Redefining Human Capital

Contributed by Lewis J. Walker, CFP®

What is "human capital"? You tend to think of your financial capital, your investment portfolio, in terms of financial assets like bank accounts, stocks, bonds, real estate, etc. Human capital sometimes is described as the lifetime money you will earn from work. defines human capital as "the collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value for the individuals, their employers, or their community."

An expanded definition is useful as you contemplate your life's course and future. If you have not done so, buy and read StrengthsFinder 2.0 by Tom Rath. The bestselling book highlights the Gallup StrengthsFinder assessment that helps you to identify and understand your top five strengths. Take the assessment and understand that your best results come when you are in the right role and operating from strength. While the definition of human capital references skills and knowledge, a true and powerful strength starts with raw talent, plus added skill and knowledge. Just like physical strength which must be built and maintained over time, a personal strength must be discerned and honed over one's lifetime as you constantly improve and upgrade skills and knowledge.

In a talk to financial advisors at a Financial Planning Association (FPA) of Georgia on 7/28/16, Atlanta psychologist Dr. Mary Gresham outlined "The Psychology of Retirement." ( My thought is that her ideas about "portfolios" are useful in the personal human capital realm way before retirement, as well as after.

We look at financial assets as a series of portfolios. Dr. Gresham cites a physical health portfolio, which is basic to wellbeing. You cannot do well in school, on the job, provide for your future, or enjoy retirement if you are a physical wreck. You know what you have to do to develop good health habits, proper diet, exercise, medical checkups. As Nike urges, "Just do it."

She also references a Social Portfolio, a close network of friends outside of work as well as in, people you enjoy and who enjoy you, friends with shared interests and activities, volunteer activities, meaning beyond work. Having a close and enjoyable relationship with adult children and grandchildren enhances life satisfaction.

Dr. Gresham details a Psychological Portfolio. To what extent do you have control of your life, of your thoughts, feelings, behaviors, decisions, attitudes, and beliefs? Do you have the relationship skills to sustain friendships and meaningful networks? Are you building and maintaining cognitive skills so your brain does not shut down once you quit working? Do you know how to relax, enjoy down time? Can you be alone with yourself and not go nuts?

Are you conscientious? Are you good at thinking, strategizing, planning, organizing, taking action, persevering, following through? It pays to know your strengths, what you are best suited to do. If you are in the wrong role, operating from weakness, you will not be happy. You will not deliver peak performance.

Added to Dr. Gresham's portfolios, consider a Spiritual Portfolio. The Old and New Testaments are full of verses about vanity and the siren song of possessions. Yes, you have to take care of business and meet your obligations. But in the end we know we can't take it with us and our Creator's "net worth statement" is not the one that documents your financial and material goods. You can check your financial credit score on line. Only you and your Creator know your "spiritual credit score."

Take a cue from Dan Sullivan, The Strategic Coach®, who said, "Always make your future bigger than your past." ( If you think about human capital portfolios, you always need a sense of meaning, of purpose, of direction, of self-confidence, of something to look forward to. Build strong habits over your lifetime and retirement should take care of itself.

The American writer Henry V. Miller (1891-1980) said, "True strength lies in submission which permits one to dedicate his life, through devotion, to something beyond himself.” Perhaps we have finally matured when we can say, "It's not about me anymore." Depending on what life throws at you, and how you respond, it takes strong portfolios to age gracefully, to be a caregiver if need be, to have a meaningful retirement no matter how you define it, and to build the kind of net worth germane to the eternal proposition.

Lewis Walker is a financial planning and investment strategist at Capital Insight Group; 770-441-2603.  Securities and advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative and investment adviser representative of  SFA which is otherwise unaffiliated with Capital Insight Group.  This information is based on sources believed to be reliable; however, their accuracy or  completeness cannot be guaranteed.  There is no  guarantee that any opinion or suggested possibility will happen.

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