Speaker 1: Welcome back to the Net Worth podcast.
This week we are diving into earning power, pricing your career like an asset.
And remember, you can check out the full edition on our website, wearenoyack.com.
So our mission today, really it’s about flipping the script.
We all tend to look at our paycheck, right?
That number that hits the bank account.
This month, but honestly, it’s kind of a terrible way to measure real financial progress.
It hides the the true value you actually own.
We want to show you how that paycheck is just, well, the cash flow from your biggest asset, your earning power and you can measure it, protect it, grow it.
Speaker 2: Exactly.
And that shift in thinking that’s the key to really getting a handle on your net worth looking just at salary.
It leads to, you know, short term decisions, lifestyle creep, earning power, like we talked about in this edition of your Wealth Blueprint.
It’s the value today of all the money you’re likely to earn in the future after taxes.
It forces you to treat your career like, well, like a multimillion dollar asset you already own, an asset that needs managing, needs protecting.
Speaker 1: OK, I get the theory.
But why now, Why is this so critical right now, especially thinking about millennials dealing with, you know, career shifts, remote work, equity that might or might not pay off, rising costs.
Why not just focus on, say, our savings rate?
Speaker 2: Yeah, good question.
Because the savings rate, that’s the result, not the source, focusing only there is.
By looking at the scoreboard without knowing the game plan right, we actually highlight five big reasons in the piece why earning power should be your main metric.
The first one, you kind of touched on it.
Paychecks aren’t plans.
What happens when most people get a raise, right?
They adjust their budget.
Maybe a nicer car, bigger apartment.
That potential wealth just becomes lifestyle inflation.
Earning power attracts the potential, not just what you spend.
And the second reason.
Small skill bumps compound like crazy.
You asked why now?
Well, careers today are all about adding skills.
Maybe a certification to your course there.
That little bump, Maybe an extra 3 grand a year from a new skill over a career that can easily add 6 figures to your lifetime earning asset.
That initial compounded over 25 years, It’s huge.
The paycheck alone just doesn’t show you that leverage.
Speaker 1: The compounding thing, yeah, that really lands.
I know people who look at, say, a $5000 industry course and think a little too expensive this year.
But if they frame it like, OK, how does this investment affect my my $3,000,000 future asset?
The math looks totally different.
Speaker 2: Exactly right, which leads to the third reason, resilience.
Planning for resilience.
When you really internalize that you own this multimillion dollar potential asset, you immediately see the risk, right?
What happens if you can’t work?
It naturally pushes you to think about ensuring it properly.
Long term disability insurance becomes obvious and keeping enough cash on hand that runway if you don’t track the asset.
Why would you protect it?
Speaker 1: Makes sense.
And 4th better tradeoffs.
Big decisions become clearer.
Should I do that expensive MBA or is this specific certification a faster, better ROI?
Take the stable corporate job or the risky startup with potential upside.
When you use earning power as your ruler, these aren’t just gut feelings anymore, they become actual comparisons you can weigh.
Less guesswork.
Speaker 2: OK, And the last point, like we put it in this edition, think of your income as the river feeding your financial life, earning power.
That’s the map.
It shows you where the river can go, the best routes, the potential dangers.
Speaker 1: All right, let’s get practical then.
A multimillion dollar asset.
Sounds complicated, needs fancy math maybe.
How does someone listening right now get a decent estimate?
Like a beginner friendly way without getting lost in spreadsheets.
Speaker 2: Yeah, totally.
We really emphasize getting a ballpark range.
Precision isn’t the point here, it’s the perspective shift that matters.
The simple method avoids getting tangled in like discount rates and future inflation guesswork.
So first step, just start with your take home pay after tax what actually lands in your bank account.
2nd pick a realistic number for how many years you think you’ll work.
Be conservative maybe say until age 60 or 65.
Speaker 1: OK so the quick math is just take home pay times years left.
That gives you the I guess the raw number.
But you said adjust it.
Why adjust?
Doesn’t that add complexity?
Speaker 2: Well you adjust it because that raw number assumes your salary never changes which isn’t realistic.
Right.
So you adjust it up, but generally factor in some likely conservative raises.
Think like one 2% real growth above inflation, not crazy numbers.
And then you also adjust it down again gently for uncertainty.
Life happens.
Career changes may be time off for family, maybe your field changes.
You build in a little buffer for risk.
Speaker 1: Got it.
So let’s use the example from the piece, someone taking home $105,000 a year, 28 years left to work, the rough total, like you said, 100 and five K * 28 years, it’s $2.94 million big number.
Wow, OK.
But then with the adjustments factoring in some raises, but also, yeah, the risk maybe taking a couple years off over 3 decades.
What does that look like realistically?
Speaker 2: Yeah.
Applying those cautious adjustments, the realistic ballpark range we landed on was somewhere between, say, $2.3 million and $2.7 million.
And we always stress using the range.
Don’t get hung up on one perfect number.
Knowing your main asset is worth somewhere in that multimillion ballpark.
That changes how you look at buying a house or figuring out how much to save it provides.
Context that range yeah it feels really powerful.
Speaker 1: It makes you respect what you already have O this is where it gets really interesting for me.
What are the quick wins the tangible benefits people feel when they switch to this earning power first thinking how does it create options flexibility
Speaker 2: ohh the first benefit hits fast.
Clarity.
It’s like someone flipped the lights on.
Suddenly your career moves, your savings goals, your investing plan.
They’re not separate things anymore.
They’re all connected, part of the same strategy.
And that clarity, it builds confidence.
You stop second guessing moves so much, like maybe you took a new job that pays only a little more now, but offers way but on skills or opens more doors.
Later you can see clearly, OK, this move increased the likelihood and size of future bumps, boosting my $2.5 million asset.
It validates the long-term play.
Speaker 1: Yeah, like the examples we use, that $3000 certification adding $3000 a year, that’s 100% return in year 1, and then it just keeps compounding on your biggest asset.
That’s efficient.
Speaker 2: Exactly.
Or think about job switches.
People often chase the big one time signing bonus, but maybe another offer has, say, an 8% base pay bump.
It puts you on a much steeper growth path.
Even without the big upfront bonus, that second job could easily add hundreds of thousands more to your total earning power over time because it resets.
Compounding base higher.
Speaker 1: OK, this sounds almost too good.
Where’s the catch?
If we’re just looking at today’s paycheck, what are the mistakes people make?
The watch outs that actually chip away at this big asset?
Speaker 2: Yeah, that’s crucial because risk often hides behind optimism, right?
A huge watch out is counting.
Maybe money.
Think unvested stock options or start up equity.
It feels real, but until it’s vested in liquid you should treat it as zero in your core plan.
People bake it into their spending and then if it doesn’t pan out trouble.
That’s planning on a bonus, not the core asset.
Speaker 1: Don’t count your chickens.
Speaker 2: Pretty much.
Another big one is getting caught illiquid while carrying high interest debt if you focus only on maximizing.
Long term savings.
You might lock up every spare penny, then a small emergency hits.
Car repair, temporary job loss and you’re forced to sell investments at the worst time, or worse, rack up credit card debt.
You need that accessible cash buffer for the next, say, 6 to 18 months.
And probably the biggest risk, the one that could wipe out the whole asset under insurance.
Absolutely critical.
Speaker 1: Yeah.
If this thing is worth millions, you have to protect it.
If anyone relies on your income, partner, kids, even parents, maybe.
Term life insurance and especially long term disability insurance are not luxuries.
They are fundamental.
Not having adequate disability coverage, that’s basically betting your entire multimillion dollar future asset that you’ll never get.
Seriously sick or injured, it’s a massive unforced error for most people.
Speaker 2: OK, so zooming out a bit in the hole, your wealth blueprint framework, where does earning power fit?
Is it foundational safety stuff or is it growth investing?
Speaker 1: It’s actually the bridge between them.
It sits right in the framework layer.
Foundation is your safety net, cash, basic legal docs.
Growth is investing.
Burning power connects them.
It takes your basic income stream and turns it into a quantifiable long-term plan.
Once you have that range, that estimate of your assets value gives you the real numbers to inform everything else.
How much should you be saving?
How much insurance do you actually need?
How much investment risk can your family really handle?
It provides the scale right?
Speaker 2: And this addition lays out.
Great, very actionable 90 day road map to get the system going.
It’s not about being perfect on day one, right?
It’s about building the habits.
Let’s walk through those phases quickly, focusing on the why behind the actions.
So weeks one and two baseline and cash map goal.
Write down your earning power range estimate.
List out any bad debt like credit cards over 810% APR.
Tag 90 days of spending.
Why tagging?
That sounds kind of tedious, huh?
Speaker 1: Yeah, it can feel that way, but it’s about closing the gap between knowing and feeling where the money goes.
Most people kind of know vaguely.
Tagging forces you to see it transaction by transaction.
It’s not about guilt.
It’s about finding the leaks in your cash flow so you can redirect that.
Money toward building the asset instead of just, you know, letting it drift away.
Speaker 2: OK, makes sense.
Then weeks 3 and 4 automate the wins.
This is about making good choices.
The default setting, exactly.
Speaker 1: The goal here is setting up automatic transfers that target 15 to 25% of your net pay, going straight to savings or investments first before you can spend it.
Also making sure you capture your full employer.
401K match that’s free money and having a clear plan to tackle that high interest debt systematically.
Automation beats willpower every time when it comes to fighting lifestyle creep.
Speaker 2: Love it.
OK weeks 5 through 8 build the engine.
This sounds like we’re the investing and protection really come in draft A1 page investment policy statement or IPS and do that insurance.
For people who haven’t done formal planning, what’s the point of an IPS?
Speaker 1: The IPS is basically your personal rulebook for investing.
It’s simple, just defines your goals, how much risk you’re comfortable with, and what types of investments you’ll use.
Why is it crucial?
Because it stops you from making panic decisions when the market gets choppy.
You decided the rules when you were calm and rational.
It keeps your strategy aligned with your long term earning power goals.
And of course, getting that insurance review done, checking your disability and term life policies.
That’s bolting down the protection around this whole wealth engine.
Speaker 2: Got it.
And finally, weeks 9 to 12 optimize and grow.
Sounds like continuous improvement.
Speaker 1: Exactly the goal here is all about.
Pre commitment you actively plan your next income upgrade, maybe asking for a raise, finding a better job, learning a new skill, and crucially you decide before you get any raise that a chunk of it will automatically go towards your savings goals.
You commit the money before it even hits your checking account.
Lifestyle creep never gets a chance and setting that regular check in.
Maybe quarterly to just glance at your earning power estimate and your net worth keeps you on track.
Speaker 2: Perfect.
So to wrap all this actionable stuff up, let’s quickly hit that five point Henry wealth checklist again.
It’s a great summary.
Speaker 1: Yeah, it’s the quick focus guide.
One track it to grow it, earning power yearly, net worth monthly.
Can’t manage what you don’t measure.
To pay yourself first, automate savings, make it the default 3.
Kill toxic debt fast.
Anything with high interest is actively working against you.
It’s negative compounding.
4 Invest in assets, not just lifestyle upgrades.
Think broad index funds, maybe real estate if it fits, but assets that grow.
And five, protect the engine.
Disability insurance, simple term life insurance, non negotiable if people depend on you.
Speaker 2: So really what we’re saying is a good salary, that’s the fuel, but earning power, that’s the whole vehicle, the mat, the entire journey planned out.
When you measure the right thing, this huge asset you own, you naturally start putting the right systems in place.
Automation buffers insurance, sensible investing roles it all.
Supports building real, lasting wealth.
Speaker 1: Absolutely.
And you know, the ultimate point of all this measuring isn’t just getting a bigger paycheck next year or hitting some net worth target.
It’s really about building a life with more options, more flexibility, more calm.
It buys you the freedom down the road to make choices based on what you want to do.
Not just what you have to do financially.
Speaker 2: O the challenge to everyone listening, take 10 minutes today.
Run that quick estimate, just knowing the number, even the range.
It’ll change how you think about your money.
I promise.
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