Your Income Is One of Your Biggest Assets

When we think about our biggest financial assets, our minds often go straight to the things we can see.

Our home. Our savings. Our investments. Perhaps a business, a vehicle or other valuable possessions.

But there is another asset that can be far more significant over the course of our lives: our ability to earn an income.

Your income is what helps turn your plans into reality. It pays for the life you have today while helping you build the life you want tomorrow.

Your income does more than pay the bills

It is easy to think of income as simply the money that comes into your bank account each week or fortnight.

But look at what that income actually does.

It might pay your mortgage or rent, power bill, groceries and other household expenses. It helps pay for your children's activities, family holidays and the occasional dinner out.

It can also help you save for a deposit, contribute to KiwiSaver, build an emergency fund or invest for the future.

Your income may even be helping you build a business, pay down debt or support other members of your family.

In other words, your income isn't just funding your lifestyle. It is funding many of the things you are building.

What is your future income worth?

Consider someone earning $100,000 a year.

Over 10 years, that's $1 million of income before tax.

Over 20 years, it's $2 million.

Of course, circumstances change, salaries increase and careers develop, so this isn't a prediction of what someone will actually earn. But it illustrates an important point:

Your future earning ability can represent a substantial financial asset.

Unlike a house or investment account, however, you can't simply put your future income in a safe or lock it away.

It depends on your ability to continue working.

What if your income stopped?

It's something most people don't particularly enjoy thinking about.

But imagine that an illness or injury meant you couldn't work for an extended period.

What would happen first?

The mortgage or rent would still need to be paid. So would the power bill, groceries, insurance, rates and other regular expenses.

You might have savings that could help for a while. You might have sick leave, support from family or other resources available to you.

But if you couldn't return to work for months or longer, those resources could eventually come under pressure.

And it's not just your day-to-day expenses that could be affected.

The savings you were planning to build might stop growing. Contributions to KiwiSaver could be reduced or paused. Investment plans might need to change. A family holiday might become less important. Plans for the future could be pushed further away.

An interruption to your income can therefore have a much wider impact than simply making it harder to pay the bills.

Where Income Protection can fit

Income Protection is designed to provide an ongoing income if you are unable to work due to illness or injury, subject to the terms and conditions of the policy.

The amount that can be insured, when payments can begin and how long they can continue will depend on the policy and your circumstances.

For example, policies can have different waiting periods before payments start and different payment periods for how long a benefit can be paid.

These details matter because everyone's financial situation is different.

Someone with substantial savings and a partner who earns a second income may have a different level of financial resilience from someone who is the primary or sole income earner.

That's why Income Protection isn't simply about asking, “How much cover should I have?”

It's about understanding what your income supports and what resources you would have available if that income was interrupted.

It's about protecting what your income makes possible

We often insure the things our income has helped us buy.

We insure our homes, cars and possessions.

But the income that helps pay for those things can sometimes receive less attention.

Think about what you're currently building.

Perhaps you're paying off your mortgage.

Maybe you're saving for your children's future.

Perhaps you're investing or contributing to KiwiSaver.

Maybe you're building a business.

Or perhaps you're simply working towards having more choices and financial freedom later in life.

All of those plans rely, to some extent, on your ability to earn.

That's what makes your income worth thinking about as an asset in its own right.

What would you want to keep going?

There's no need to assume that something will happen.

Most people will continue working and earning an income throughout their careers.

But financial planning isn't only about what we expect to happen. It's also about considering what could happen and understanding how we would cope if circumstances changed.

So, rather than asking only:

“How much do I earn?”

It can be useful to ask:

“What does my income make possible?”

The answer might be much bigger than you first thought.

Your income pays the bills, but it also pays down debt, supports your family, builds savings, funds investments and creates opportunities.

Protecting your income isn't just about protecting a pay cheque. It's about protecting the life that income helps you build.

If it's been a while since you reviewed your insurance, it can be worth looking at how your current cover fits with your income, financial commitments and plans for the future. At New Vision Financial Services, we can help you understand the different options available and how they may fit into your wider financial picture.

Nimalka Perera
Business Development Manager
New Vision Financial Services

Plan your future and let us help you have peace of mind along the way.