You may be a lot wealthier than you think. Most people look at their 401(k) or other retirement plan, add in the value of other assets — their home, other investments, savings, etc. — then subtract their debt to get their net worth. After the housing-market bust and the bear-market rout of recent years, that number may look painfully small.

But what's the value of you? That is, how much are your future paychecks worth? That number is your "human capital" — and some experts say it should be a key part of your overall financial planning.

Human capital "is anything that's going to generate a cash flow that isn't your investments," said Moshe Milevsky, a professor of finance at York University in Toronto.

"It's your ability to work, your ability to get a bonus, to get overtime. It's a gold mine and an oil well, but you're producing the gold and the oil," he said. "It's millions of dollars when you're in your 20s."

As you age, your financial assets increase and your human capital — the value of your future earnings — decreases, because you have fewer working years ahead. While your human capital is not cash in hand, it's an asset that should be protected and managed just like other assets in your portfolio, Milevsky and others said.

Still, while the concept of human capital has existed for decades and has generated interest among economists and finance experts, there's no guarantee your local financial planner embraces the idea. "Human capital is not as appreciated as it should be," said Andrew Sieg, head of retirement services at Bank of America Merrill Lynch. At a recent panel discussion on retirement risks facing young people, Sieg and others raised the concept repeatedly.

"Almost no [financial planning] tools factor human capital into retirement planning," Sieg said.

Milevsky, who also is president of Toronto-based wealth-planning company QWeMA Group, offers a free tool for measuring human capital. is a free planning tool that incorporates the idea of a household balance sheet. Goalgami's maker, Advisor Software of Lafayette, Calif., makes financial-planning software for professional advisers that "can deliver a certain amount of precision to the human-capital calculation," said Neal Ringquist, president of Advisor Software.

However, a future job switch or other change may render "that level of precision meaningless," he said. Thus, "we use the household balance sheet to capture the impact of the level of human capital on the household financial circumstances. "It's how those numbers fit into the overall financial picture of the household that is relevant."

Diversify, Protect

Whether or not you gauge your future earnings' value, the human-capital concept implies a more immediate task: Reassess whether your portfolio is diversified. For instance, if you work in the technology industry, then you might want to dial down your investments in tech stocks.

"You work for an auto company? Your financial portfolio shouldn't have auto stocks in it," Milevsky said.

And there are other ways to diversify these days, said Robert Johnson, senior managing director of the CFA Institute, which awards the chartered financial analyst designation. "The growth of exchange-traded funds aimed at specific sectors makes the task of diversifying your human capital easier," he said. "Now you can short these ETFs... it's much easier to isolate that exposure now," he said. "There are ETFs [for] virtually every sector."

Still, some say investors should proceed carefully. "Perhaps a career in financial services might lead you to lower your allocation to financial-services stocks," said Mackey McNeill, president of Mackey Advisors, a financial planning firm in Covington, Ky.

But "rarely would I suggest someone skip an asset class altogether based on their career," she said. A real-estate professional, for example, might reduce his exposure to real-estate investment trusts, or REITs, she said, but might still consider investing in foreign real estate.

Another task: Protect your human capital with life insurance (if you have dependents) and disability insurance.

"If we were as focused on human capital as we should be, [everyone] would have disability insurance," Sieg said.

That's because, given the value of your paycheck, you need to insure against its loss. Just over one-fourth of today's 20-year-olds will become disabled before age 67, according to the Social Security Administration.

Also, your human capital may help you decide whether to go back to school. Investing in your human capital may give you the option to work more years, Milevsky said.

Others agreed. "I have a 76-year-old client who is beginning her fourth career," McNeill said. But assessing the return on educational investment is key before taking on debt. "You have to look at what you will spend on your education and what are the likely [salary] outcomes," she said.

Part of the Plan

While many financial planners may not overtly embrace the concept of human capital, a client's expected future income is included in the planning process.

Michael Eisenberg, a certified public accountant and personal financial specialist in Los Angeles, said he asks clients about their current job and income, and asks them to assess the long-term viability of their job.

"We normally take their cost of expenses now and factor in a 3% inflation factor. That gives you the needs down the road," Eisenberg said.

Financial planning in a nutshell, he said, is "here's what you're going to spend, here's what you need to bring in to spend that, how do we plan to get you there?" he said. "Unfortunately, nobody can say that whatever it is they're doing today they're going to continue doing five years from now."

Advisers don't necessarily use the term "human capital," said Johnson of the CFA Institute. "When you're a CFA charter-holder you are charged with taking an individual's circumstances, their personal circumstances and their financial position into account and part of that is your future earnings stream," he said. "That is a part of doing financial planning, of putting together appropriate portfolios and giving advice for clients."

The CFP Board, which grants the certified financial planner designation, has a similar take.

"The concept of 'human capital' is not directly identified in the current or upcoming exam blueprint," said Dan Drummond, spokesman with the CFP Board. But "the concept is indirectly covered" when assessing factors that affect clients, "particularly regarding earning potential and its economic value to the planning process."

Financial planners also incorporate the idea of human capital when they help clients prepare for the possibility of disability, and whether someone's skill sets would be transferable to another profession or career, Drummond said.

Andrea Coombes is MarketWatch's personal finance editor, based in San Francisco.

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