Barbara Corcoran Shares Her Biggest Money Mistake You Might Be Making Too

Before Barbara Corcoran was a multi-millionaire or an investor on "Shark Tank," she took out a small loan and used the money to start a real estate firm in New York, the Corcoran Group. In 2001, she sold what had grown into a massive brokerage business for $66 million. Despite that massive payday, Corcoran admitted that she made some surprising financial mistakes after the sale.

Her cautionary tale also happens to be excellent financial advice, even for those without millions to invest. These are Corcoran's big mistakes, the steps she could have taken instead, and what you can do to avoid the same fate by putting your money to work for you.

Leaving it all in a checking account

In an interview on the "Earn Your Leisure" podcast, Corcoran explained that after the $66 million sale, she let that money sit in a checking account for four years, admitting she did not invest it or move it into something that would collect interest like a high-yield savings account.

Without her company, the entrepreneur said she felt she needed to "hold on" to that money, a move she later realized cost her a great deal in unearned interest.

"I kept it in my checking account without interest for probably four years, which is probably irresponsible if you think about it," Corcoran told the podcast hosts.

Fearing her 'golden goose' was gone

Corcoran's reasoning for letting the money sit came down to fear, she said.

"I was scared. I don't have my golden goose laying any eggs anymore. All of my staff was gone, and I had no way to produce money," the entrepreneur explained.

However, with a $66 million fortune, Corcoran's money could have been producing additional millions for her during those four years through investments in the stock market. High-yield savings accounts or CDs also would have yielded significant returns over so many years.

Not considering FDIC insurance

Whether you have millions or not, leaving a large sum of money in one place or a single checking account is not a responsible move, as Corcoran eventually learned. The Federal Deposit Insurance Corporation (FDIC) provides insurance of up to $250,000 for customers at FDIC-insured banks.

Obviously, Corcoran had much more than that. Storing all the cash in one place left much of it uninsured.

Falling behind on inflation

Corcoran also admitted that while she clearly knew how to grow and market an incredibly valuable business, she was clueless when it came to putting money to work for her.

"I knew how to make a business, I knew how to get market share … the last thing I knew about was how to make money with money," Corcoran explained. Letting money sit for four years earning no interest technically meant that her fortune was growing smaller due to inflation.

Corcoran's lesson applies across the board, even if you don't have much to save or invest. Leaving money in a no-interest checking account often means falling behind on inflation.

Where to put money instead

Instead of leaving money in a no-interest checking account, moving it into a high-yield savings account allows you to earn interest while still having easily accessible cash if and when you do need it.

Once you have an emergency fund parked in a high-yield savings account, any additional cash could be put to work, either through retirement accounts or longer-term savings accounts like a certificate of deposit (CD).

CDs tend to offer more interest in exchange for leaving your money in the bank for a set amount of time.

When to consider a financial advisor

Traditional financial guidance suggests putting away three to six months of expenses in an easily accessible savings account for emergencies such as job loss or an unexpectedly expensive home repair or medical bill.

If you have savings carefully squirreled away in a high-yield account and have some cash left over, it may be worth it to consider meeting with a financial advisor for expert insight on budgeting and investing.

Bottom line

In Corcoran's case, she clearly realized her mistake, put money to work for her, and eventually began investing in other businesses through her work on "Shark Tank." No matter how much money you have to work with, the key lessons from Corcoran's story can be used to grow your wealth.

Instead of letting money sit in a checking account earning no interest, or letting it burn a hole in your pocket and going on a spending spree, park any excess cash in a high-yield savings account or CD, and consider conservative investments to make that money work for you.

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