s focus on one of the prime areas for making a difference in your wealth: managing your career as an asset. Or maybe I could say, “manage your career asset.” Regardless, everyone needs to think more proactively about their earned income, which begins with the work they do and evolves into the job they have and the career path they’re on.

Here’s my premise: your career is the biggest asset you have. Thinking like a financial planner, if you assume a 5% return on investment, every $10,000 per year of income is like having $200,000 invested. If you’re earning $50,000 a year that’s like having $1,000,000 stashed away. Yes, I just made you a millionaire! Of course, you have to get up and work; you can’t just spend all your time at the beach hitting the pina coladas. But the flow of income that you receive from work, from earned income, is the largest and most easily influenced source of cash flow you have. Since your career represents your largest asset, treat it with the same respect you’d treat a million dollar portfolio: preserve it, grow it, and align it with your values.To help this conversation make sense, let me step back and give a few definitions. In general terms, an asset is an economic resource. Wikipedia defines it as a resource you control as a result of past events, and from which future economic benefits are expected to flow. We normally think of our houses as an asset, for example, even though their ability to provide economic benefit is questionable these days. Other assets include an investment portfolio, an inherited collection of old coins, a profitable blog, or anything else that helps build your wealth over time. Clearly the work you do qualifies as an economic resource that (hopefully) you control and from which you gain economic benefits that you can reasonably expect to continue to accrue.

Back to the pina coladas, a unique aspect of the career asset is that without your time and attention, it has no separate value. You can’t sell your career to someone, though if you’re smart and build a business around your career, you can sell your business. That’s a crucially important strategy, and one that requires further explanation, but one I’ll save for a future article. Either way, though, your career is the ground from which you build current and future cash flow (remembering last quarter’s column on frugality and STREAMS).

I have deliberately chosen the word “career” as the description of the asset I think you should be managing. I see earned income sources on a continuum: you have work, then you get a job, and finally you’re in a career or on a career path. Having work is a fairly low level of employment: no special skills are required and you could be let go at any time since you’re much more exposed to the vagaries of economic conditions. Having a job implies a greater sense of control and engagement, a slightly higher level of permanence. But a career is a journey you’re “on.” The word comes from the Latin word carrus, a two-wheeled wagon, and is related to car and careen, implying the movement one makes through life, specifically as it applies to work, occupation, and profession. A career implies specialized skills, higher pay, and an arc of work that transcends specific jobs or employers.

A career is closely aligned with your best skills: it involves things you love to do and would do if no one paid you (though getting paid is nice!). A career is also emotionally and socially fulfilling, and can often contribute to the betterment of society. Remember that your most important sources of wealth are not financial but fulfillment, not cash but contribution, not lucre but love.

So, how do you manage your career asset? The first step is awareness; most folks I mention this idea to pull their heads back in surprise: “Ah! I never thought of that.” When you realize that improving your earned income is like adding hundreds of thousands of dollars to your portfolio, well, that tends to grab your attention!

When you’re at lower income levels, boosting your earned income is generally the fastest and easiest thing you can do to increase your wealth. You’re already investing your most precious and limited asset, your time, so make sure you’re getting the best return. As with other assets, look to increase return while keeping an eye on reducing risk. And by return, I mean financial and emotional and spiritual and social returns.

A useful tool for conceptualizing how to bring in more cash flow from your career – i.e., how to quickly improve your return on investment – is an idea I call the Chain of Profitability. It’s a simple metaphor based on the idea that you’re pulling cash towards yourself with a chain. If the chain breaks, where does it break? The weak link. If you want to strengthen the chain to be able to pull in more cash, you might bypass the troubling weak link and make other links you’re more comfortable working on stronger. If you do that, where will the chain break? Duh, at the same old weak link! Imagine pulling a very large pile of cash towards you: you need a really strong chain. Strengthen the weakest link – it’s the fastest path to success.

Let’s flesh out this metaphor a little more. Your Chain of Profitability has four links. One link is capacity and ability: your skills, knowledge, experience, and motivation and productivity. The next link is product or service: whatever it is that you’re selling, either to clients or to an employer.

The third link is marketing, the system you have in place that brings you clients or helps establish your value in the marketplace. The fourth link is the market, which includes the locale where you sell yourself, the number of folks interested in your product or service, and the impacts of broader economic conditions. Each link deserves attention, but to be the most strategic and economical in your thinking and investing, apply your resources to your weak link first.

If you have an MBA but no one knows about you, don’t go get a PhD. Figure out how to get your name and resume out there, and make yourself appealing to employers. (Marketing is your weak link.) If your ice cream shop has incredible ice cream, an excellent storefront, amazing word of mouth, but it’s located in a small town in northern Canada, you’re just not going to be able to make much money selling snow cones. (Market is your weak link.)

For almost everyone I’ve worked with, marketing is the weak link in his or her Chain of Profitability. Most people love to learn, but most don’t enjoy promoting themselves. If you’re highly qualified but underpaid, guess what? Marketing is your weak link. Occasionally the market is the weak link, as many fields have hard ceilings on pay. You might have a PhD in Art History, but there’s only so much you can make interpreting Andy Warhol for museum mavens.

The Chain of Profitability is an analysis tool that you ought to use regularly, as your weak link changes over time, especially if you’re working diligently to strengthen your Chain. At the start of your career, the capacity link is often the weakest. You need schooling, and you desperately need experience. But once you develop those, marketing often becomes your weak link. When you resolve one weak link there is now another; there’s always a weakest link! If you focus your attention on identifying and strengthening a succession of weak links over several years, you will make dramatic progress in your career and in your wealth building. Over time you’ll have a strong chain with burly links that can pull in a fat stack of cash, all while doing what you love. That’s what we call quality of life!

Please let me know how you’re doing, and do feel free to raise any questions you may have. Many thanks to financial planner Michael Haubrich from Racine, Wisconsin, who pioneered the “career asset” idea.

This article first appeared in the Summer 2010 edition of the Natural Investing newsletter

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Christopher Peck

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