The Core Philosophy

The purpose of this website is to illuminate the path to lasting wealth. Together we will try to:

• Explore and explain the hidden truths of personal finance
• Extend our understanding beyond the common ideas found in most discussions of personal finance
• Use financial modeling techniques to explore personal finance concepts
• Overcome the many challenges inherent in a data-driven approach to personal finance
• Develop a tool-kit that any family can use to custom-build a lifetime financial plan that will allow it to achieve all its financial goals

What You'll Find on this Site

Tools to help you manage your finances. I've built each of the tools to help you make educated decisions in all the key areas of your financial life. Please give me feedback on these tools so that I can continue to improve them.

Blog. A forum to discuss the ideas generated by a financial modeling and data-driven approach to personal finance.

Newsletter. A vehicle for me to explore in greater length new ideas, concepts, and questions

My Book. A description of my forthcoming book, If I'm So Smart…Where Did All My Money Go?: Balancing Your Financial Objectives for Lasting Wealth, which is available for pre-order now.

A Little About Me

First, I'm not a financial planner, I am a private equity investor. My firm, Kessler Warshauer Ventures, invests in and manages businesses. I co-founded the firm in 2001.

When I consider investing in a new business, I spend a great deal of time building a financial model to try to forecast that business' future cash flow. The model attempts to account for all the major factors that will impact the business. A good model can tell pretty accurately how much I can afford to pay to buy a business and still make an appealing return on the investment.

In addition to building financial models, I spend a fair amount of time negotiating with business owners and managing our portfolio companies. These tasks, however, are a bit less relevant to the subject matter of this website, so I won't dwell on them here.

Before starting Kessler Warshauer Ventures, I was an executive at a mid-sized privately held company and, before that, I was in school for good long time. My degrees (for those who are interested):

• BA in Social Sciences from the University of California, Berkeley
• MA in Cinema Studies from NYU
• MBA from the Kellogg School of Management at
• Northwestern University

How this Site Came About

Flash back to mid-September, 2008. The financial markets have frozen. A prolonged depression is not out of the question. Adding that concern to the normal risks of buying a business and the near impossibility to raising bank financing to support a new purchase, I saw little chance of completing any new acquisitions in the near future.

This state of affairs gave me time to devote to a new venture. The financial crisis fascinated me. Of the crisis' many causes, the cumulative influence of millions of people's poor personal financial decisions stands out. Why did so many people buy homes they couldn't afford and finance those purchases with mortgages they couldn't pay?

Why Personal Finance is So Hard for People

When one person makes a bad decision, we tend to regard it as a personal failing. When millions of people make the same bad decision, something else is happening.

The massive amounts of debt that people accumulated does not mean that Americans are stupid or greedy, or that they cannot defer gratification. It reflects the fact that people have substantial conflicting financial objectives and they do not know how to balance them all.

As an example, let's look at housing, the epicenter of the financial crisis. People have always relied on LENDERS to tell them how much they can afford to spend on a house.

In the middle and late 2000s, lax lending standards encouraged people to devote way too much of their resources to their home, at the expense of everything else. No one recognized this at the time because, by relying on lenders to tell them how much they could spend on a mortgage, people believed they were buying homes they could afford.

My Aha Moment

I decided to develop a better way to assess how much someone can spend on their home. But I quickly realized the home purchase decision must be evaluated in the context of all of the other financial demands people face. I couldn't isolate the home purchase from the auto purchases, the normal day-to-day living expenses, and the college tuition coming due eventually.

This was a complicated task, but not an impossible one. In fact, I realized it was not too different from modeling the financial future of a business. A business' financial performance over its lifetime depends on a few key variables: the rate of sales growth, changes in gross profit margins, the rate of overhead expense growth, the impact of inflation, the success of new product introductions, etc.

A family's financial future similarly depends on a few key variables: its rate of income growth, its ratio of annual spending to net income (its savings rate), the growth rate of its investments, and the amount it must accumulate to pay for its children to attend college and for eventual retirement.

So, in the Fall of 2008, my mission expanded to building a series of detailed financial models to capture ALL the key financial decisions that families must make.

What I've Learned So Far

I've been fine tuning these models for the last couple of years. They are, and will continue to be, works in progress. But I have made enough progress that I am convinced these models can help you make better financial decisions, decisions that will enable you to achieve your goals.

There appear to be five key steps to achieving lasting wealth:

1. Control your spending so that you save a sufficient portion of your net income each year. For most families, 10% will do. If you have unproductive debt (credit card and consumer debt), pay it off as soon as possible.
2. Once your debt is repaid, begin saving money to make your major short-term purchases: homes and cars. You want to pay cash for your cars, and you want to put at least 20% down on your homes.
3. Invest your savings to maximize the chances of achieving your goals. Different goals have different time horizons, and the right investment decision depends upon the time horizon.
4. Develop a College Savings Plan that will enable you to pay your children's college bills when they come due. That means effectively forecasting how much you will owe and saving and investing appropriately to accumulate that amount.
5. Develop a Retirement Savings Plan that will allow you to set aside enough money to support your retirement. As with the College Savings Plan, you must forecast how much you'll need and then save and invest in a manner specifically designed to achieve your goal.

How You Can Benefit from this Knowledge

I have converted my models into the tools available on this website. These tools will help you take the above five steps. There are tools available for every major step:

• Budgeting your expenses
• Planning to repay your debts
• Deciding how much to spend on a car and when to buy one
• Deciding how much to spend on a home, when to buy one, and how to finance it
• Developing a college savings plan
• Developing a retirement savings plan

While I have endeavored to make the tools self-explanatory and simple to use, if you want to understand the big picture, I recommend reading my book: If I'm So Smart…Where Did All My Money Go?: Balancing Your Financial Objectives for Lasting Wealth, which will be available soon. (You can pre-order it now). Its purpose is to teach you to make financial choices that reflect your true priorities and enable you to achieve all your goals. By reading the book in conjunction with using the tools available here, you will be able to create a fully individualized lifetime financial plan that will set you on your way to lasting wealth.