Maybe you’re struggling with a mountain of debt. Maybe you’re behind on saving for retirement. Or maybe you just feel like you don’t completely understand managing your money. Your friend suggested hiring a financial coach, but what are they and how does coaching work?
Four in seven Americans are financially illiterate, and it’s not very surprising. Personal finance courses are only required in high school in seventeen states and for decades, families considered it rude to talk about money. As a result, young adults had to guess how to manage their cash when they struck out on their own. In a world where there’s a lot of pressure to keep up with the Joneses, not having good financial habits in place early means financial trouble later.
What Is A Financial Coach?
A financial coach is essentially a teacher and a cheerleader for your money. They will help you build a budget, make a plan to get out of debt, and plan for your future and long-term goals. You’ll still have to do the heavy lifting, but your coach will be there to cheer on your successes and keep you accountable when you’re struggling.
Financial Coach Vs. Financial Advisor
A financial coach is NOT the same thing as a financial advisor. An advisor recommends investments and specific financial products; for instance, insurance from a certain company or that you invest in X stock that should perform well within your risk tolerance.
Some people may benefit from a coach and an advisor, but the majority of people who need a financial coach don’t want or aren’t yet at a point to need a financial advisor. Additionally, while a coach won’t tell you what to invest in or which company you should buy a product from, they will teach you how to make those decisions confidently and on your own.
How Does Financial Coaching Work?
This can vary from coach to coach, so I’m just going to discuss how I work with my clients.
It starts with a complimentary consultation. We meet on Zoom and discuss where they are currently, what problems they’re most concerned about, and how they feel about their level of financial knowledge. This gives me a sense of whether or not I’m the best person to help, and what they need from me. Sometimes I recognize that while they feel their biggest problem is X, it’s really Y – for instance, they may feel their biggest issue is their investing habits, but I can see a bigger issue with their saving priorities.
Then we create a plan. We identify their short-, medium-, and long-term financial (and life) goals. We discuss the roadblocks they feel are holding them back from achieving their goals. Then we build a plan that includes actionable steps to reach their goals. My approach is customized to each client; two people who are both struggling to get out of debt may need very different plans on how to get there.
Next, we schedule regular meetings, usually bi-weekly or monthly, depending on the client’s schedule and needs. Each call focuses on one or two steps in the plan – bite-sized pieces to incorporate into their lives. Slow but sustainable progress is better than hearing 50 changes you have to make and then forgetting half of them. I try hard not to overwhelm clients with new information and life changes. I also check in via text or email between meetings. That way, if there’s a setback, I can help them get back on track quickly. This also means I can answer any questions they have as they arise.
And as my clients make progress, I adjust the action plan we created. Maybe they were able to eliminate debt faster than expected , so we can move onto building up a fully-funded emergency fund. Or, their next goal may be to buy a house instead of investing, so we can adjust the plan and schedule to ensure that they’re prepared for that next goal. Other clients may experience a major life change (positive or negative) while we’re working together, and we can pivot to ensure that they can handle the financial considerations. My clients become confident in making financial decisions because they have a plan and they know what needs to be done to achieve their goals.
Typically, my clients work with me for three months to one year. Some choose to work with me longer to ensure that they are entirely prepared. Others only need one session for a specific concern. Regardless, my goal isn’t to keep my clients as clients forever (except maybe as friends). My goal is for my clients not to need me anymore. I want every single person I work with to feel confident in making their own financial decisions. And, if a client has questions in the future, I’m always still available to help.
Who Needs A Financial Coach?
So how do you know if you need a financial coach?
Well – do you understand personal finance? Do you feel confident making investments and planning for your future? Are you prepared for an expensive emergency? Do you have a plan to achieve your financial goals? Are you debt-free and sure that you know how to avoid getting buried in debt?
If you answered “yes” to all of those questions, you may not need a financial coach right now. But if you didn’t, then I have one more question.
Do you want the answer to those questions to be “yes”?
Do you want some help with that?
If you’re ready to commit to changing your financial life, ready to learn how to manage your money, and have the discipline to start building healthy money habits, then a coach may be the best way for you to achieve your financial goals.
How Much Does Financial Coaching Cost?
This also varies from coach to coach. In general, money coaches charge somewhere between $80 and $500 an hour. That sounds expensive, but when you consider how much your money will improve, it’s a worthwhile investment.
Additionally, nearly every financial coach – me included – have packages that help bring down the cost.
Picking A Coach
So what do you look for when picking a coach?
Well, you want someone who knows what they’re talking about and has experience managing money responsibly. There aren’t any required certifications for being a financial coach, but there are some training courses. For instance, I completed the Dave Ramsey Financial Coaching Master Training program, but more than that, I have a Ph.D. in accounting, experience as a certified public accountant, and over a decade of experience teaching accounting and personal finance in a university. And all of that prior to becoming a financial coach!
Actual knowledge isn’t the only thing to look for, though. You also need to consider personality and approach. You have to find someone you mesh with. If you don’t think their opinions regarding money are correct, or if they aren’t supportive of your goals, you aren’t going to make the progress you deserve to make.
You may need to arrange consultations with a few different coaches to find the right one for you. Be wary of signing a contract that locks you in for an extended period of time. You want to have the ability to change coaches if one doesn’t work for you. Otherwise, you’re just wasting your cash, and your time.