Thursday, June 28, 2012

You Inc.

Moshe A. Milevsky in his book, "Are you a Stock or a Bond" has a great chapter titled "You Inc.".  Addressing the idea of Human Capital, he recommends a person should estimate the present value of their earnings stream and add this to their personal net worth statement. Based on this new balance sheet, financial planning takes on different decisions - asset allocation, insurance, and debt. 

After all, You Inc. is a "small, tightly controlled, privately held company with productive assets invested in non traded units of your future salary and wages".  Started by Parents Inc. as a speculative venture that lost money in the early years, it was always planned to be spun off into a separate entity.  An eventual merger of equals (marriage) may occur at You Inc. and will be rightfully renamed Family Inc. anticipating the decision of creating one or more Child Inc.  Various stakeholders in this Family Inc. will now include spouse, children, and in-laws (maybe even Parent Inc. again).

So is You Inc. a stock?  Higher returns, leveraged, risky cash flow, and volitile?

Or is You Inc. a bond?  Conservative, steady reliable interest payments, with a long maturity?

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