Cover image credit: Capital by Pix4free.org is licensed under CC BY-SA 3.0.

Have you ever considered what is the most valuable resource available at your disposal from a financial point of view?

It’s not the money, honey!

If you think it’s any of your material possessions or even the money you have in your bank accounts, think again.

In reality, money is only one of the most useful financial resources available at your disposal, since it can be readily exchanged for utilities that you may want or need.

So, what is a more valuable financial resource than money?

What’s more valuable than money

The smart folks might answer that it’s the ability to earn money (henceforth termed “earning power” for brevity) that is more valuable than money itself, since with this ability you can always earn more money. While there is some truth to this statement, in reality your ability to earn money is not your own financial resource¹, as we’ll see below.

Your earning power is based on some of your personal characteristics, such as:

• your skills and knowledge
• your experience and training
• your physical and/or mental attributes, e.g., fitness, intelligence, etc.

In addition to these internal factors, however, your ability to earn money also depends on external factors, such as:

• the marketplace for your talent in your location at the current time
• the financial state of the economy, field, and/or industry you work in
• governmental, technological, social and other changes relevant to your field of work

Thus, we see that your earning power cannot be your most valuable financial resource.

So, what is your most valuable financial resource?

What’s missing?

As we saw above, your earning power includes some components that are more valuable than money itself, yet earning power cannot be your most valuable financial resource. To answer the question of your most valuable financial resource, let us introduce another related concept.

From the foregoing discussion, it is clear that your most valuable financial resource should include the personal characteristics of your earning power. Notice however, that

how much money you earn is not only a function of your skills, knowledge, experience, etc., but also how much time and energy² you’re putting in your work to earn money.

In other words, your earning power only encapsulates how much potential you have to earn money, which may be very different than how much money you actually end up earning.

Lifetime capital

It follows that, in addition to your personal characteristics that determine your earning potential, your most valuable financial resource should also include the following most critical factors that determine how much money you actually make, viz.:

• your time
• your energy

Let’s call the entire set of personal attributes that together play a crucial role in determining how much money you actually make as your “lifetime capital”.

The first thing to notice about how we’ve defined lifetime capital is that it includes only your personal characteristics, and make no reference to external factors outside your control, e.g., the talent market in your area. Therefore, lifetime capital qualifies as a candidate for your most valuable financial resource, unlike earning power.

Furthermore, just as earning power is more valuable than the actual money you have, by the same token, lifetime capital is more valuable than your monetary possession, too.

By now, you can see that your lifetime capital is a better candidate for your most valuable financial resource than your earning power or how much money you possess.

But, why should lifetime capital be your most valuable financial resource?

Importance of lifetime capital

As we saw above, one of the critical components of your lifetime capital is your time. This represents the time you spend in doing your work to earn money. Since this time comes out of your finite lifetime, it follows that the time spent in earning money is not available to do something else, e.g., enjoying time with your loved ones³.

Furthermore, the time you spend in making money is gone forever – unlike your money – so your lifetime capital is more precious than any of the other financial resources at your disposal.

Thus, your lifetime capital is arguably your most valuable resource⁴.

Some profound implications

One way to look at the money you earn through paid employment is that it’s our capitalist society’s default way of measuring the lifetime capital that you’ve spent in earning it.

This implies that when you spend your money to buy a utility, it’s equivalent to spending the corresponding amount of lifetime capital to acquire that utility.

To take a concrete example, say you earn at an hourly rate of 100 LCU, and are spending 10,000 LCU for a monthly video subscription service that you only sometimes get to enjoy for a short while due to your busy work schedule. This implies that you’re spending the lifetime capital accumulated by working for 100 hours per month of your life for this occasional pleasure. Contrast this to the actual time you’re spending to do other meaningful activities in your life, e.g., maybe you spend only 50 hours per month with your loving family. Thus, you’re spending double the time to earn enough money to indulge in yourself in your video subscription service compared to the actual amount of time you spend with your family! Would this video subscription service be still worth that much to you?

In this way, when you start seeing your spending decision from the perspective of your lifetime capital, you may begin to realize the real importance of your spending decisions in your life, and with this awareness you can align these decisions with your true personal goals and values.