I recently wrote an article summarizing my top 10 financial planning tips for success. The impetus behind the article was being asked to speak at my business school reunion at UC Berkeley. I have decided to explore each of the tips in more detail in subsequent articles.

In order to achieve financial independence and realize many of your dreams, it is important to proactively manage your human capital throughout your career.  Human capital is the net present value of your future earnings stream. Early in your career, your human capital asset is actually larger than your financial capital. It is your human capital that enables you to build financial capital. Getting a college or graduate degree increases the human capital asset, whereas taking a long time off work tends to decrease it. Therefore, you should spend at least as much time and effort managing your human capital as you do your financial capital. This message is particularly relevant for women (or dads) who take time off to raise children.

Human capital can be enhanced in a variety of different ways. The most common ways are:

  • Getting an education
  • Working with a career or life coach
  • Negotiating for what you are worth
  • Building and maintain your network

When we are younger, building your human capital tends to involve getting some form of formal college education and carefully choosing a career that suits you. However, learning should be a lifetime habit. It can take different forms, such as attending conferences, reading books and industry magazines, taking an online course or going back to school.

In addition, at various points you might feel like your career is stalling. At this point, it is a good idea to work with a career or life coach to determine what direction you want to go in. This process can be short or longer-term. Some people work with coaches continually over their career. A coach can help you determine what job might best suit you and what training you might need to obtain to break into a new field.

Another way to manage your human capital is to always negotiate for what you are worth. It can be easy to work and not worry about whether you are earning what you are worth. It is a good idea to talk to recruiters periodically to see what your market value is and even go on an occasional interview to keep your interview skills sharp and stay abreast of opportunities. Information is power and will enable you to negotiate a raise even if you want to stay at your current company. Complacency is not your friend.

An under-appreciated way to enhance your human capital is to build and maintain a strong professional network. Schedule regular meetings with people in your network to maintain the relationship. Then they will be more inclined to help you when you ask for help. LinkedIn is a good tool to manage your network and avoid the problem of an outdated Rolodex. Your network can add value through business opportunities, job offers and mentoring.

I have a plea to the stay-at-home moms reading this article. Managing your human capital is important for you, too. I hear too many stories of women struggling to re-enter the workforce and taking big pay cuts to do so. And then there are the sad stories of women who get divorced and must drastically reduce their lifestyle because their earning power is much lower after raising kids. So, whatever you do, invest in yourself and your kids by proactively managing your human capital even if you are a stay-at-home mom. Stay plugged into your industry by networking with former colleagues, reading industry journals and attending an occasional conference. Keep your job skills sharp by volunteering for a non-profit or your kids’ school, particularly in leadership roles. If you want to do something different when you go back to work, then hire a career coach to begin the exploration process. Invest in yourself. Your kids will thank you for it.

In summary, an integral part of a comprehensive financial plan is an on-going commitment to managing one’s human capital.