6 Ideas to Protect Your Greatest Asset

Recently, my friend Patrick from Cash Money Life wrote, “Your Greatest Asset is the Ability to Create Income.” In it, he said:

“What is your greatest asset? Most people think it is their house. They are wrong. Bank account? Wrong again. For the vast majority of people, the greatest asset they have is the ability to generate income”

What do you think? I agree with Patrick. Now, let’s explore this concept a little further. Your ability to generate income is not only your greatest asset, but also for everyone that depends on your income — i.e., your family. So, how are you protect your greatest asset?

6 Ideas to Protect Your Greatest Asset

At the foundation of any important process is a well defined disaster recovery plan. This is true financially as well.

1. Pay off Your Debt and Cut Your Expenses

These do not directly protect your greatest asset per se. However, living an expensive lifestyle and carrying debt handicap you financially by stealing your flexibility. For instance, you can’t do what you want with your money because you are stuck spending all the money and using the rest to pay off debt.

By getting rid of your debt and living frugally, you are giving yourself the flexibility needed to start an emergency fund, invest, and grow your income streams. If you want to see how real people are doing this, check out

2. Emergency Fund

Emergency fund helps protect you against unforeseen expenses and lost of income. It allows you to survive financial hardship and pay your bills. It protects you against cascading effects like having to pay late fees, defaulting on loans, ruining your credit score, etc.

It used to be hard figuring out where to keep your emergency fund, but there are actually quite a few options to choose from. When deciding how much to save, a good amount to aim for is 2-3 months worth of living expenses. If you think that is too hard, try to put away just $3 a day — by this time next year, you’ll have over $1,000 saved!

JD at wrote an excellent article, “How and Why to Start an Emergency Fund.” I highly recommend that you read it.

3. Continuous Learning

This one is not obvious at first. But I challenge you to do job searches on the web. If you have been with your organization for more than a few years, you will find that the job market is very different and you may no longer have the skills that companies are looking for.

In order to protect yourself against job loss, and recover quickly in case you do, you should periodically monitor the job market and find time to keep your skills and knowledge current.

4. Disability Insurance

This is a great way to provide some basic coverage in case you become disabled and can no longer work. My company provides basic short-term disability insurance, and for a little extra money I was able to buy extended long-term disability insurance. For instance, my disability insurance provides 100% salary replacement for the first 3 months, 80% for the 4th and 5th months, and 70% until I turn 62 (when I become eligible for Social Security payments).

If your company does not provide disability insurance, or your feel that the coverage is inadequate, you can always look outside. There are plenty of insurance companies vying for you business.

5. Diversify Your Income Streams

I discussed the idea of alternative income streams before. I believe that everyone should proactively look for ways to reduce dependence on their day job (i.e., primary income) and build passive income streams. After all, you can’t truly retire until your passive income replaces enough of your primary income to cover all of your living expenses.

A good target is to grow your passive income by 5% of your primary income per year. For example, if your salary is $50,000, try to make $2,500 away from your job, then try to shoot for $5,000 next year, etc. This means your passive income will be the same as your primary income within 20 years. Where to start?

6. Life Insurance

Well, it’s no longer about you at this point, but about whom you left behind. There are a lot of theories on how much life insurance you should buy. After reading a lot of articles on this subject, I believe the right amount of life insurance is 20-25 times your current living expenses (not income). This way the beneficiaries can invest the payout and withdraw 4-5% each year to cover their living expenses. Of course, this requires that your spouse is savvy enough to handle the finances without you, or know who to work with (i.e., professional financial advisor).

What are you doing to protect your greatest asset?

About the Author

By , on Jan 17, 2008
Pinyo
Pinyo is the owner of Moolanomy Personal Finance. He is a licensed Realtor specializing in residential homes in the Northern Virginia area. Over the past 20 years, Pinyo have enjoyed a diverse career as an investor, entrepreneur, business executive, educator, and financial literacy author.

Leave Your Comment (17 Comments)

  1. Britt says:

    thank to you guys mii insurance is never better i appreciate you and your businees i am now more successful then i was before so again i thank you guys

  2. Jonathan says:

    I read that original post by Patrick and I thought it was excellent too. I think that creativity is key to income generation as without it it just becomes a dull world. Look at blogs for examples they all use the same basic software and yet they are all different. I think the mistake people make when trying to make quick money is to follow what everyone else is doing and that is way the internet is awash with dull money making schemes. So let’s all be a little original.

  3. Joanne says:

    I agree with Patrick too and Indeed you’re right Pinyo that our ability to generate income is not only our asset, but also for everyone that depends on our income like our family. In my case, I’m the one who supported my younger sister’s BS in Nursing studies and it involves a lot of money. It’s a 4-year course and has a board exam. But with a personal financial plan in which one of it’s component is a budgeted statement, was able to protect my greatest asset. My sis just graduated yesterday and I’m truly proud and happy for her that she’ll surely have a great future ahead!

  4. Mr. Stubbs says:

    i agree, its yourself not your possession but your skill or talent. however not everyone ‘income potential’ is their greatest asset and increasingly it is their property.

  5. Minimum Wage says:

    The minimum wage job market is still pretty much the same as it has been for many years, not much change down here. It’s not as if dishwashing and hamburger flipping have become high tech.

  6. deepali says:

    To take it upstream a bit more, in addition to worrying about insurance in case of death or disability, you should also take care of yourself to avoid getting to that point (as much as possible). Decrease or manage your stress, eat right, exercise, cultivate your personal relationships, etc…

    Great post!

  7. Very nice Pinyo! I like all six of your points (although I’m not concerned about life insurance yet since I don’t have a family that depends on my income). I may need to start looking into disability insurance.

  8. Pinyo says:

    @Deamiter – Great clarification. Term life is what I have too.

    @MBB – Good add. Keeping yourself healthy is also important to protect your income. Now it’s 7 ideas. :-)

    @Lynnae – Congratulation on improving your family income. That’s a really good news.

    @Ciaran – Thank you. Actually, I think I need to increase my coverage now that the baby is here. Oops…

    @Plonkee – I’m sure your alternative income will grow.

    PS: Really hard to blog with baby in my arms.

  9. Steve says:

    Yep, I’m with Deamiter – term life is the way to go. I think the idea of defining your “greatest asset” as your career is a great way of looking at it. I can’t disagree with one of those 6 points….

  10. plonkee says:

    I’ve got disability insurance (both kinds) it doesn’t replace enough income at the moment (about a third of my salary), but if I get a payrise in April, then I’ll review it.

    Through work, I’ve got about 10 times more (free) life insurance than a single person with no dependants needs, so that’s covered.

    I have an emergency fund, and a tiny alternative income stream. Maybe I’ll be ok if the sky falls in. Need to keep working on all of it though.

  11. Ciaran says:

    Another succinct and helpful post. I agree with Deaminter, term insurance is the way to go and it’s important that any family with young children look into this insurance immediately.

  12. Lynnae says:

    Like Patrick, my husband and I are working on all of these areas. We need to check with his new job to see if he’s eligible for disability insurance. If not, we’ll have to look elsewhere.

    Thanks for the mention! (though our income has increased since the $19K days….we’re still well under the average income for our area, though)

  13. Raymond says:

    Good background tips! The health part might be the most important believe it or not.

  14. Pinyo says:

    @Patrick – Thank you. I am working on improving my alternative income streams too.

    @Ron – Welcome to Moolanomy. I didn’t know about that. I will have to find out from HR.

  15. Deamiter says:

    Certainly life insurance is very important when you’re raising children or otherwise have people heavily depending on your salary, but I think it’s equally important to note that you can save quite a bit by purchasing term life insurance to expire when your children are independent. At that point, you should have solid retirement savings that your spouse could tap into in an emergency, and there’s no reason to continue to pay the insurance companies.

    The decision to go without life insurance isn’t for everybody (certainly not if you’re heavily in debt or have people heavily depending on you) but in my opinion, it’s not necessary to subsidize the insurance companies after your children are grown and you have a significant nest-egg your spouse could tap into.

  16. Ron says:

    One thing to be sure and consider: if you pay your disability premiums with after tax dollars, I believe your benefits are not taxed. If you pay with pre-tax dollars, you’ll get nailed.

    This is what my HR department tells me, so you might want to check with a certified tax professional to make sure.

  17. Patrick says:

    Excellent ideas, Pinyo. I am working on all of these. One thing I need to do is increase my disabiliy insurance. I have a limited amount through my employer, but I’m sure I could augment that for additional coverage.

    Alternative income streams is another area I am trying to improve.

    Thanks for the mention. :)

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