Doug Warshauer, co-founder of Kessler Warshauer Ventures, not only invests in and manages businesses, but also writes a personal finance blog Doug Warshauer Blog and has recently released his book, “If I am So Smart, Where Did My Money Go?”
Having met Doug via blog commenting, I am proud to share this interview.
- Doug, what motivated you to write this book?
I began researching the book in September 2008, when the financial crisis hit. It struck me that financial crisis was caused, at the deepest level, by a collection of terrible individual decisions. Millions of people bought homes that they could not afford or ran up credit card debt that they had little hope of ever repaying. I thought I might be able to develop a way to help people make better decisions.
- Doug, tell us a bit about yourself. Have you been writing about personal finance for a long time?
No, writing a book was a real transition for me, because before that point I’d been entirely focused on running my private equity investment business. That turned out to be a lucky break, because I had developed an expertise in building financial models to project the cash flows of businesses. When I began to research this topic, it stuck me that I could use the tools that I normally use to evaluate a business and apply them to modeling a family’s financial life.
This proved enormously fruitful. Using these tools, I can show people how to calculate, for example, exactly what percent of their net income they need to devote each year to college savings and retirement savings.
- With all of the financial advice, blogs and books available today, what makes “If I’m So Smart…Where did All My Money Go?” unique?
Most personal finance literature focuses on teaching concepts. The idea is that, if you educate people about how they should manage their money, they will take those concepts, apply them to their personal situation, and make good decisions. So we tell people to spend less than they earn, stay out of debt, minimize the use of high interest credit cards, pay off your mortgage, save for college, save for retirement, etc.
Unfortunately, it doesn’t work well for a lot of people.
Why doesn’t it work better? Because people already know the concepts. The problem isn’t that the ideas are complex and hard to understand. The problem is that they are hard to execute because they conflict with each other. It’s hard to do all the things you’re supposed to do at once.
My book helps teach people to solve the underlying problem, which is the conflict between each of their objectives. It shows people how they can address their problems one at a time, and how to figure out exactly how much money they need to devote to each of their objectives. A reader’s ability to apply the guidance specifically to his or her own situation makes this book something that people can really use to improve their lives.
- Your book uses stories of ten fictional characters to help the reader relate to real money issues real people struggle with. What can we expect to learn from these stories?
I thought the stories would be much more interesting to read than straight nonfiction. Finance can be a dry subject, and if it’s dry and boring, people will give up on it.
Plus, the characters in the story gave me a perfect vehicle for demonstrating how to use the techniques I’m teaching through examples. There is a character in the story named Mitchell, who is 55 years old and has two boys getting ready to go to college. In the book we go through his finances in detail, and he learns how to determine how much he needs to save each year to pay for his sons’ college education. He also learns to determine how much, and when, he should save for retirement. By seeing how this program works for the characters in the story, the readers can learn how to apply it to themselves.
- What is the personal side of this book for you? For example, have you experienced a time in your life when you wondered where your money went?
I have. I think we all have. That’s why the title seems to resonate so well with people. There are so many areas of modern American life that seem to suck our money from us. It’s very stressful. Until you know how to set aside an appropriate amount of your resources for each of the things you want to do, you worry that you won’t be able to do them all. But the good news is, once I went through the process I teach in the book, I found that I actually could do all those things, and the stress really melted away.
Thanks Doug, for a great interview. Here’s hoping your new book will help lots of people!