Human Capital
The present value of a person's future earnings.
What is Human Capital?
A young professional's largest asset is usually their future income, not their portfolio. Treating it as a balance-sheet item explains why the young can hold more equities and why insuring the earner matters more than optimizing a small portfolio.
Human Capital: a worked example
A 28-year-old earning $90,000 holds human capital worth well over $2M in present value.
More terms in Planning, Insurance & Estate
Emergency Fund
Liquid reserves covering several months of essential expenses.
Net Worth
Total assets minus total liabilities.
Term Life Insurance
Pure death benefit for a fixed period, no cash value.
Whole Life Insurance
Permanent coverage with a guaranteed cash value component.
Disability Insurance
Income replacement if illness or injury prevents you from working.
Long-Term Care Insurance
Covers extended custodial care that health insurance and Medicare do not.
Will vs. Revocable Trust
Directs assets through probate versus holding them outside probate.
Beneficiary Designation
Account-level instructions that override the will.