Farnoosh Torabi has taken her passion and her expertise and done what so many entrepreneurs strive to do: She’s turned them into a brand and a platform from which she has launched herself as a nationally recognised expert. Whether she’s appearing on NBC’s Today Show, CNN, or The View, or writing for The Wall Street Journal, MoneyWatch.com, or USA Today, Farnoosh is consistently in front of a huge audience of people who hang on her every word when it comes to money matters.
Her latest book is, Psych Yourself Rich: Get the Mindset and Discipline You Need to Build Your Financial Life. In this practical, straight forward guide, Farnoosh goes beyond the cold hard facts of finance and digs down into the relationship each of us has with money. She tells how to get to a place of financial well being while maintaining, and even enhancing, your psychological well being. The book is perfect for anyone who wants to develop a positive relationship with money, and one thing we love is that, as Fabio Rosat, the CEO of Elance.com says, Psych Yourself Rich shows you how to “…shift to entrepreneurial thinking…” when it comes to your finances.
Recently, Farnoosh was kind enough to take some time out of her busy schedule to answer some questions for us, and we know you’re going to get a lot out of what she has to say. So without further delay, here is the interview:
Your new book, PSYCH YOURSELF RICH, is about a lot more than just positive thinking, but it is about mindset. What part does mindset play in an entrepreneur’s financial life?
Mindset is critical. In general entrepreneurs may need to be a bit more hands-on and forward-thinking with their finances than others, simply because they can’t count on a consistent paycheck. Entrepreneurs also need to embrace a bit more risk in order to succeed professionally and financially. A 2009 academic study found entrepreneurs, as opposed to corporate managers, engaged in more modest rule breaking as children. Since an early age you’ve probably become pretty comfortable with challenging convention. You probably know what it’s like to be sent to the principal’s office. You’ve had some practice developing, articulating and following through on your convictions. In Psych Yourself Rich, I call this “breaking from the norm,” and it’s a fine – and often fruitful – habit to get into in life, whether one has entrepreneurial aspirations or not.
The greatest risk of all for most entrepreneurs, unmistakably, the financial risk. The threat may be that you never shore up enough money to properly invest in the business or that you never reach profitability, despite your time, good intentions, investments and deals. I have a few key steps can help you control and combat financial risks:
- Anticipate each and every possible worst-case scenario. Just face them head on before they creep up and strangle you from behind. Grab a pen and paper and write down every possible risk you can imagine. This is not to depress or dissuade you from pushing forward. Rather, it’s a way to get you to encounter your financial fears. A tenet of Psych Yourself Rich is that “fear is good” when we leverage this otherwise dark emotion to get us to make healthier and sounder financial decisions. How do we do that, exactly? We have to explore the toughest consequences. Imagine living in your car in the event that you lose all your money. What would that feel like? Never want to get to that point? Then start drafting your combat plan (aka Plan B). Some other potential risks to consider on your list: What if you have to pull from your savings for the first six months to keep the business afloat? What’s plan B if you can’t get a line of credit from the bank? What if you need to lower your prices in order to compete with the neighbouring competition? What if an employee quits?
- Get your financial ducks in a row. Have ample savings and insurance to protect you and your assets when times get tough. If business is lackluster for a time period, you know you can ride it out thanks to your financial safety net. You can take also on predicable and unpredictable risks with more confidence and ammunition. The fact remains, you never want to take on an entrepreneurial venture without some financial stability and security in your personal life. Having six to nine months of living expenses saved in a liquid account, while you aim to get the business up and running, will not only keep a roof over your head, it will allow your to pursue your start-up business with peace of mind. If you work a part-time job while getting the business off the ground, don’t just quit if that paycheck is handy. Keep at it until you have enough financial security to pursue the business full-time.
- Track Your Financial Progress. This goes back to the earlier topic of how to manage your goals effectively. By tracking your sales progress on a weekly, monthly, quarterly and annual basis you can see where and how you are spending, the growth areas of the business and where money may be getting wasted.
- Be organised. Invoice clients on a timely basis and separate your home finances from those of the business. Case in point: I recently met a married couple during a money and marriage segment on the CBS Early Show, Rich and Janice from Hoboken, New Jersey. Rich worked full-time for a company while Janice had started a local yoga business. Their main concern was how to ensure Janice’s business spending didn’t compromise the family’s household budget (they have two young children). The simple answer: divide and conquer. Make sure Janice’s business has its own bank account, ATM card and credit card. Luckily, the business was already at a place where it was self-sustaining. The money she made was used to reinvest in the business and she had no need to use Rich’s income to grow the business. And if time comes where Janice may need to stick her hand in the family financial jar, the couple needs to agree on a pre-determined percentage – maybe 5 or 10% of the monthly income to use as a back-up resource.
- Seek Help. The perspective and advice of others can help save your business. Whether it’s an accountant who can be another set of eyes to review your numbers or an experienced entrepreneur to give you their take on the various risks. These individuals can give you their various vantage points (maybe you can learn from their mistakes) and from that, you’ll have a better idea of how to face your financial challenges.
There are a lot of graduates with majors in finance out there. You’ve taken your field to a whole new level though. What has made the difference for you? What are some steps you took early on to become a recognised expert?
No matter what you study in college, I think the most important criteria in separating yourself from the crowd and achieving your goals as soon as possible after college is having five-year goals. Identify your skills, strengths and selling points and begin exploring the different paths you may want to take in the next five years. Where do you want to be professionally, personally and financially? Constantly checking in with yourself and aggressively chasing after your pursuits is how you can get from point A to B faster than anyone else. It keeps you ahead of the game. Also, don’t be afraid to make choices. Your ability to make smart, calculated decisions is a rule of success. If you end up making a mistake, that’s fine. The sooner you learn how to pick yourself up from defeat, the more successful you will be in the long run.
Looking back, I’ve had five-year goals ever since a sophomore in college. Obviously, graduating was one of my top goals. But as soon as I decided to become a journalist that year I sketched a path towards going to graduate school right after college and living in New York. These became my obsessions and I spent a great deal of time researching the different ways to achieve these goals. I examined how other journalists got their start, how much graduate school would cost, what I needed to do in college to be considered by graduate schools and how to make a living in New York City.
What are your thoughts on entrepreneurship for young people – especially in an economy where jobs are harder to find?
The market will always need new inventions, ideas, products, and services, so building a business is never a bad idea. And the earlier you start the less you have to lose. And don’t let the recession fool you into thinking it’s a bad time to start. In fact many household brands from Hewlett Packard to Disney started or thrived during the Great Depression because a down economy is usually when other companies choose to downsize and slow production.
If becoming the next Richard Branson is not your thing, I think it’s vital to, at the very least, think like an entrepreneur, especially in this evolving economy where many people are learning the hard way that you can’t count on your 9 to 5. Entrepreneurship is leadership.” It doesn’t mean dropping your corporate life for starting a jewelry business or a restaurant. It may or may not mean owning a business at all. In its purest form, an entrepreneur is one who takes initiative, creates his or her own opportunities and accepts some risks. It’s somebody who wants to be in charge and earn freedom, flexibility and control over his or her career and finances. And being entrepreneurial can lead you to a more fulfilling life and secure future.
What three pieces of advice can you give to someone who wants to become an expert in their chosen field?
1. Choose an area that connects with you on a personal level. To be trusted in your field you want to not only have the academic or professional credentials to back it up. It helps if you live it, too.
2. Invest in your presentation both online and offline. Make sure, as the saying goes, you “build your brand” along the way, which means developing a distinct character and voice that singles you out as an expert in your field. Have a blog, have a twitter feed, have a Facebook page, network with people directly at events, comment on other people’s articles, etc.
3. Don’t be afraid to be contrarian. I explain the importance of taking risks in Psych Yourself Rich. One example is acting outside the box and avoiding the ‘herd mentality’ of doing what others say is the right thing to do. Forge your own path to success and don’t feel pressure to compromise your values and personal goals.
How do you define success?
Success is financial security, happiness in your profession, and having a supportive and devoted community of family and friends.