My 2012 Federal Tax Bill

The paper work is in, the numbers are tallied and I am as happy as a clam. Our 2012 household taxes are completed and here are a few bullet pointed highlights:

• ·        Our effective federal tax rate for 2012 was 11.15%
• ·         We owe the KGB feds $68

Yes I am thrilled and excited to not get a refund and to owe our wasteful government money. If it were up to me I would not send a single penny to those who waste our money in Washington until April 15^th and I would pay our entire annual taxes, all tens of thousands of dollars of it, in actual pennies, but hey, that’s just me.

To help get us to our 11% federal tax rate we used a lot of the same options that were available to us in 2012. We made over $2,000 in after tax contributions to our health savings account, we made steady and consistent charitable donations and we utilized as many pre-tax expenses as we could through work. As a combination, all of these factors helped lower our taxable income and get us to an 11% federal tax rate.

It gets even better this year as well! The limit that I am allowed to purchase monthly mass transit passes with pre-tax income has been raised so this year I will be purchasing monthly transit passes for myself and my wife. Over the course of a full calendar year that comes out to $2,400 worth of bus passes that I can buy pre-tax – thus lowering my taxable income by that same amount. We are also continuing to plug away at depositing money every month into our health savings account which also does the same trick J.

For what it’s worth as well, and this is especially important for anyone who invests or plans to invest the Dave Ramsey way, there was a bit of a curveball the KGB feds threw at us last year. We spread our investments across 4 types of mutual funds through our Roth IRAs and our taxable brokerage account. Now growth on the ROTH is tax-free but our growth on the brokerage account is taxed at our investment income rate. When we started investing the Dave Ramsey way our superstar mutual funds started generating dividends and capital gains payouts which we elected to reinvest automatically. When these taxable dividends and capital gains payouts started happening, that triggered Washington to require us to send in estimated quarterly tax payments of over $300.00.

To combat this we use a simple savings account that we call our “tax account” which we use as a sinking fund to meet this quarterly payment. So every month we set aside a certain amount from our budget to go to the “tax account” and when the quarterly payments come due we just write a check. No scrambling, no guessing, no trying to play catch up, just peace of mind.

An interesting footnote as well to end on, our tax form states that our taxable income, in the eyes of the fed was just about $20,000 less than our reported adjusted gross income. To reiterate, we are debt free, don’t own a home, owe no one a single penny and we were still able to lower our taxable income with deductions that amounted to nearly $20,000. I’ll certainly take the charitable donation tax deduction over the mortgage or student loan interest deduction every day of the week! 

My Insurance Review

In light of recent events I figured today would be a good use of space to revisit my overall insurance game plan. Life in itself can be full of ups and downs and events that you plan for as well as ones that you don’t plan on. To me insurance is fundamentally about paying premiums to transfer risk.

Within the last week my wife began to feel ill and visited a walk in clinic near her office. In what felt like the blink of an eye she has now had a few diagnostic tests run and has a few follow up appointments on the horizon. **SPOILER ALERT** Thankfully my wife is doing fine and tests so far have ruled out anything seriously imminent, but this entire ordeal in itself has definitely brought insurance to the fore front of my mind.

Health Insurance

Through both of our employers my wife and I are able to carry individual health plans. I carry a high deductible plan along with a health savings account, and my wife has her health plan furnished free of premium through her employers. During our recent event a few passing thoughts have fluttered through my head. One of them is that life in itself can bring about enough stress and worry. It terrifies me to think of having to face the same situation without health insurance. I cannot even begin to imagine what it would be like to be in the middle of this same event and start to second guess whether to proceed with medical testing because the resulting bills would be too high.

 I actually used to be of the mindset that if a person did not have insurance available through work that maybe they could slide by and make it through just by playing the odds of unexpected events. Now I believe that medical insurance is something that you can’t afford to live without. Whatever it takes, seriously, work it into your budget. I have a few friends whom have been able to buy health insurance on the open market through one of Dave Ramsey's Endorsed Local Providers. While it is true that buying through work is cheaper premium wise, the benefits of having health insurance far outweigh the risk of being without it. Study after study I read state that medical bills are a top cause of bankruptcy. So to me a high medical insurance premium is a small price to pay for being able to cover any and all major unexpected or expected life events.

Mental Health

Piggy backing on health  insurance, in the last year I have begun to consistently see an individual therapist and my wife and I have begun to regularly see a couples counselor. After our insurance pays out all we owe for each visit is a co-pay of $17 and $20, respectively. To me these have been some of the best dollars that I have ever spent. In these regular appointments I am prioritizing growing and developing myself as well as my marriage. And if that weren’t enough, I regularly contribute pre-tax income every month to my health savings account to cover these co-pays, thus lowering my taxable income. It is quite the win-win scenario in my book.

Renter’s Insurance

For those of you fellow renters out there hear me loud and clear: If your apartment is broken into, lost due to fire or damaged due to a flood, the landlord cannot replace your items. I am the only person able to insure my possessions against any of the aforementioned events – and then some! So we carry a relatively low policy that covers around $20k for a few hundred bucks a year.

Dental and Long Term Disability

An odd pairing I know. We both carry a dental policy, furnished through our employer and stay up to date with our regular checkups.  Thankfully through my employer I carry long term disability insurance free of charge. If I were to be eligible to need LTD, then after 90 calendar days I would be paid 60% of my base salary all the way up to 65 years of age.

Term Life

It shouldn’t come as a surprise that I subscribe to Dave Ramsey’s philosophy when it comes to life insurance. That philosophy is to keep insurance and savings separated. When my wife and I were in our early 20s we bought 30 year level term policies equal to roughly ten times our annual incomes at the time. I’m a bit behind the 8 ball on this one since we should update our policy to cover our raised income amounts (hi honey, guess what we’re going to talk about tonightJ).

So instead of buying whole life policies where we pay endless fees, set ourselves up to have the insurance company keep our built up savings upon our death and get awful rates of return, we pay low premiums through our term policy and invest/save the difference on our own. In the event that one of us would need the funds of the term policy the implementing plan would be pretty straightforward. The surviving spouse would set aside 5 years’ worth of the departed spouse’s pay in a cash holding (money market account or simple savings account) and invest the remainder in the 4 categories of mutual funds that we invest in. This way the surviving spouse can maintain their standard of living for at least 5 years and be able to replace lost income over the long haul.

In conclusion none of this stuff is clean or easy to talk about. Just in these paragraphs I’ve had a flood of emotions run through me just considering “what if” scenarios. I can imagine how going through one can be gut wrenching and traumatic even before money enters the equation. That’s why I feel a solid insurance game plan is key to any road towards financial peace. With the right pieces in place I’ve been able to focus on what matters: the health of a loved one and not whether I can pay the bill or not.

My 3rd (of 4) Daily Motivational Mantras

Love Generously

This is probably the most difficult of the 4 daily motivational mantras that I have found to implement in my life. Over a big portion of my life I’ve carried a ton of baggage along with me. Only within the last few years have I made the intentional effort through individual counseling and personal development to begin to heal wounds that I have carried around with me for decades. Truth be told a lot of that baggage has inhibited me from genuinely loving others and myself.

In fact working through therapy to love myself has been one of the toughest things that I have tried to do as an adult. For anyone that knows me, they might find this hard to believe, but I have held an incredibly negative point of view towards myself since childhood. That negative self-view caused me to do a lot of harm to myself over the last couple of decades, and I virtually severed myself from any meaningful relationships in my life.

Only through the grace of God have I been able in the last few years to tackle this head on and make progress. With a loving and supportive wife, faith in God and a personal will that wanted to change, I’ve really began to make strides personally. This blog has talked a lot about the finance side of things, but personally I have also only began to grow in love for myself and others, and it feels absolutely amazing.

I have spent a ton of time chasing after the future. One day I will get my act together. One day I will have a wife that loves me and makes everything better. One day I will care for others. One day I will forgive myself for my past misdeeds. Between you and me, one day will steal your entire life. For decades I chased after one day. It has been in the last few years that I have begun to put the healing touches on my baggage. And it’s kind of fitting, even when I first started to put the effort towards recovery I immediately felt compelled to love others. Whether it was serving through my time, offering my talents or through meaningful acts of giving, I started to really come alive and be the person God meant for me to become once I started loving myself and others.

The steps of progress, though not as fast as I would like at times, have been incredibly profound. I am more intentional on erasing my negative self-image, sharing my emotions and feelings with my wife, reaching out to others for meaningful friendships and putting healing touches on fractured relationships.

This might be a long detour to get to the point, but for me at this point in time loving generously is about stripping away all of my hurts and hang ups and embracing life for what it is right at this moment. My therapist put it this way, “The person you are today is greater than the person you want to become because the you now is real.” That has really stuck with me.

Since being more intentional with bringing healing and peace to my own life it has really opened me up to the world. I feel a lot more aware of the needs of others and asking myself how I can serve those needs in meaningful ways. I’m also learning to love and embrace exactly where I am today. Lying on our couch last week I felt an incredible feeling of peace come over me as my wife was cuddled up next to me. I’ll share with you, loosely paraphrased, what I told her:

“This is enough for me. I am absolutely thrilled and loving where we are in life right this moment. If our mutual funds never return another penny, if I were to never advance in my career, if we were to stay exactly where we are, having this life, you as my wife and the love we share, is all I ever need in life.”

I firmly believe that the contentment I find in life at this moment derives from the actions that I have taken over the last few years to love others, myself and God generously.

My Change in Giving

It has now been about 7 months since my wife paid off her student loan and our household became a completely debt free one.  But I feel as if just about now we are getting into a great groove of budgeting without debt line items.  We still (and always will) budget and plan every month before it begins and give every dollar an assignment.  And in becoming debt free we’ve planned to do a little more saving, spending to have fun, and giving.

As a general rule we tithe on our net income. My thought is it takes an act of God to make taxes come down, so if God wants more, He knows what to do. J  Up to now we spread our tithe across 3 places: our local church, sponsoring children overseas through Compassion International, and for miscellaneous gifts throughout the year such as birthdays, weddings, anniversaries, etc.

In our latest budget committee meeting we agreed to only spread our tithe between our local church and Compassion.  We will use our disposable income to save monthly for year round gifts.  Why the change? Well, it’s important to us to give to a local ministry and with this revised plan, we can now give an extra $1,200 a year to our local church on TOP OF what we have previously been giving to our local church.  Forget the tax deduction for a moment, for us giving is a declaration that God owns everything.  Regardless of the amount, we prioritize and plan our giving so that in emulating God’s example of giving, we too can be open to receiving the love and grace that comes with holding our money with an open hand and spirit.

Giving has changed me. Over the years it has opened my heart to healing and love that I would have never thought possible years ago.  It’s made me less selfish and has encouraged me to recognize the needs of others, and to open my eyes to how I can serve with my time, talents and resources.

I know I may have gotten off point here, but giving is probably my favorite thing to do with money.  So here we are, in February, debt free and planning to give more to one organization than either of us have in our entire lives. I can’t wait to see how God is going to use these gifts!

My Book Review: "Purple Cow" by Seth Godin

Lately all I have been able to think about has been purple cows and rhinoceroses. This post is about the purple cows.

Seth Godin’s, “Purple Cow” is one of the best reads I’ve had in this early year. It is incredibly motivating and certainly relatable on an individual level. With that said I have one negative critique that I’m sure will set off a firestorm with the Godin faithful: The first third of the book was unbelievably boring.

A lot of the open in this book is technical and speaks directly to business minds and entrepreneurs that keep the wheel that is our economy spinning. This is not me. I was a communications major in college, which might be the furthest thing from the business program. Seth, I don’t understand your charts and most of the info in those opening chapters went right over my head, especially when I went back over the material at an even slower pace.

But of course that’s not a knock on Godin, as much as it is an open statement that the business thinking functions of my brain are pretty much non-operational. But once I got past the technical part of this book, the advice, aspects, insight and guidance Seth provides is just about second to none.

The application of the purple cow I felt is not even restricted to the formal business settings. I drew a ton of correlations between my own personal walk and journey in life to the concept of the purple cow. Some of the main things that I took away from this book included: staying sharp with continual learning (whether formal or informal), constantly staying up to date on the skills I bring into the workplace and for that matter even shortfalls that I need to work on and to always seek out personal growth as a human being.

So in case there is any doubt in your mind, I assert that “Purple Cow” is a must read, especially after the first third of it!

My Reverse Superman

In “Quitter,” by Jon Acuff (a book that has been reviewed here), Jon talks about doing the reverse Superman act. The reverse Superman is when you go from doing what you love to your day job. In the book Acuff uses his own personal real life example of being a keynote speaker one night, catching the red eye home and walking into the day job the next morning. I experienced this during the week.

My 2^nd FPU class wrapped up this past week and the last lesson always leaves a special place in my heart. But at this group’s last meeting it took on an even greater significance. As a group we had a round table discussion about what the class meant to us on an individual basis, and the response thoroughly left me in awe.

Couples shared about healing and better communication in their marriage. Singles talked about the empowerment they now have to review their personal finances with competence. And this one impressed me, as a few shared that even before this FPU class ended, they have been finding opportunities to help friends and family with needed financial guidance, sharing what they were learning along the way.

I felt energized, revitalized and in awe of how God is works through this program. I’ve been on my Total Money Makeover journey since 2009 and I am still blown away at how empowering and life changing this material is, especially when I see it reshaping and encouraging others. My wife and I stayed up that night about 2 hours past our bed time talking about the experience of facilitating the class. I was so pumped up and energized from being a part of what was experienced that I couldn’t go to sleep if I had tried.

The numerical end results were phenomenal as well. From a group that fluctuated around a dozen households, on average each household had an average change in financial position of $5,400! There was even one household that had a $17,000 change in financial position during the course of this class. Now that’s fun! Being a part of something that I believe in, getting to share it with others and see their lives transformed before my eyes is one of the best feelings in the world. And of course I’m already looking forward to the next round of FPU that my wife and I will be leading!

Now if there were only a way to do this type of thing full-time! 

My 2nd (of 4) Daily Motivational Mantras

"Laugh Often"

There couldn’t be better advice when it comes to personal finance than this gem, especially for those of us who take themselves way too seriously (guilty as charged). Even when I found the right path to financial freedom I still made and make mistakes. You will too. Especially when it comes to drafting and then living off your first few zero based monthly budgets. I overthought, overcomplicated and overstressed the entire ordeal a lot more than I should have.

As I’ve progressed though in my financial development I’ve actually found laughing at myself a much more easier process to go through than when I first started. When I first started I was crunched for time, 20k in debt and felt like I needed to get a move on everything, and get it functioning perfectly and fluidly ASAP. There was a ton of stress in my life brought about by the debt I owed and coupled with not having a plan and wanting to move along the financial prosperity spectrum in a hurry, it was a lot harder to laugh at myself when I made mistakes. Back then I felt that there was no margin for error.

Now when I mess up I still get stressed out about it, probably because I’m the control freak nerd spouse, but it takes me a lot faster than it did 5 years ago to pull back, look at the situation, see where I’m at, laugh about it and move on. So I find it fitting to share with you some of the best opportunities I’ve had to laugh often during my road to financial peace.

The first envelope pull

After having read, “The Total Money Makeover,” for the like the 5^th time that week, we were set to follow Dave’s envelope system for certain spending categories. Our zero based budget was drafted and agreed upon, and as soon as the vote was set to agree on our plan I whisked off to the nearest ATM to make our monthly cash pull for grocery expenses. I was so confident, a bit arrogant, but set in stone that this plan was going to work and work right now in my plan for financial prosperity. I stopped at the ATM and pulled out our agreed month allotment and then proceeded to the grocery store (a block or so away from the ATM) to make our first cash grocery purchase “on the plan.” When I came home we put the groceries away and I pulled the receipt to accurately track how much we had spent and how much should be remaining in the grocery envelope. When all dollars were counted, the envelope was short $20! I went into orbit and felt like such a failure. Here I was trying to get my financial act together and blew it on day one.  Did I drop it in the street? Did I overpay the cashier? Is it in another pocket? None of these questions would be answered because I had lost $20 the first time I tried to use the cash envelope system for grocery spending.

I can assure you that looking back on it now, I genuinely am laughing at myself. That young man at that time needed to learn a lesson in humility. He needed to know right off the bat that perfectly planned months don’t happen and that life is always happening to your budget, whether you like it or not, or plan on it or not. That night we made needed adjustments to cover the $20 shortfall from another category, breathed deeply and moved on. I am happy to report that since that night I have never lost a single dollar transporting cash from the ATM to our envelopes. As a matter of fact a month or so ago, when my wife and I were returning from the very same grocery store that I had lost $20 at, walking down the very same path back to our apartment, we found a clean, crisp, $20 on the ground. Yes we picked it up and yes we used it to refill the grocery envelope from that $20 lost long ago. It’s interesting how things circle back around!

The Cash Holding

This past year I was ready and set. When the market crash of 2008 occurred we used a limited amount of disposable income from our month to month budget to invest as the market free fell. With the 2012 fiscal cliff deadline looming in the distance I was going to be ready for that imminent market drop. So months before December 31^st, 2012, we had stockpiled $5,000 to be ready for when we all went over the fiscal cliff. I was expecting a big market drop and wanted to swoop in with even more cash than we had in 2008. We still did our systematic and consistent investing through our retirement vehicles, but I wanted to give our brokerage account a nice cortisone shot in the arm by buying awesome mutual funds at great prices with even bigger dollars. December 31^st, 2012 came and went, we went over the fiscal cliff, our brilliant government passed an awful solution, and the market didn’t drop. In fact it pretty much has done the exact opposite. This has left me wishing I had taken my own advice: consistently invest steadily and regularly over long periods of time and do not try to time the market.

I should really listen to that guy, he seems to know what he’s talking about J! But be rest assured that even though a lot of that $5,000 in cash has missed out on the ride that has been Q1 2013, between our entire investment portfolio we currently have over $100k that is invested and has been a part of this ride.

The middle of nowhere suggestion

This one is not financial, but it’s still a funny story in my book. A few years ago my wife and I took a road trip up to Northern Michigan to Mackinac Island. Along the way we stopped by main drags in small towns along the way. My wife had randomly chosen 3 or 4 great places in a row that were picturesque and really fun to have stopped at. So when she took the wheel I figured it was my turn to strike gold. So with our GPS in our rental car I randomly picked a destination in a small town in route with an address of Main Street. About an hour later through windy hills and countless farmland we ended up at the destination I had selected:  vacant farmland in the middle of nowhere that was not exactly off a major highway. When we arrived at the destination point my wife pulled the car over and we immediately burst into laughter for a good 20 minutes. It still makes me chuckle how confident I was that I could find our next great adventure on our little roadie.

The mutual fund that got away

Now I believe with everything in me that if you filter and search, that there is a plethora of excellent mutual fund choices out there. But every once in a while one crosses your path that just makes your jaw drop in awe. Many moons ago one of the best mutual funds I’ve seen in a while crossed paths with me. Through my employer’s 401k one of our choices was a superstar Dodge & Cox Large Cap Growth and Income fund, known lovingly as DODGX. This beauty has been around since 1965 and has an average annualized return of 10.74% since inception. Oh, and its fund manager Mr. John Gunn has lead the fund since 1977, so he kind of knows what he’s doing J!

For about 7 glorious months this mutual fund was a part of my portfolio, and I am understating this when I say that it was bliss. But the rug was pulled out from under me, as our 401k options changed and this proven stud was traded out for a couple of mutual funds that weren’t old enough to be out of diapers AND had average annualized returns that were a fraction of what DODGX brought in. I was scarred, I was upset, I was hurt, but I moved on. Looking back on it now I definitely chuckle at the fund that got away.

Conclusion

I have found that I have absolutely no control whatsoever at the curve balls that life will throw my way. Whether I end up in a field, losing a great mutual fund, am left holding a pile of cash or losing Mr. Jackson, I’ve definitely seen firsthand that life’s ups and downs are going to happen. I have and will make stupid mistakes (hint: you will too). But with a solid long term financial game plan that works through bulls and bears, and not taking myself too seriously, I am genuinely happy right where I am in life and the direction that I’m heading. Through the successes, failures, laughable moments and everything in between, I must say that life has been really enjoyable in my post-Ramsey days!

My International Mutual Funds

I decided it would be fitting following my super fund annual checkup to give a breakdown and assessment of two mutual funds in our portfolio. In my opinion these 2 funds epitomize the highs and lows as well as the perceptions and realities that come when looking at investing in the stock market.

Within our taxable brokerage account we have a small army of 8 mutual funds. From the 4 categories of mutual funds that Dave Ramsey advises to invest in, in our brokerage account we have 2 of each. The two that I am going to focus on today are the 2 international mutual funds that are in this account. So as I go forward in this tale please keep in mind that across all of our investments we are earning a little over 16% average annualized returns, and this is only a micro look into 2 funds that help make up that 16%. I still only advise investing in historically proven mutual funds and buying and holding for at least 5 years, but I have the feeling you already knew I would say that J!

When I began investigating, researching and compiling what mutual funds would be in our taxable brokerage account it was the winter of 2008. The market was freefalling and blood splattered the streets red. Panic was everywhere like a fast spreading disease. As a lot of investors were jumping off the roller coaster and selling their equities for bonds or opting for cash, my wife and I were determined to start our investing portfolios right then and there (my wife more than I, admittedly). 

I am confident and proud to say that the American economy (as a group) is the most resilient force on the face of the planet. It is resilient against war, depression, recession, threats of war, economic busts and acts of terrorism. So when it came time to assess and look at international mutual funds, I was even more stringent than usual.

Europe as a whole dictated how I strategized the international mutual funds that would end up in our portfolio. The economies of Spain and Greece were wreaking havoc on the Euro and the region as a whole did not appear to be on the upswing to me. However, when I look at Europe I see a developed group of nations, that as a whole, is incredibly stable. But outlook to me at the time said that over the next 5 years, if an international mutual fund carried a mix of European companies, that it was going to be very tough for that fund to average 12% average annualized returns in that region.

So I took a swing. I decided to look at international mutual funds that looked outside of Europe and were region specific. That led me to 2 mutual funds that met my strict criteria and took me away from the Euro. These funds were region centric to the Asia-Pacific and Latin America.

APAC

More than being fascinated, I have always been drawn to this part of the world, from an investing point of view, as a great mix of emerging and developed markets. Aside from China (because everyone already knows about it!) just about every country from Japan to Australia has seen excellent and continuing growth from blue collar manufacturing to white collar financial. Now while our mutual fund that focuses on this region has a slightly higher weight on companies in China, the contribution, growth and development of this region has happily contributed to this mutual fund earning 22.76% average annualized returns while we have held the fund. Solid growth, great diversity and tremendous upside, our APAC centric mutual fund has been a winner through and through.

Latin America

Then there’s this one. In the 9 week version of FPU Dave asks if any of us have had so many kids that we have a stupid one. Well, this is my stupid one. It had been about 3 years since I bought my first set of mutual funds in our brokerage account and I was gearing up to buy the next 4. I still felt the same way about Europe, and at the time (and I still feel this way) I felt bullish on Latin America. My positive feelings generated from two things: (1) Brazil hosting the 2014 World Cup and (2) Brazil hosting the 2016 Olympics. With a horizon right at 5 years I still see upside for the region. So I sought out a Latin American centric mutual fund with my heavy hitting criteria, and specifically looked for ones that were slightly weighted towards companies in Brazil. I still see these 2 events as a steroid shot for the economies in the region and I remain bullish, probably to my own fault in this case, through 2016. To date our Latin American centered mutual fund has returned -16% average annualized returns for us. Ouch!

I still see upside and look forward to the region hosting the World Cup and Olympics. But once the torch is lit in Rio we will be liquidating our Latin American mutual fund and seeking a global fund that meets my strict criteria. I do think this mutual fund will turn around as 2016 approaches and come into line with its historical averages, but beyond the Olympics we are planning to cut the investment and seek another fund. So we will continue to hold the shares that we have invested until the torch is lit, but we will not be purchasing any additional shares and have also elected to not reinvest dividends and capital gains and will liquidate this fund once the Olympics begin in 2016.

So there you have it, one nicely up, one disappointingly down. But as I go forward I will continue to stay diverse in my investments with historically proven winners. Because through all of our investments I find it interesting that even with a negative 16% loser, our overall portfolio is up 16%...ironic??

My Super Fund Annual Checkup - 2013

Early February is one of my favorite times of year.  The bitter cold of a Midwest winter has settled in, the holidays are over and did I mention here in Chicago we are a good 2-3 months away from consistently warm weather?!?! So why am I so chipper this time of year?  Because in early February of every year I take a bird’s eye view of my investments for a thorough performance evaluation.

A big part of going from $0 to a million is demonstrating that Dave Ramsey’s principles work in real life.  Sure, a lot of his suggestions come across as common sense to the masses: get an emergency fund, pay off debt and live on less than you make. But the most contentious issue on everything that is Dave Ramsey is, “Can you really make 12% investing in the stock market?”

Some naysayers say REIT’s get good returns and that mutual funds aren’t the only way to go.  But the majority of the “anti-Dave” crowd asserts that 12% just can’t be done. And my super fund annual checkups put the Ramsey way of investing to the test.

For those new I’ll bring you up to speed. I follow Dave Ramsey’s style of investing, and in some regards use an even stricter criteria.  I spread my mutual fund investments across 4 types: aggressive growth, growth, growth and income and international. I invest in mutual funds that have averaged at least 12% average annualized returns since inception, and those funds have to have portfolio managers that have lead the fund for at least 5 years.  In my superfund annual assessment I look at my average annualized returns across our Roth IRAs, our taxable brokerage account and my 401K.  A disclaimer on my 401K though:  The equity options suck through my program, so in my 401K I am currently invested in a bond fund and include my employer’s 50% (newly reinstated by the way) match as growth on my contribution.

I know you’ve been on pins and needles, so let’s get to assessing! My Roth IRA is currently returning 8.45%, and my wife’s Roth is bringing in 12.36%.  My 401K, even with instant 50% growth through the match, is currently bringing in 16.26%. And lastly, our taxable brokerage account is swinging in at 27.95%.  So across our reported investment vehicles, we are earning 16.255% average annualized returns investing the way Dave Ramsey teaches.

This is quite the change from last year’s 9%!  For one, I found some better tools through our broker to get more accurate calculations, but mostly our mutual funds did a great job of riding the wave that was the bull market of 2012 that spilled into early 2013.  So I encourage you to not only follow Dave’s advice on investing, but to please share this post with anyone who says 12% is unattainable or does not believe “the little man” CAN build wealth through the stock market.  The market is not rigged; you just have to make informed and well researched decisions when investing. J