The Most Important Financial Asset?

The Most Important Financial Asset?


The global financial situation becomes more uncertain by the day. We all want to be financially secure, but what are the right assets to invest in? Are stocks better than real estate? Should we invest in gold Bitcoin? How can we protect our financial security? Today, I wanted to share an interesting perspective that I found while reading The Seven Habits of Highly Effective People. In this book, author Stephen Covey claims that "Our most important financial asset is our own capacity to earn" (p.55).

This post is not intended as financial advice, but I have to admit, I think Covey's claim makes a lot of sense. To invest in anything, you have to have some initial source of funds. This requires the capacity to earn, so earnings capacity is fundamental to making any other investments.

Not only is earnings capacity fundamental to making other investments, but it is the best "safe-haven" asset we have. Let's consider two assets that are typically thought of as "safe havens." Gold has been used as a store of value throughout history, and many people purchase it today to protect against inflation. I think owning gold is a good idea, but let's look at what can go wrong. During the 1930s the U.S. government forced citizens to turn in their gold and replaced it with less valuable paper money. Suppose that a new gold mine is discovered or that space mining finally becomes profitable and the price of gold falls dramatically. My point isn't that even being "as good as gold" isn't good enough.


On the other hand, many people believe that simply putting cash in a bank is a safe way to protect themselves. Unfortunately, even cash is not safe. Every time there is a recession, the government prints money to finance bailouts and pay for stimulus packages. All of this extra money that is created erodes the purchasing power of the dollars that you already have. During the height of the Cyprus financial crisis, the government actually confiscated money in citizen's bank accounts. Thankfully, something like that has not happened here, but we have to keep in mind that it may become a possibility someday. 


The job experiences we have, our skills, and our education all contribute to our capability to earn. That's why I think that constant self-improvement is the key to financial security. Many of you have probably heard of real estate investor and author Grant Cardone. Forget about inflation and recession; let's go with the absolute worst-case scenario. Suppose that overnight, every asset that I owned vaporized and Grant Cardone suffered a similar fate. Who would be in a better situation? We would both have no money, no real estate, and no property, but Grant would have something I don't. He would have a much higher earning capacity.

He has experience managing over $900 million in real estate, authoring best-selling books, and giving motivational presentations around the world (Seth, 2019). Even if he lost all of his assets, Grant would have no trouble making money by authoring a book about how to recover from the crisis or speaking at events that help people rebuild their wealth. My point is that even if some major financial catastrophe were to occur, all of Grant's experience would give him a better chance to recover than someone who lacks similar skills. I will probably never have the same business experience as Grant Cardone, but building earnings capacity is something that each of us can do in our own small way. I might build my capacity by taking courses to earn my CPA license, and a car mechanic might increase their earnings capacity by branching out and learning about motorcycles or earning their ASE certification. Building earnings capacity is not limited to taking classes or earning certifications. Building your professional network, or generating alternate income streams from blogging or teaching online are all ways to gain a skill set and increase earnings capacity. 

Assets such as stocks, bonds, gold, and cryptos are certainly valuable, and I think that they are an important part of any financial plan. That being said, it is hard to argue against Covey's statement that "Our most important financial asset is our own capacity to earn." To be honest, I am concerned about the future of the financial system. We never know what will happen with recessions, government debt, and inflation, but I do think that building our skill set and increasing our knowledge base is a good way to prepare for whatever future lies ahead.


Covey, S. R. (2004). The 7 Habits of Highly Effective People. New York: Free Press.

Seth, S. (2019, June 24). The multi-million real estate empire of Grant Cordone. Retrieved from





The Part Time Economist
The Part Time Economist

Hi everyone. I'm just a simple man trying to make my way in the universe. I am passionate about cryptocurrency and hope that I can make at least some small contribution towards promoting wider crypto adoption and understanding.

The Part Time Economist
The Part Time Economist

Hi everyone. This is just a place for me to post some of my thoughts and analysis. I hope that someone finds them useful.

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