Justify the ties between a person's human and financial capital and their return and risk targets, objectives and constraints

Human capital behaves like an asset in the total balance sheet, so the financial portfolio should complement it. Stable, bond-like earnings, such as a tenured public servant's salary, allow a larger equity allocation; volatile or equity-like earnings, such as a commission-based broker's or an entrepreneur's, call for a more conservative portfolio and less exposure to the employer or its industry. A high ratio of human to financial capital increases ability to take risk; a large, fixed spending need relative to financial capital reduces it. Constraints such as liquidity, horizon and tax also shift with life stage. A strong justification names the capital feature and the objective or constraint it drives. A classic error is concentrating savings in the employer's stock.