Elisabeth Greenberg, writer for All About Business, has a brand new article up about her experiences at her first “real” job in the retail sector. Check it out here, or visit www.allaboutbiz.org.

Writer, All About Business

According to the online version of the Oxford English Dictionary, “unemployed” is defined as “not put to use; not applied to some end or purpose.” As one of the many unemployed Americans, I am highly offended by this definition, but I’m not as offended by dictionary.com’s definition of “unemployed,” which is “not productively used.”

I utilize myself very productively, perhaps more so now than I did when I was employed. Job interviews, follow up phone calls and e-mails, scouring the Internet and newspapers for job openings, and networking – and that’s just the tip of the iceberg regarding my quotidian efforts to find employment. Is that not a productive application of self? Regardless of how productively one applies himself or herself, and regardless of how qualified, experienced and/or educated one is, finding employment is an extremely difficult task in America circa 2010.

When I go on job interviews and I’m sitting in the designated waiting area, I often strike up conversation with the other applicants to pass the time as well as to feel out the competition. What I discovered in doing so is startling and somewhat disturbing: there have been instances when it was an entry level position, and the guy waiting beside me has a Master’s in business management, has just finished grad school or has ten plus years experience in the field. The most mind-boggling of them all had to be when I went to be interviewed for a Security Supervisor position, and there was a guy there for the same position who had a Master’s in criminal justice from John Jay School of Criminal Justice and was currently enrolled in Harvard University law school earning a Ph.D. At first, I thought, “how can he find the time to work a full time job while going to school full time to earn a law degree?” Then, I thought, “how the hell can I compete with this guy? He’s qualified enough to supervise the person who’s going to interview us!”

Undoubtedly the lack of employment opportunities in this nation is critical when people spend tens and hundreds of thousands of dollars on education, which we are taught as children will guarantee us a good job or the career of our dreams, only to graduate in debt and to have to settle for a salary of $36,000 a year.

This makes it even more challenging for someone as me – who does not have a degree – to find employment, not that it wasn’t always a challenge to find suitable employment without a degree. Prior to the drastic rise of unemployment, however, degree holders tended to apply for positions which required a degree. Now, degree holders are applying for jobs which do not require a degree – jobs that I tend to apply for, and generally stood a good chance of getting until the level of competition elevated. I went from competing with a person with a high school diploma or GED and comparable experience to competing with the next Johnnie Cochran for a position offering a starting salary that the real, late Johnnie Cochran would have turned his nose up to a few years ago.

Considering the unemployment epidemic in America, any employment is good employment. Naturally, the initial reaction would be “well go back to school and earn a degree.” I might be inclined to agree, although I would add that you have not properly absorbed the situation in its totality. A close friend of mine told me of an old high school classmate of his whom recently graduated from Columbia University that contacted him asking if he knew of any employment opportunities. I should also mention that my close friend is unemployed and does not have a degree himself. My point is that it is becoming, or perhaps has become, equally difficult to find employment, regardless of whether you have a degree.

At my former job, pay raises were denied and people were let go due to a lackluster economy. This put a strain on remaining workers who were expected to produce equal results with less manpower. So now we have to work twice as hard for the same pay because pay raises were being denied indefinitely. However, despite my department being downsized by nearly 50%, we managed to meet quotas and expectations. That’s a good thing, right? Well, what corporations and local businesses have learned during this rough economic time is how to operate with less labor and still produce equal results and turn a profit. So now I ask myself: is it difficult to find a job because of the economy, or have companies adopted an attitude of “why hire more employees, when the handfuls of employees they have now are able to produce just as well as the multitude of workers they once employed?”

Some of you who read this will probably combat what I say with statistics and fancy graph charts that I would probably need a degree to comprehend. I could have easily done some research and provided endless (and irrelevant) statistics to support my claims, however regardless of what the statistics say, the fact is that I and many others are still unemployed and are having an extremely troubling time finding employment.

Brian Johnson is a freelance writer based in New York City who attended Brooklyn College and was an English major. He has written and edited bylined articles for print publications and websites. Brian’s articles range in topic from addressing issues of public concern to thought provoking editorials.

Written By Ryan Mack, President of Optimum Capital Management, LLC

Embedded in the recent health care legislation was great news that will be a great benefit for students…the Student Aid and Financial Responsibility Act (SAFRA) also became law.  I like this legislation because if we are ever going to become a nation that makes things for ourselves, and doesn’t depend upon purchasing all of our goods from China making them richer, we must make those necessary investments into our own intellectual capital as a country.  Making college more affordable for those who wish to further their education is a primary means to achieve this goal. SAFRA is a common sense legislation that is a great step in the right direction for this country.  Let me give you the quick and dirty of what is in this legislation:

No More Middle Man – The cheapest and safest place to borrow money is the US Government and private lending banks understand this. Banks were using the government-backed student loan business to make billions of dollars each year from two sources:

1. Taxpayers were subsidizing these private banks to provide these loans. Yes…you were paying your hard earned money to banks for the privilege of letting then loan it back to you.
2. The banks were borrowing from the government at a lower interest rate than they were lending it to you in order to make profit from the spread (i.e. borrowing at 1% from the government and lending it to you at 2%).  Yes…in addition to the banking industries receiving your hard earned monies as subsidies, they are also marking up the interest rates in order to make a larger profit.

Without the presence of the middle-man private banker, students are able to borrow directly from the Government at lower interest rates and over the next 10 years WE (the taxpayers) will save almost $90 billion that we would have been paying to the banks to provide these services ($8 billion will be directed back towards US Treasury to pay down the deficit).  Many people are up in arms over this because they feel that the banks will suffer because of this; however, the banks will be just fine and already have enough of our money that they still have yet to pay back.  This portion of the legislation will go into effect on July 1, 2010. 

Additional Pell Grants (Simplified FAFSA Forms) – With the billions that we save from removing the middle man SAFRA invests $40 billion dollars to increase the amount and size of Pell Grants that are being awarded in this country. Had this legislation not been included, the size of Pell Grants would have decreased to less than $3000. However, because of this legislation the maximum size will gradually increase to $5,975 by 2017. It is estimated that by the school year beginning in 2020, over 800,000 additional Pell Grants will be awarded because of SAFRA.  Also, in order to make it easier for people to apply for these loans, they have simplified the FAFSA forms (many people don’t even attempt to fill out these forms because they feel that they are far too confusing).  Remember that these are grants and not loans which have to be paid back so this is a huge step in the right direction to making college more affordable.

Caps Payback Limits – Starting July 1^st, 2014, the amounts that you will be expected to pay back to your student loan will be capped at 10% of your income (reduced from 15% of your income).  All loans will be forgiven after 20 years of payment and after 10 years if you choose a career of service (i.e. nurse, teacher, military, government position, etc.).    

Support for Community Colleges – My mother works for Wayne County Community College in Detroit, and she informs me that her enrollment is through the roof. This is because in this hard economy people are finding value in the inexpensive but invaluable education/training that can be found at community colleges across the country. These community colleges are supporting over 6 million students and this number is growing fast. Many of these students have been recently laid off from work and need to obtain further training. Community colleges are providing the training necessary for millions to find employment in new fields or furthering their education in current fields in order to find employment and continue putting food on the table.  Over the next four years this bill will invest $2 billion over the next four years for them to further their adult education programs; enhance job training; improve instruction; improve student support services; and help to implement those reforms necessary that will lead to valuable accomplishments such as a college degree, certificate, or credentials to help obtain employment to millions across the country. 

Support for Minority Colleges – For those who are always crying that President Obama doesn’t do enough for the minority community, there is something in this legislation for you too.  This legislation provides $2.55 billion over the next 10 years to support colleges of which serve mostly minority student bodies (i.e. Historically Black Colleges and Universities).

You can also talk about the $10,000 tax credit given to help purchase tuition and books, the components that ensure loan rates stay competitive, and expansion of early education programs as highlights of the program. All in all, this is a great piece of legislation that will assist millions across the country to being able to achieve that lifelong dream of achieving a college education.  Why should people have to go broke just because they want to further their education and become a stronger contributor to this country? We still have a ways to go but this legislation shows that this administration places a premium on education. In the midst of all of the negativity and cynicism that we see and hear from the naysayers of this administration…I wanted to take this time to say thank you President Obama for making this important investment into the intellect and future of this country!

It really began in 2002 when I attended a financial empowerment seminar and was moved by the number people discussing this issue.  There wasn’t enough time to field the multitude of questions being fired towards the presenters.  However, the next day, just before the stores were opening I walked past a shoe store and noticed a long line in front.  I recognized one of the participants from the previous day’s financial empowerment seminar standing in line with her son.  It was easy to remember her because she had asked many of the questions at the seminar, and in doing so, painted a very grim personal financial picture of her own circumstances.  After re-introducing ourselves, I asked the purpose of the line and she shamefully responded, “They are releasing the new Jordan’s and I wanted to purchase them for my 7 year-old child.”  I walked away knowing that the Black community was in need of more than simply education.  Knowledge by itself is not power.  Knowledge plus action equals power and it was time to take action.

My name is Ryan C. Mack, President of Optimum Capital Management.   One of the reasons I launched my company was to address the economic problems within the Black community.  I didn’t always know that I would take this route.  My mother, Carol Mack, knew that I would eventually pursue a career in finance well before I did.  When I was four she would give me a quarter.  Six hours later, she would see her snotty nosed son running with a clinched fist.  After asking what was in my fist, I would answer, “My qwoordah.” She realized long before I did that even as a child, I recognized the importance of fiscal responsibility.

In 1999 I graduated from the University of Michigan Business School with a concentration in Finance.  During the next five years as a trader on Wall Street, I began to develop an interest in the significance of financial literacy within the African American community.  I established my own financial awareness group in 2003, and began to write bi-weekly newsletters informing the members of important principles of financial literacy for people of all income levels.

Wanting to pursue a full-time career in financial planning, in 2004 I decided to interview for positions with financial planning firms only to discover the expectation that as an employee of these firms, I was to service solely high net worth individuals.  This expectation was not in alignment with my own values and commitment to the community.  Given the following information according to “Black Wealth, White Wealth”, by Melvin Oliver and Thomas Shapiro, I felt it would be socially irresponsible for me to ignore the commitment I felt to the Black community:

•    Black unemployment rates are twice those of whites
•    Blacks own less then three percent of the wealth (even though we are 13 percent of the population)
•    Forty one percent of our households hold less than $1,000 in net worth
•    For every $100 Whites possess, Blacks have between $8 and $19

Armed with words of wisdom from my grandmother before I moved to New York from Detroit (“Don’t loose yourself when you go out there boy”) and with an enhanced spiritual connection with God, I was directed to create my own company.

For the next 12 months I created my own company by:

•    Creating a business plan
•    Analyzing the company material of those firms who had previously given me offers of employment.
•    Networking with other entrepreneurs to discuss business strategies.
•    Acquiring membership with Crown Financial Ministries and serving as a volunteer Budget Coach who uses Biblical principles to assist others with their financial planning strategies.

It is important here to note, that during my last three years on Wall Street, I volunteered weekly working with inner-city youth in the community.  I established an organization entitled Leaders of Tomorrow (LOT) for students grades three through eight who were taught the values of leadership, unity, and commitment through stepping (a fraternity past time).  Upon establishing my own company, the success of LOT resulted in my decision to establish another youth organization more aligned with the principles of my company.

I launched All About Business (AAB) in 2004.  AAB is a group that is designed to increase financial awareness with high school students.  Working with Benjamin Banneker Academy students in Brooklyn, New York, the students and I worked one day per week during the school year studying principles of financial literacy, current events, business etiquette, networking, and entrepreneurship.  These students excelled with such a high level of proficiency, that I created an internship program within my company which allowed them to demonstrate their intellectual capital to the community.  During this internship program the students:

•    Each developed and instructed their own financial literacy workshop (for adults as well as for youth).
•    Each wrote and published five newsletters discussing principles of financial literacy.
•    Each organized their own community outreach program assisting community based organizations.
•    Each analyzed financial markets and individual securities on a weekly basis.

AAB participants were successful in learning about financial literacy and listed below are many of the tangible results:

•    One received a fully funded Bill Gates scholarship through his PHD because of the program. Interview skills are also through the program as well as scholarship research assistance. When they interviewed him and learned what he was doing he was a natural candidate.
•    Two received offers from INROADS after being interviewed and talking about their involvement in the program (both received high marks of approval as being “abnormal and exemplary” INROADS candidates).
•    One received a $5,000 scholarship. During the interview he communicated what he was doing within the program; he was a natural candidate.
•    All have a portfolio of published financial literacy newsletters to submit to their next potential employer.

During the first few months of Optimum Capital Management, I initiated several other educational programs:

•    Developed and instructed personal financial courses for colleges in the New York area.
•    Conducted free workshops within inner-city housing developments throughout the east coast of the US and Detroit (my hometown).
•    Developed financial workshops geared to train union employees to navigate through the obstacles of an unstable economy.
•    Continued to publish newsletters and write for numerous venues that are distributed to my clients and read by others who have an interest in financial independence.
•    Developed financial empowerment programs to institute within schools for the benefit of teachers, parents, and students.

What is Optimum Capital Management?  Optimum is a company established because the financial planning industry has long been neglecting the need for financial education in the community.  As a company we instill principles of accountability and responsibility within a community plagued by high consumption and debt levels.  Optimum Capital Management is committed to providing highly-skilled, full-service financial planning in the most cost efficient means for our clients.  While we are a for-profit company with a significant clientele, we are committed to the needs of the community.

Optimum Capital Management recognizes the tasks to be accomplished.  There are many factors that account for the economic and social status of African-Americans, some of which are not directly within our control to resolve.  These issues must be addressed but not at the expense of neglecting the need for financial awareness within the community.  How can we demand increased government funding for economic development when we are still spending 93% of our money outside our own communities?  “The Black dollar turns over less then once on average before it leaves the community.  Asians turn over their money nine times in their communities, and Whites turn their money over eight times before it leaves.” (Taking Care of Business – Lee Jenkins)  How can we get upset at the government for the lack of support when we aren’t supporting ourselves?  Sixty percent of America is spending more money than they are earning per month (The Millionaire Next Door).  The fact is that consumption is within our control.  Your FICO score, your debt levels, your consumption levels, and your insurance coverage are all within your control.

Consider too that the estimated loss to the 401K’s belonging to Enron employees was $1.2 billion. If Enron employees had received proper financial literacy education, they would have known about diversification and would have appropriately limited the amount of company stock held within their personal 401K plans.  Many employees had as high as 80-90% of their retirement portfolio invested in Enron stock.  With defined contribution plans becoming more of the norm (as opposed to defined benefit plans), employees are now burdened with the responsibility of planning for their own retirement.

Without the basic knowledge of how to control our finances, without being equipped or supplied with an ability to think for ourselves, we are not empowered and are at the mercy of others.

I have made a life commitment to God that I will do all that is necessary to assure that my community is not only educated of these empowering principles, but that they can use Optimum as a means to implement the proper solutions within their lives.  A paradigm shift is needed to start this movement in our communities; our actions thus far have not been successful.  Optimum will create the change that is necessary in our communities and beyond.  This is my commitment and I will continue to do God’s work by any means necessary.

•    A man crosses the street and sees a child about to mindlessly step into oncoming traffic.  He rushes out and grabs the boy before he is injured.

•    While eating at a restaurant, a doctor sees an individual at the next table choking.  The doctor jumps up and immediately gives the individual the hymleck to save his life.

•    A father sees his son fall from a tree to break his arm.  Without thinking he picks him up and drives him to the hospital which then gives the boy treatment.

What will happen if the mother doesn’t answer the baby’s cry?  What will happen if the father doesn’t take his child to the hospital?  The possible answers to these questions are so unbearable that all of the individuals are forced to take action.  All of the events described above are instances where an individual uses their instinct to respond to a seemingly urgent situation.  They see or hear a particular situation, and from past experiences, they know that if they fail to respond appropriately there could be drastic results.  They may have been doing something they felt was important at the time; however, the situation that arose was so drastic that they stopped what they were doing to attend to it.

I ask you now, what are you doing that is so important that you don’t have the time to get your financial future in order?  Perhaps you don’t perceive your financial future as urgent. Considered these facts?

•    By their 65th birthday, 93% of Americans require the financial support of family and friends or social security just to provide for the basic necessities.  (US Department of Labor stats)
•    Fewer men are worth $100 at age 68 after fifty years of hard work than at age 18.  (Denby’s Economic Tables)
•    85 percent of all people have only $250 in cash at retirement.  (Social Security Administration)
•    Over one-third of all senior citizens live below the poverty level as established by the federal government.  (US Census)
•    Two and a quarter million senior citizens forfeit their social security because they have to work.  (Social Security Administration)

There are two types of people in this world.  There are those who are proactive and those who are reactive.  The reactive person lives his/her life and responds to changes as they come.  The proactive person lives his/her life by preparing in advance for things that could occur, and making his/her decisions appropriately.

For example:

A reactive person says, “I want to treat myself to a new SUV.  My budget is tight now, but I have worked hard enough to treat myself.”

The proactive person says, “I want to treat myself to a new SUV, but my budget is a little tight these days.  If gas prices continue to rise I wouldn’t be able to afford to drive it.  Plus, I don’t have my emergency fund (3 months of living expenses) completed yet, nor have I saved as much as I can within my IRA.  I think I will purchase something a little more affordable.  Then when my income increases I will be ahead of the game in my retirement savings and then I might think about splurging.”

The reactive thinker becomes the retiree mentioned in the above statistics.  The proactive thinker was the one who found the situation urgent enough to begin saving earlier to avoid becoming a statistic.  Just as that individual who pulled the little boy out of the street because he could foresee what would happen if he didn’t, so does the proactive thinker start saving as early as possible because he has seen what happens to those who fail to see the urgency in planning for the future.

So I ask you again, which one are you?  Are you the one who never has the time to plan for your future?  If you ask the 85 % of the people who don’t even have $250 at retirement, they will tell you what is TRULY important.  They will tell you what you should make time for.  The dilemma with life is there are no second chances and those 85% will never have the opportunity to go back and begin planning for their future at an earlier age. One must ask, how many of those 85% thought they would never be in this predicament?

How are you spending your money?  Why haven’t you started an investment plan yet?  Few things are more important than your financial future, your financial independence, your financial freedom.

If you tell yourself that you will certainly have more than $250 at your retirement, or that you will have enough saved to afford not to work, then I ask you “What are you doing now to prepare for that future?  If you only could see what I have seen, you would join the ranks of the 7% who decided that NOTHING is more important than starting TODAY!

Written By: Ryan Charles Mack, President of Optimum Capital Management, LLC
Email Comments and Questions to ryan@optimum-capital.com.
(www.optimum-capital.com)

• One business owner if that is to be you. If you have a partner, than I would not suggest this method.
• No formal documents are required in formation so if ease of formation is your most important feature, then this could be an option.
• There is unlimited liability of the owners. There is no separation between you and the business. If someone wants to go after you, then all your personal assets are fair game.
• You are taxed on the individual level. You can take a deduction for a portion of the amount paid for health insurance to cover yourself, spouses, and dependents. The deduction was only 70% in 2002, but was raised to 100% in 2003 and continues to be the same. You would be liable for self-employment tax, in effect paying both the employer’s and employee’s shares of Social Security. You are not subject to unemployment tax.
• There are generally retirement plans available.
• You, as owner, will generally have more difficulty qualifying for other employee benefits.
• When you pass away, so does the proprietorship.

General Partnership

• Usually two or more owners.
• Not a lot of paperwork is required, but there is a little more required than a sole proprietorship.
• As the sole proprietorship, there is unlimited liability of the owners. No separation of personal assets and business assets.
• These are pass-through entities for federal income tax purposes. You within the partnership will pay no tax, and all items of the partnership will flow throw to the partners and will appear on their respective income tax returns. Usually, the general partnership can be thought of as a tax-reporting entity rather than a tax-paying entity. You are not usually eligible to receive tax-favored employee fringe benefits. Tax-favored retirement plans, however, are available.
• As stated retirement plans are generally available.
• You will have difficulty qualifying for employee benefits as the owner.
• You can usually liquidate the partnership without adverse tax consequences.

Limited Partnership (usually formed as a means of raising investor capital and is the popular choice for real estate syndicates where the losses can be passed down to the limited partners)

• Where there are no limited partners in a general partnership, this entity will have AT LEAST one general and one limited partner.
• There will be a partnership agreement required. This can be very tedious. Not because the paperwork involved is hard to file, but there can be A LOT of trust issues that come into play when drafting this document. I personally did not choose to form this entity, because there is no one that I trust more than myself. How the document is drafted will mean everything, if there is a legal dispute and one needs to determine liability. One can be found liable for the others actions, when one had no part in the wrongdoing. However, your situation might be different. Pray about it.
• There is unlimited liability for the general partners, but limited liability for the limited partners. The limited liability is restricted in the amount of investment in the partnership. Limited partners can’t take part in the active management of the partnership or they could be treated as general partners. In other words, if you try to act as if you are a limited partner to reduce your liability, and your actions show otherwise, you will be treated as a general partner (Just be honest from the jump and save yourself some potential headaches.)
• This is a pass-through entity as well.
• Retirement plans are generally available.
• Pretty hard to qualify for employee benefits as owner.
• Same as general partnership, you can liquidate without adverse tax consequences.

Limited Liability Partnership

• Usually two or more partners.
• You need to register under the applicable state law.
• There is limited liability for acts of other partners, employees, and agents.
• There is pass-through taxation.
• Retirement plans are generally available if you choose to form one through the entity.
• Hard to qualify for employee benefits as the owner.
• You can liquidate without adverse tax consequences.

“C” Corporation

• This is good if you are planning to be HUGE. There are unlimited numbers of owners.
• This is not hard to form, but is very costly and time consuming.
• There is very limited liability of the owners, which is why Enron and Worldcom almost got away so clean.
• There is no pass-through taxation for this entity. The corporation will be taxed, and you will be taxed at the individual level as well. There are ways to get around this taxation however. For one, the level of tax is not as high as the individual taxation level. Another way is to EXPENSE EVERYTHING! I mean everything. Expense your salary, cab rides, dinner outings, up to 40% of your rent if you work from home, your education costs, pension contributions, benefits, bonuses, etc. There are many books out there that can help you with this. The goal is to almost zero out your earnings, and eliminate this taxation at the corporate level. Many people do it and are successful with it. However, I do advise, please operate within the legal confines of the system, and keep good record of your write-offs. This can be very tedious, but can keep you from some fines and/or jail time when the IRS comes around (and they will come around).
• Retirement plans are generally available.
• As an owner, you can find it pretty simple to qualify for benefits.
• The life is not affected by your death.

“S” Corporation (very popular among starting small business owners)

• You will have a limited number of owners, no more than 75.
• There are a number of rules and regulations that you have to abide by.
• As in the “C” Corporation, there is limited liability of the owners, so you wouldn’t have to worry about being sued for your personal assets.
• Unlike the “C” Corporation, and the most popular aspect of this entity, is the pass through capability of the taxes. You are not taxed at the corporate level, but only once at the individual. However, many people are unaware of the large accounting and legal costs that it takes to start and maintain the “S” Corporation. Many times they far outweigh any tax advantage that you have from forming this entity.
• As owner, you might find it more difficult to qualify for employee benefits.
• Retirement plans are available.
• As in a “C” Corporation, the life of the corporation is not affected by death, retirement, etc. of owners

Limited Liability Company (my favorite and what I chose for my company)

• You can have as many owners as you want.
• It is pretty easy to form. New York does have a publication requirement for all LLC companies. I can lead you through this if you want, just got my process going. I also have the paperwork, necessary to file for an LLC. Also, LLCs are not subject to many of the restrictions of the “S” Corporations (no limits on the number of shareholders or the prohibition against corporate shareholders).
• You have a choice of pass-through, or corporate level taxation. I chose pass-through of course.
• There is some difficulty qualifying for employee benefits. I haven’t gotten to that level yet, but I will be setting them up within the next week or so. I will keep you posted of the difficulties I run into, provided you choose to form an LLC entity as well.
• Retirement plans are generally available (I am in the process of setting up an SEP IRA).
• One can liquidate with out adverse tax consequences.

As stated, I chose LLC. It was the easiest to maintain, and the most cost efficient for me. However, those weren’t my primary benefits. I wanted an entity that I could pass on to my children with ease, will avoid double taxation, will allow me to grow my firm as large as I wanted without restriction, and one that would allow me to expand and set up shop in many different states. The LLC allows me to do all of these things, and the maintenance is not as much as it would be for an “S” Corporation.

I hope this helps.

How many times have you heard financial advisors, bankers and other “financial gurus” say that “You should have a diversified portfolio”? Well, they are correct. Diversification is the key in any portfolio and should reflect multiple investments. By choosing multiple asset types you protect yourself from the risk of declining value in one particular asset type thereby having a negative impact on your cash flow and net worth.

Typically the word “diversification” makes you think about having the right mix of stocks, bonds, and mutual funds in your 401k or 403b. These assets are extremely important when creating a diversified portfolio; however, they do not tell the whole story of diversification. There are actually four major asset classes that everyone should invest in to truly have a diversified portfolio:

1. YOU
2. Paper Assets
3. Real Estate
4. Business Development / Entrepreneurship

From a financial context when you increase the presence of these four asset classes in your portfolio, you also increase the ability of those assets to generate income and create wealth for you.

Of the four asset classes, YOU are the greatest and most important asset in your portfolio. When you begin to invest in yourself, you not only increase your value but you are positioned to increase your income as well. You can increase your value by:

• Returning to school for another degree
• Reading a book a month
• Meeting someone new every month
• Learning another language
• Learning to play an instrument
• Joining the gym
• Learning a new trade

When an employer takes note that you are well educated, speak three languages, have a Rolodex filled with valuable contacts and have great ideas, you become an invaluable asset to that employer giving you more bargaining power and leverage when it comes time to negotiate your salary and bonus.

The second asset class is paper assets. We are most familiar with these assets, such as stocks, bonds and mutual funds. Most invest in these assets through publicly traded companies with the purpose of increasing their value and producing income through dividends. Ultimately your net worth is increased as the company increases in value. Your paper asset portfolio can be increased by investing in quality assets, such as certain ETF’s and mutual funds representing the entire stock market.

Real estate investments is the third asset class and can increase your income through rental income and your net worth through the appreciation of the property. You can further increase the value of your real estate portfolio by making improvements and/or renovations to your property to enhance its value.

The fourth asset class is business development. Owning and investing in your business is a major endeavor with the potential to yield great income levels and increase your net worth over time. Studying the wealthiest people in the world, 99% of them own businesses and/or invest in other people who have their own businesses. You may not have an interest in starting your own company; however, you can still have an equity stake in someone else who has a privately held business.

True diversification is all about investing in all the major asset classes in order to protect your income and net worth from being negatively affected. If we have learned anything from the global financial crisis over the last year, we have learned that we cannot rely upon any one asset class, but we must invest in all of them to protect us against unforeseen events that may happen.