Fear and Overspending:
Successful Entrepreneurs Reveal Their
Biggest Money Mistakes

If Farnoosh Torabi can’t make people smarter about their money, maybe no one can. The financial expert has spent decades writing articles, interviewing experts, and speaking on panels—all on the subject of financial education. And then there’s her award-winning podcast, So Money—if you haven’t listened yet, download it immediately. Torabi has built up an arsenal of the smartest advice for what to with your income, your assets, your investments, your debt, all of it. And—perhaps even more importantly—she’s learned what not to do. Which leads us here: to six brave lessons pulled from her podcast.

(Editor’s note: This April, Torabi adds one more feather to her cap: a touring interactive financial pop-up called Stacks House, designed to educate women on how to take control of their finances. Think the Museum of Ice Cream’s Instagram playground—but for money. If you get a chance to go, by all means do.)

The Biggest Money Mistakes I’ve
Heard from Female Entrepreneurs

Hosting my podcast So Money has been eye-opening. We get to hear about the financial journeys of some of the most accomplished and successful entrepreneurs, celebrities, athletes, and academics. But what have been far more interesting than their financial successes are their failures. How they grappled with money, amassed debt, battled financial fear. It is so revealing—and it proves that no matter where we are in our life or how different our path, our financial challenges are a mighty common denominator. We all have them—and we can all grow from them.

I’ve interviewed over a hundred female entrepreneurs. Here is just a sampling—but their takeaways are universal.

Mistake 1: Spending too much on start-up costs.

Rebecca Minkoff overestimated. This was in the beginning of launching her international fashion empire in the early 2000s. She was a bit overconfident, she says, in thinking her business would take off easily and purchased materials before orders were actually in: “I thought, I have to shoot a fancy look book, I have to go ahead and cut all the patterns for all the clothing in every size, and I have to buy all the fabric for it.”

This rush to spend led to a depletion of about $10,000 in savings. “Not having a very strong sense of business and finance and costs, it was very hard for me to juggle the cash flow, live, and make the collection each season,” she says. Her business made a turn for the better in 2015 when she teamed up with her entrepreneur brother Uri Minkoff, who became the CEO. The sibling duo has been a winning combination ever since.

The lesson: You may not need to spend as much money to start your business as you think. In 2018, 42 percent of CEOs responding to Inc. magazine’s annual survey said they used less than $5,000 to launch their businesses. Pay attention to how you allocate the money you have to ensure your initial investments will be worthwhile for growth. If you need support, invest in experienced people to help guide your financial decisions.

Mistake 2: Hanging on to debt.

TheSkimm founders Carly Zakin and Danielle Weisberg have amassed $12 million in funding for their daily newsletter and a list of celebrity admirers (including Oprah). However, when they first quit their jobs in journalism to start the company, they had only two months’ worth of living expenses in their bank accounts. So they turned to credit cards. For an entire year, the cofounders (who were also roommates at the time) lived off of their plastic. “We believed in what we were doing so much, we were like, We’ll just figure out how to pay for it,” Zakin told me.

It took them three years to pay off all the debt. And while it’s never ideal to live off of credit, the bigger mistake, says Weisberg, was paying just the minimum balance for a period of time. This dragged out the debt repayment. “I would kind of ignore the overall balance of my credit card bill,” she says. “As long as I was making the minimum payments, I really wasn’t thinking about the interest that I was paying.”

The lesson: The more cash you have in the bank, the more likely you can support yourself as you build your business. Credit is helpful at times, but be sure to borrow only what you can afford to pay back in full and quickly to avoid the high interest burden.

Mistake 3: Turning a blind eye to your finances.

Fitness guru Jillian Michaels says she was “intimidated by money.” And that caused her—regrettably—to hand over her finances to various professionals. “This cost me so dearly on so many levels,” she says, explaining that one person overpaid “an obscene amount of money” on her taxes one year. “This person didn’t bother to understand the structure of my corporations, so she double-paid on a percentage of my income that year, and I didn’t know it because I didn’t understand. I didn’t bother to look. I didn’t question,” says Michaels.

These days, she pays every bill herself: “I will stay up in the middle of the night and get it done because I will never allow myself to lose control of my finances again.”

The lesson: Hiring a financial planner or tax preparer to work with you to achieve your money goals isn’t a bad idea, but turning a blind eye to your money management can be a costly error.

Mistake 4: Letting fear interfere.

It’s hard to predict markets, but comedian Margaret Cho counts missing out on a hot real estate deal as one of her top financial mistakes. What held her back? Fear of failure.

In 1994, Cho had the opportunity to purchase a friend’s apartment in Manhattan for $400,000. Despite having the money, she turned it down because she felt it was too risky a proposition. That home today is worth millions, she says. Years later, she was offered a partnership in a restaurant for an investment of $25,000. She could afford it, but her fears got in the way—again. The owners have since “quit working and have yachts.”

The lesson: Do a proper analysis of each investment opportunity that comes your way. Take into account market research. Ask yourself: What is the actual likelihood of failure? If I were to lose my investment, would that derail my financial plan? Is it a relatively small risk for a potentially big reward?

Mistake 5: Not seeing the bigger picture.

In 2007, as the stock market was headed on a downward spiral, Sallie Krawcheck spoke with her financial advisor. She wanted to understand the impact a serious market correction would have on her investment portfolio. But she failed to analyze the implications beyond that. Krawcheck lost value in her retirement savings, her job on Wall Street, and a big chunk of her net worth, which was tied to her company’s stock. “What we failed to do was to continue the train of thought,” says the Ellevest founder. To “look and say, ‘Okay, what would happen to the stock of the bank I was working at…if there was a market correction of that size? What happens to my employment possibilities? Well, we know what happened there, too. Out of the job.”

The lesson: The strength of your financial plan is measured by your investments and your income security. It’s worth it to check in once in a while and ask: What if…? What if you lose your income? What if your investments take a nosedive? What if it all happens at the same time? Diversification among your investments—and income streams—proves critical in down markets. As for owning a piece of your company as Krawcheck did, a good rule of thumb is to not have more than 10 percent of your portfolio’s value in your company’s stock. If you own more, just be sure it isn’t tied heavily to your overall net worth.

Mistake 6: Not getting enough sleep.

Skimping on sleep may not seem like a financial misstep, but Arianna Huffington calls this one of her biggest regrets. Huffington learned her lesson the hard way while working long hours to build Huffington Post. Her body shut down. She collapsed in her office, hitting her head and breaking her cheekbone.

There’s been significant research on the importance of sleep and productivity. If those of us sleeping fewer than six hours every night increased our sleep to just six or seven hours, this could add more than $226 billion to the US economy, according to research from RAND Corporation. Huffington believes that her dedication to sleeping more has enhanced her life, business, and finances: “I think, unequivocally, I’m a better leader…and more creative in terms of my writing and my speaking and also, just as important for me, there’s more joy in my life,” she says.

The lesson: Self-care is one of the best investments you can make in your lifetime.

Farnoosh Torabi is a leading personal finance expert who helps Americans live their richest, happiest lives. She’s reported for Money magazine, hosted a prime-time series on CNBC, and written monthly columns for O, The Oprah Magazine, and Mint.com. Torabi’s award-winning podcast, So Money, made its debut in January 2015. On the show, she interviews leading experts, authors, and influencers, including Tony Robbins, Margaret Cho, and Tim Gunn, about their financial perspectives, money failures, and habits. She also answers listeners’ personal financial questions each week. This April, Torabi and her female cofounders will launch Stacks House, a touring financial education pop-up that will make its first monthlong stop in Los Angeles. Stacks House is in partnership with Zelle, Charles Schwab, and Day Owl.