I know the feeling of unemployment. I have been unemployed before, and I wrote about one of my experiences in the book How to Build Wealth and at more length in the book Gainful Employment. Unemployment can be painful, but one of the most overlooked truths about unemployment is that unemployment can be an incredibly profitable opportunity.

When I was unemployed, I did the only thing that I could do — besides keep looking for a job. I made myself more valuable. That is right; I became more valuable while I was unemployed. How did I do that? I increased my education.

If you have read the book Gainful Employment, then you will know that there are four qualities that employers look for. Employers look for experience, education, personality, and character. If you have the four qualities that employers seek, then you have value and employers want you. It does not matter if unemployment is 35%. If you have the experience, education, personality, and character that an employer needs, then you will be hired and you will be retained. Why? You meet the needs of your employer.

Knowing this, I chose to increase my education. I was actively seeking employment, but it was not forthcoming. So, I set out to learn more about my field. As my field was computers, and more specifically network administration, I asked the question “what education would help me to be more marketable to an employer?” The answer that I arrived at was Microsoft’s MCSE certification. That certification consisted of multiple exams that, when passed, would confer the certification. The MCSE was and still is a certification that employers actively seek when they want to recruit a Network Administrator. I believed that if I could attain the MCSE certification that I would have an easier time finding the job that I desired. I already had a Bachelor’s degree in Information Technology, but I knew that the certification also carried a lot of weight as it showed specifics that an employer would need.

So, I set out studying for the certification. How did I do it? I did it cheaply. Remember, I was unemployed. I did not have the cash to spend to send myself for formal training. I did have enough cash to buy the books to study, however. And, that was what I did. I bought about a dozen or so books related to the certification and read them. I devoted myself to getting that certification and getting it cheaply because I knew that it would help me in the future.

Yet, don’t let me fool you. Of all things that I’ve ever done, this might be the single most painful thing I’ve ever done. I have experienced no shortage of mentally challenging obstacles, but this was probably one of the worst, if not the worst. Why? I was unemployed. I could not find a job and it felt like life was passing by. I was already dissatisfied and depressed about not having a job. What could only make it “better?” Reading dry, boring, technical manuals — how satisfying!

Oh, and making maters worse, I failed 1 out of 3 tests and had to take them over. Instead of 7 tests, I had to take 10 — and I had to pay to take 10 of them.

Still, I did attain the certification. What kept me going? Probably desperation — and this is important. I would NEVER have read those books and attained that MCSE certification without being unemployed. If I were employed I would have had far better things to do with my time that sit in a room and read boring technical books so that I could pay money to take challenging technical exams that I might not even pass for a certification that I would have probably had to have quit my then-current employer to get paid for.

That is why I can say that my unemployment was a golden opportunity. Unemployment FORCED me to do something that I would never have done. It forced me to further educate myself. It was mentally very painful and dissatisfying, but it was absolutely a positive thing in the long run, because I made the most of it. Within 3 months of finishing my certification, I had been hired to a position that required me to use the MCSE certification that I had acquired. If I had no MCSE certification, my unemployment would have continued, because I would NOT have been hired for the job.

If you do not both understand and feel that experience, education, personality, and character are the qualities that an employer looks for, then you will have a hard time wanting to better yourself while you are unemployed. It is so easy to fall into the trap of wasting time and feeling depressed. Yet, because I knew that bettering my education would make me more valuable to near and more future employers, I was able to set a goal. That did not mean that it was easy to motivate myself to study and pass the exams, but I had a goal that I could focus on. Even though I did not feel like studying, I was able to force myself to study because I knew that I would get a return on my effort and there was very little else that was productive for me to do.

If you find yourself unemployed, or underemployed, earnestly seek to increase your value to your next employer. It does not have to be your education, for you could do something that would improve your experience. Maybe there is something that you could not have done while you were employed that you can now do that you are unemployed. Maybe it would be so valuable that it will be better in the long-run that you were unemployed, rather than working. Maybe you’ll look back in the future and say, like I did, “I sure am happy that I was unemployed, for I owe a portion of my career success to the things that I was forced to do while I was unemployed.”

If you do not give it any thought, you might err and believe that unemployment has to be comprised of wasted time, depression, and endless job searches. After reading this you should see that unemployment could be one of the best things to happen to you, if you use it wisely.

The truth is that you can ask for a raise anytime you are worth it, though please give consideration to the timeframe in which an employer typically gives raises — I mean that if they often give increases at the end of a fiscal or calendar year then you may want to ask on their schedule.

If the economy is bad and getting worse, then you need to take that into account when you ask for a raise because your employer may find that you are too expensive when compared with the unemployed who would love to have your job. As I explained in the book Gainful Employment, your compensation is a function of your value to the employer. By applying the quality that I describe in the book as selfishness, you “demand” that your employer recognize the value that you provide. When you provide an incredible service that profits the employer and you are underpaid for the service that you provide, then it does not matter that the economy is going from bad to worse, because the employer will not be able to find someone who provides as much value as you do since you have exhibited so much growth.

In my own case, I asked for a raise and received one because the services that I currently offer my employer are in excess of the requirements of the job. Because I am providing my employer with services that meet their needs but are beyond what we agreed I would do, I need to be paid more to continue to sell my services to this employer.

So, how do you ask for a raise? You prepare. You prepare by doing the job you are supposed to do — and doing it well. You prepare by taking on additional responsibilities.

But what if you just do a good job? Should you get a raise because you do a good job? The answer is no. You are already PAID to do a good job. If you don’t do a good job, you deserve to be fired. What makes you deserve a raise is to take on additional responsibilities while still doing what is expected of you.

If you were hired to be a receptionist but your position has grown to include accounts payable and collections, it seems likely that you are being paid less than you deserve. If you were hired to manage a storefront that has less than stellar sales and is competing in a shrinking market and all you have to work with are unmotivated sales staff but you take the business and make it very profitable, then consider the degree to which you have exceeded expectations — that is by how much you should ask for an increase. If you were hired, as I was, to wear one “hat” (job responsibility) and now you wear five or six “hats” (as I do) because your company’s business needs keep expanding, then ask for what you are worth.

While it is difficult to ask for a raise in recession due to the fact that many employers are fearful of the uncertain future, if you are clearly worth a raise, ask for one after you consider what your position is really worth to the employer.

How?

Survey jobs in your field. Search a site like Monster.com and see what other employers are paying for the services that you now provide. Once you have an idea of what you are worth and what you can get, then you’ll know how much the disparity between what you earn and what you are worth actually is. Also, do not hesitate to take this information to your boss and have an honest discussion with them about the reality of your compensation. Make sure to explain that you don’t want to leave, but explain that if the company wants someone who can take on all of these additional responsibilities then they need to compensate you at a reasonable rate.

So, what about your compensation?

Well, consider that maybe more money is not the only compensation that you can accept. Maybe you want training. Maybe you want more time off. Maybe you are willing to accept a bonus instead of a wage increase. Try to work with the employer to find an increase in compensation that works for both of you.

Lastly, realize that it might take a lot longer to get an affirmative reply than it used to. Employers are afraid of the uncertain, just as employees are. If you want more money, you need to be prepared to make a convincing argument to your boss, only because you might need to talk to your boss first so that you can then talk to your boss’s boss before you get to the real decision maker who just so happens to be your boss’s boss’s boss.

There is no harm in asking for a raise when you are worth it. If you clearly explain why the employer has benefited by your services and why you are asking for appropriate compensation for all of the extra tasks you’ve taken on, then you have a chance that the employer will agree, and that is a chance worth taking.

This audio segment explains why allowing a college or university to manage a student’s financial aid is not necessarily the wisest course of action, nor the one that can most rapidly support wealth and credit building.

Anyway, I purchased the property from a real estate agent who had helped me with previous properties. This one, however, was his own personal property. He had owned it for more than 15 years. As I had been looking at a similar property on the same street as his was located, he mentioned to me that he wanted to sell his. It was the same exact physical property on the same street as I had already tried to buy but had been rebuffed by a different seller. The only difference was that my agent’s own personal property was more expensive than that of the other seller, and my agent’s property was in better condition and fully rented — definitely positives.

There were obviously a number of reasons why the agent would want to sell to me directly. First, he didn’t have to advertise it. Second, he knew that I already wanted to buy the same property a few houses down the street. Third, commissions for agents would not be an issue. Fourth, I would probably be a quick sell, and he already knew I could afford it.

So, we negotiated and agreed upon a price. I figured on a sale price of $85,000 or there about. The reason for that was because the property was generating about $1,010 in rental income monthly. For my area, I knew that an annual gross rent multiplier should be less than 8. This property came in at about 7.05, so it was a good deal in comparison with all of the other property in the area, as nothing else was under 8.

How did I figure out that the price was right? I took the total rent ($1,010 monthly) and multiplied it by 12 months. The total of $12,120 was the annual gross rent. I did simple division with the $12,120 and the $85,000 and found out that the multiplier was about 7.05. In comparison to all of the other properties in the area, this was fantastic. I would also add, for comparison sakes, that all properties were apples to apples comparisons; I was not comparing a property where one landlord paid all of the utilities with a property where the landlord paid no utilities, as that would introduce error into my formula.

Now, obviously, it wouldn’t have been a great deal if the property were to cost me tens of thousands of dollars to repair, or if there were other major problems with the property. That, however, was not the case. The property needs repairs of the lintels (those are the metal strips above windows in brick buildings that hold the brick up) and has a small retaining wall that is standing straight up and will eventually need repaired or rebuilt (they’re supposed to lean backwards against the earth to keep it back, not stand straight up).

I had a home inspection and a pest inspection. I went with the home inspector and walked around the building and asked him questions. I had an appraisal and a title search. I had an old survey as the property bounds were clearly marked.

As loans for multifamily properties nonowner occupied were far harder and more expensive to get than they were only six months ago, I went to a mortgage broker. The mortgage broker shopped around for me to find a loan that would be the best for me. He also kept his fees reasonable. I paid a 2% commission on the funds that he procured, but considering the market, it was worth it.

After talking to my mortgage broker, it was discovered that I was going to need 20% to buy. That was no problem, as that was what I was prepared to do. What I wasn’t prepared for was the rate, which was awful. After discussing options, the broker told me that if I put 25% down on the property, I could get a rate under 7%, fixed, for 30 years. I agreed to do so.

Unfortunately, 25% down would stretch me thin. It isn’t as though I’m made out money. No, I’m one of those people who make my money the old fashioned way: I work for it. Anyway, 25% percent down was more money than I had expected to pay, and because of that I needed to ensure that I negotiated a price with the seller that would make it possible for me to buy the property.

The seller and I finally agreed at $86,500. The seller would also give me 2% seller’s assistance, or $1,730 at the closing to help me pay my closing costs — that freed up my cash and enabled me to put 25% down. I also required the seller to give me all of the appliances that were in the property and also to provide a one year home warranty on the property — the warranty was somewhere between $600 and $700, I forget exactly.

After getting everything in order and waiting on the appraisal results, my broker called me to tell me that the appraiser had told him that this property was worth at least $95,000. “Did you know that?” my broker asked me. Yes, I knew that. I knew that 8 was a reasonable multiplier in my area. I knew that the seller had other reasons for wanting to sell quickly and he was also saving closing expenses so he was happy to sell to me at that price. I, too, was quite happy to buy for that price. I knew that the neighbor (next door) had sold the same building, though in better condition, for $115,000 two years prior. I knew that I was getting a deal.

The appraiser also told my mortgage broker to tell me that my rents were too low. I needed to raise my rent, in the opinion of the appraiser. That, I also knew. I figured that the property, at fair market rents, should be bringing in $1,110.

I’ll explain my rental philosophy in a later post. Suffice to say that I’m quite happy to have a profitable building that puts money into my pocket and already has tenants who are delighted to be paying too little rent.

Oh, but there is another thing to mention. Even though the building has positive cashflow already, I built wealth just by buying it. The building is clearly worth $95,000, not $86,500 – $1730 seller’s assitance and including appliances and a home warranty.

The bottom line was that fter paying ALL of the closing costs, putting the money down, and financing the rest, I added at least $3,000 of wealth to my net worth. Instead of buying and not making any money for the first two years or so as is common for many investors, I made money when I bought and I made money as soon as the first rent checks came.

And that, as they say, is why you make your money when you “buy.” It is absolutely true.

Oh, but one interesting side note. Talking to my neighbor — where I live, not near the property that I’m referencing here — he told me (and he’s never owned any rental properties) that now is a terrible time to get into real estate because the market is so bad. He said he hopes everything will work out for me, but that I missed my chance to get into real estate because the time to get into real estate was years ago when things were good.

Now, you did catch that I referenced that he never owned any rental real estate, right? Ok. Good.

Well, it is probably a bad time to be a speculator, I’ll say that, but it is a FANTASTIC time to get into income producing real estate because all of those people who bought too much house and lost it are now looking for places that they can afford to rent. That increases the supply of tenants, and that makes the landlord’s job easier. Also, real estate is not the same in all areas. You cannot buy into a declining area or one that is artificially pumped up — well, if you want a value.

What I mean is that the safe, measured, reasonable way to build wealth is what I just described. Be patient. Save your money. Pay down your debt. Wait for opportunities. Buy when everyone else is running around screaming that the world is going to end. That is how to invest in real estate.

On Tuesday, I was in a Wendy’s. I ordered two Junior Bacon Cheesburgers and a small baked potato. I was charged for three Junior Bacon Cheesburgers and a small baked potato. I thought something was wrong but couldn’t figure out what. I handed the cashier $10 and felt something was wrong when I received less money back than I had been expecting. When the cashier placed my receipt on the counter, I leaned over to see what she actually charged me for. Then, I called for her and I informed the cashier of the oversight. She refunded my money for the burger that I did not want. As an interesting side note, the cashier opened the register and handed me the refund in cash without doing anything, that I could discern, to account for the burger that Wendy’s did not sell or the cash that was returned to me that Wendy’s would now have to pay taxes on…

On Wednesday, I was at a Busy Beaver — a hardware store in my area. I was returning a flashlight for $3.49. I received $2.14 with tax. First, the associate told me that the item was discounted. Strangely, there was no item discount when I paid. Then, the associate asked someone else who searched for the previous price. They couldn’t figure out that it was, but they both decided to explain to me that the cash register doesn’t lie. I explained to them that the receipt didn’t lie either. The reason that the receipt was showing $3.49 cents for the item was because I had indeed paid that much for it. The reason it was showing up for $2.00 on the refund was because it was now on sale. The reason for the problem was that the cashier didn’t understand that they needed to … umm… read the receipt and override the price. Eventually, I received the refund. The cashier just handed me cash without accounting for the difference that they gave me. Gee, that is the second time in two days that a retailer ended up paying taxes on money that they didn’t have.

Lastly, on December 10th, 2008, I was reviewing the settlement documents for the two unit that I purchased. I discovered that even though the seller was supposed to give me the prorated rent that they were collecting from the tenants before we went to closing on the 11th of December, I, instead, was PAYING the seller for rent that the seller had kept. Hmm… something seems wrong about that. It was corrected, needless to say. The title company simply made a mistake.

Mistakes happen. Everyone is not out to get you. Some people are just not paying attention. Nevertheless, no matter what mistakes are made by the people around you, you need to be vigilant and verify that you really are getting what you expect to receive. If you do not watch to ensure that people provide what they are supposed to, you will lose money. It might not always be a sizeable sum of money, but every penny that you allow to slip through your fingers is money that you cannot save, invest, or pay down debt with.

Education enables you to compete. Education makes you creative. Education helps you to cut costs. Education opens doors of opportunity. Education is an asset.

On December 11th, 2008 I purchased another rental property — two units, side by side. This, too, is an asset. It also comes with responsibility. It comes with the responsibility that I need to keep the units rented and I need to maintain the structure. I need to know how to fix the problems that arise and I need to understand whether or not a contractor is taking advantage of me. I need to know the laws that govern landlords and tenants in my area. I also need to know how to keep my building profitable. There sure is a lot that I need to know. Fortunately, I am already committed to learning more about those areas.

Sure, I’ve done significant work on my other rental units, so I already have a lot of experience. I can do wiring and electrical, I know how to replace a toilet, I can trim trees, paint, and change a faucett, and I can screen tenants and understand the financing and fiscal issues related to real estate investing. But, I always need to know more.

So, you can imagine my glee when, yesterday, I received a brochure from my local community college. It listed noncredit classes that will be offered in the spring of 2009. In reading through the brochure — much like I have in years past — I saw a goldmine.

Not only was the college offering the same exact twenty four hour landlording and property management class (for $119) that enabled me to get into real estate investing, but it was also offering a forty hour class on plumbing ($300) and a thirty hour heating, ventilation, and air conditioning class as well ($200).

I said this once, and I’ll say it again. Education is an asset. These classes will help me to better manage my rental properties. They will give me a better understanding of the fixtures and mechanicals. They will help me to cut my costs when dealing with contractors and enable me to tackle jobs that I cannot at this time, because of my lack of understanding. They will enrich me.

Sometimes I meet people who I deem to be ”educational snobs.” These snobs believe that one kind of education is superior to the other, and when you go to college for a degree that you somehow magically know everything you need to know.

I know that my technical school training was looked down upon by my college prep teachers back when I was in high school. I remember that my non-traditional college degrees were scoffed at by former classmates of traditional colleges (who paid twice as much as I did and took twice as long to graduate). I also recall the woman who told me that she had an MBA already, so there was no additional business training that would be worth her while. What she meant was that she’d never consider going to some “flunky” community college for a “cheap” $200 course.

Gee… I must have missed something.

I have a Bachelor’s Degree in Information Technology. I have a Master’s in Business Administration. I am a Microsoft Certified Systems Engineer. Oh, sure, my MBA is an asset. My MCSE is an asset, too. They help me to earn money. Still, formal education and certifications are not the beginning and the end of education.

In the case of my local community college, I can say that I’ve probably had as much benefit from their noncredit classes as I’ve had from my degree pursuits. Indeed, it was the noncredit classes that showed me how to invest in real estate and how to move from writer to author. I cannot discount the books I have read, either. I’ve been to seminars that are worthwhile. I’ve read blogs and websites. I’ve listened to audio tapes. I talk to people who know more than I do.

I try to soak up knowledge like a sponge, because useful knowledge is power — notice that I said “useful.” When you know more you can make better decisions, spot opportunities, and prevent catastrophic mistakes. When you don’t know, you can only work harder and harder.

I know that the more I learn the less I feel like I know. There is a whole world of complexity and if you stop and consider the complexity of any one particular thing, you will realize that for all you know you know almost nothing. I realized this a long time ago, and it was quite sobering. That is why I try to learn enough about every topic that interests or benefits me. I’m also no education snob, because I’ll learn where ever I can see that there is something in it for me.

With noncredit classes I learned about property management, writing, publishing, financing, technology, and so much more. The costs of such courses were almost trivial compared to my degree pursuits, but each had its place and each has provided me with a good return.

Keep your eyes and your mind open for educational opportunities. If spot something that you think will enable you to be a better performer on your job, go after it. I’ve been pressing my employer to send me for training related to firewall technologies, so that I can better support their operations and save them money — there’s a benefit to me too, for I’d be worth more to them. I’m also planning on taking a class on Adobe’s Photoshop so that I have more control over the design of images related to my book business, and so that I can better communicate and work with my website and graphic designer. I am taking courses on plumbing and HVAC so that I can cut my costs and know how to fix or install things that I would have to pay dearly for otherwise. I am going to take a class in the spring of 2009 on taxation for the self-employed so that I can better understand the tax issues related to my business. I am going to take that landlording and property management course again so I can see how much things have changed in the years since I first took it.

Various people over the years have asked me how I “know so much.” First, let me restate that I feel like I don’t know enough, as I mentioned above. Second, there is no secret. I’m not a genius. I don’t just “know” what I know. I pursued education. I sought after the knowledge that I wanted and I found it. It enabled me in the same way it can enable you.

If you recall the first chapter in my book entitled How to Build Wealth, you’ll remember the advice that I mention over and over: Spend Less Than You Earn and Invest The Difference. In the case of education, I recommend that you devise a plan that works for you so that you can invest some of your money and your time into getting additional education — formal or otherwise. The returns can be astounding, both inside of work and outside of it.

Or, then again, maybe it would have made sense for people who did not know what they were doing to learn about what they were doing and not rely on “experts” who may have been little more than salespeople with slick titles.

This might be my bias, but almost every time I meet an “expert,” I have to tell them  what to do. Oh, sure, I get good advice and I cannot do everything on my own, but I take the recommendations of “experts” with a grain of salt, until they’ve been proven.

Let’s look at a tiny sampling of my ”professional” experiences.

1. The tax professional who was going to claim my mortgage deduction twice 
2. The closing agent for my recent real estate purchase who had me paying the rent that I was supposed to collect
3. The commercial real estate agent who incorrectly assessed the rental rates of one of my units
4. The financial advisor who was not doing anything more than reading from the financial news online to make his “recommendations.”
5. The mason who wanted to tell me that two sturdy brick pillars needed to be replaced because even though they had been standing tall, strong, and with no cracks for the past 40 years, they might crack “someday.”
6. The cashier who gave me one dollar and three dimes
7. The THREE bank managers who could not calculate a mortgage payment correctly
8. The investment advisor who told me that the Dow Jones Industrial Average (Dow) reflects the fact that stocks outperform all other assets over the long-term.

Just because a person has a title, position, and the appearance of competency does not mean you should trust them.

Let’s take a look at the 8th item in my outline. The Dow has increased steadily over the long-term and it appears, from looking at it, that stocks that the Dow tracks must surely increase over time because it always goes up on average. Ok — that’s all I needed to know! Invest in stocks! Umm… right?

Wrong.

What the “professional” forgot to tell me (maybe he didn’t know) was that the Dow swaps successful companies in and throws the failing companies out. Oh… that changes things, doesn’t it? You can always having a winning team when you throw out the scores you don’t like, right?

Why then would I want to invest for the “long-term?” I don’t. I do not  want to do what is called “investing for the long-term” because all that means is that you put money into an asset and hope that over time it will go up. Well, the Dow sure does go up, but what about all of the bankrupt companies thrown out of the index? How would owning those bankrupt companies impact your profit? Think about it.

When you invest, you invest because you understand the fundamentals of the market, the business, and (if you are investing on technicals) because the technicals support your investing. You can always lose even if you know what you are doing, but if you do not understand the risks that impact your investment, you should not invest in it, and choose something that you do understand.

I am not going to give my money to some “professional” (often code for salesperson) who may or may not have the time, concern, or ability to invest for me wisely. If I do not understand something, I don’t invest in it. I want to build wealth, so I start with what I understand and develop my understanding to invest in more risky assets. I don’t say “let someone else do it.”

Why? Because NO ONE will protect and grow my money in the way that I will.

Six months ago, I had a considerable amount of my money at risk in the stock market. Because I refused to accept the battle cry of “invest for the long-term” by those who stood to profit at my expense, I took my money out of those assets that I thought would lose money. The result was that I didn’t lose a dime, and got to keep all of my previous gains.

If you want to learn How to Build Wealth, I recommend that you invest with a long-term perspective, but pay attention to what is going on in the world. Also, realize that you need to learn enough about what you are investing in to make a difference, because markets go up and markets go down. When the market is heading for a cliff, you don’t want to say “oh well, everything will work itself out in time.” No, you want to do as I did in the case of my retirement plan and pull that money out of those assets so that you have it and you don’t lose it. In this case, I didn’t pull the money out of my retirement plan, but put it in cash equivalents.

Don’t be mistaken, there are people who saw this coming, and they have profited immensely. However, most people did not, and they have lost. In my own retirement account, a 401(k), I shifted out of equities about six months ago. In the past six months, every single fund in my retirement account has lost money except for one — and many of them have been big losers. What I was doing was not rocket science. I realized that the retirement plan funds followed sectors in the broader economy. If the economy took a dive, which sectors would be impacted? I simply asked myself that simple question.

When people have less disposable income, will they buy as many Flat Panel Televisions (retailers)? Will they keep paying their mortgages when they are out of work (banks)? Will they buy houses with no income (real estate development)? Will foreclosures decrease house prices even further (less money for discretionary spending)? Will exporting nations keep selling things that American cannot afford to buy (developing nations)? These simple questions protected me, because I looked at cause and effect.

And then there is diversification. I hate to say it this way, but diversification — the way “experts” recommend it — is what you do when you don’t know what you are doing. Think about it. Why would you need to diversify if you knew what would win and wouldn’t. No, obviously, you cannot forsee the future with clarity, but if you are diversifying just because you hope that somewhere you will make up losses on other areas, then you’re doing little more than gambling. Don’t consider that investing, because it is not.

Do I diversify? Absolutely. I pick what I think are the winners and I go with them. I “diversified” in cash in my retirement plan because it was the best option. I “diversified” in additional education because it helps me earn more. I “diversified” by buying another two units of income producing property because all of those people who no longer can afford their mortgages have to live somewhere. I “diversified” my time into writing books that I thought would be relevant in the coming economic climate (and beyond it). I “diversified” by putting my cash to pay down debt.

I am diversified.

The difference is that I diversified in things that I thought would all be winners. I didn’t say “growth, value, cash, bonds — I’m diversified!” No, I really  diversified. Do you think that your financial advisor is going to tell you that to be diversified you shouldn’t put all your money into the products and services that they recommend? Hmm…

When you invest, you do so because you see that there is a demand for the services, products, and utility that an asset provides. You pick assets based upon real understand of the market conditions and the underlying quality of the asset. If you don’t have any idea if that “hot stock” is really worth it beyond the hype of your uncle or friends friend, do not buy it.

Yet, if you are going to leave your investing to others and pray that they know what they are doing, I recommend investing for the long-term, diversification, and lots of bacon — with a little luck and lots of bacon, you won’t live long enough to need the money that you won’t have anyway.

Homeowners insurance protects against full and partial losses, as long the building is insured for what the insurance company requires. In my case, the investment property was insured for what was called the replacement cost. This means that I carried enough insurance for the insurance company to pay for the building to be rebuilt if it were completely destroyed by something covered in the policy. I was required to take insurance, by my bank, that was for the replacement cost and that also had a clause that would cover the loss of rents if/while the building was being repaired or rebuilt.

If you are buying insurance based upon the replacement cost, and there are other ways to buy it such as on the market value, then you need to ensure that you have adequate coverage. On the other hand, it does not pay — and I mean that literally — to buy too much insurance. If you own a home or structure that will take $250,000 to replace and you have $600,000 of coverage, you are wasting your money.

When it comes to the cost of insurance, there are various factors that determine how much your premium — the cost of the policy — is going to be. If you have poor credit, you are going to pay more. If you have had two insurance losses in the past year, you are going to pay more. If you have a low deductible, you are going to pay more. This only makes sense. If you raise your deductible, you are telling the insurance company that you won’t use the insurance for small losses. That saves the insurance company money, and they pass on savings to you.

In my case, I chose a slightly higher deductible ($1,000). Why? It made sense for me. If damage occurs to my property and it is only $500, I’m not going to have an insurance loss to cover that. If damage occurs that is $1,200, it won’t destroy me. If my building burns down, I’ll be covered. Therefore, it makes sense not to pay a higher premium, for me, just so that I can have coverage for minor damage.

Oh, make sure that you shop around for insurance. Also, check with other companies year after year, because insurance companies expect you to pay higher premiums on existing policies. By your inaction, you will pay higher premiums if you are not wary.

There are many options when considering life insurance. The two primary divisions are whole life and term insurance. Whole life insurance continues (as the name states) your entire life, as long as the premiums are paid. Term insurance only exists for a certain amount of it, and then it expires.

Many conflicting opinions exist about which of the types of insurance is the “best” to buy. One camp states that agents prefer to sell whole life insurance because they make more money (and they do). Whole life is also a lot more expensive than a term policy, dollar for dollar. Furthermore, the one camp states, you typically only need insurance to cover the people who cannot support themselves. You don’t need to pay insurance premiums to make your children or spouse rich upon your death (it would be quite an expensive proposition if you tried that, anyway, with whole life). Therefore, the logic is, whole life insurance is a waste because you need insurance, for example, while you are rearing young children, but when they are grown you do not need the insurance to provide for them, as they can provide for themselves.

The other camp argues that a term life insurance policy is a poor investment. If you buy term life insurance, it will expire. The question often asked is “which insurance will likely be around when you are ready to die?” The answer to that is obvious: whole life. The logic goes that insurance becomes more expensive as you get older. Also, as you age, you are more likely to develop diseases and other problems that would result in insurance becoming even more expensive. What the whole life camp concludes is that you won’t be able to afford the term insurance when you are older because the costs are prohibitively high.

To anyone not prone to superficial allegiance or self-serving dishonesty, the answer is plain. You buy the kind of insurance that is best for you. In my own life, I did not exercise the guaranteed purchase option because the cost for the $25,000 was, in my opinion, not worth it. I am not buying insurance as an investment or to make someone else wealthy upon my death. I’m buying whole life insurance to protect that assets that I have and pay down (or off) the debt that I have on those assets as well as to provide cash to keep those assets (like rental properties) operating while my heirs dispose of them or arrange their financial situations to keep them operating. If one day I marry and have children, then I would purchase term life insurance to protect my children until they are able to provide for themselves, as a term life insurance policy would very cheaply buy a large amount of coverage.

If you look at How to Build Wealth as part of the big picture of living, then you will see how your assets and your pursuits will align with the life you desire to live. Life insurance is just one small but necessary part of that picture.