In my last blog post, I talked about the risks we face in our financial lives. Managing financial risks starts with identifying them, determining what could go wrong and how bad things could get. Only then we can construct a risk management plan to protect against potentially catastrophic events.
The theory, known as “lifecycle finance,” explains how individuals and families can maximize their standard of living by making smart financial decisions during the various phases of their lives. The central concept is the distinction between two types of wealth, human capital, and financial capital.
Our last discussion focused on human capital, our future earning potential. This week concentrates on financial capital, the amount of net assets, after paying off debts, we have already accumulated and are available to support us in the future. Read more