What is Financial Coaching?

Have you been wondering: What is financial coaching?

Financial Coaching is a key component of a Fee-Only Financial Planning relationship. Note that Financial Planning isn’t a one-time event – it’s an ongoing process. Financial Planning combined with Coaching provides education, encouragement, accountability, and empowerment.

Not every financial advisor, investment advisor, or financial planning includes a coaching component in their services. Read on to understand what the coaching part includes (and doesn’t) to help decide if you’d benefit from an advisor who also provides coaching.

Is there a need for financial coaching?

Are you ready for help navigating personal financial topics?

Half of Americans live paycheck-to-paycheck. “Normal” is being just one missed paycheck away from a serious financial disaster for most families.

BUT, among households that have created a financial plan, 88% report that they are making solid progress toward their financial goals.

Navigating the myriad of personal financial topics that exist can be tough! Are your financial habits inline with your life goals? Do you understand stock market fluctuations, and how they can be a good thing? Are you saving enough for college? How about for retirement? Are you invested in a way that aligns with your risk tolerance but can also achieve your goals?

Education on personal financial topics is woefully lacking unless people specifically seek it out. That is why financial planning and coaching is so important. It has a powerful impact in the lives of the people who engage with a coaching financial planner.

Are you ready to be empowered? Is it time to have a plan in which you can be confident?

Financial Coaching defined

What is financial coaching?

Financial coaching is a confidential, judgment-free relationship with a personal finance expert to help address current and immediate issues, then proactively map out actions needed to accomplish future financial goals. The coach will help the client clarify their goals, suggest changes as needed, and assist in aligning client-specific priorities with a financial plan to achieve major life goals.

Just as athletes, entertainers, and entrepreneurs often utilize coaches to improve themselves and their ventures, a financial coach will come alongside to help individuals and families improve their personal financial situation through education, guidance, standard practices, and accountability.

You may have heard the term “money coach”, which some people use interchangeably with “financial coach”. In most cases, a money coach is a more specific role – dealing exclusively with handling money. A financial coach certainly helps with money but also provides coaching on career, estate planning, insurance, and other related topics.

What does a Financial Coach do?

A financial coach doesn’t do the work for a client but rather helps empower the client to implement important changes and processes to improve their financial fitness. Coaches also help clients develop a plan to achieve their goals and live the life of their dreams.

Is it time for you to have a solid personal financial plan?

More specifically a personal financial coach will help clients clarify their goals and priorities, then focus all tasks through that very personal lens. Help is provided in developing and maintaining personal financial statements to reflect net worth (wealth measurement – which is a key metric toward goal accomplishment), cash flow (aka budgeting, which directly impacts net worth changes), getting out of debt, college and retirement planning, insurance coverage, investment education and planning, and commonly relational topics.

Finance coaches can also help on the income side of the equation, giving some tips and guidance on career planning, ways to generate extra income, and even preparing for starting your own business.

What makes a good financial coach?

A great financial coach has the best interests of the client always as the key focus. This may or may not be what the client wants to hear, but it should definitely be what the client needs to hear.

A great financial coach takes the time to understand the clients’ specific situation, works with them to clarify concerns, goals, and dreams, and then makes sure all discussions are in the context of the clients’ personal priorities.

A great financial coach does not sell any third-party products like investments or insurance. There is nothing wrong with those services, but your financial coach should have no financial incentive to recommend any specific financial product – and will provide unbiased guidance that is always in the best interest of the client.

A great financial coach has life experiences and has specifically learned-from, and corrected, past mistakes. No one is perfect and challenges in the past can make a financial coach more understanding and compassionate. A financial coach should be a model for clients and have their own financial house in order. Our financial coaches all practice what they preach.

Is financial coaching for you?

Financial coaching is ideal for people who have realized that their financial situation isn’t quite in the place where they know it should be, and they want someone to help walk alongside them to guide them into a place of enhanced financial fitness.

Understand that engaging with a financial coach is going to take some work. Gathering data and clarifying a complete financial situation takes some time and effort. Trust us – it’s all worth it.

What financial coaching isn’t

Financial coaching isn’t investment management

If you want someone to manage your investments and your money for you, then you probably want an investment advisor or financial planner – not a financial coach. A coach will help you understand and navigate all the options so that you can make the best, educated decision possible for your finances – but a financial coach won’t tell you specifically what to invest in or manage your investments for you.

Managing investments doesn’t need to be overly complex (in fact, complexity often lowers returns), so the average person can sometimes handle their own investments. But there are professionals, like us, who can do that for you if desired – removing the workload while helping avoid bad decisions.

A financial coach doesn’t do all the work for you

If you want to hand all of your documents and paperwork to someone and have them put together a plan for you, then you likely want a financial planner rather than just a financial coach.

Just like athletes and other performers need to do the actual work to be successful, such is the same case with most people and their personal finances.

Financial planners can serve a need for specific clients with certain levels of estate size and complexity.

Some people don’t need a financial planner. Yes, they need a financial plan, but the average American is fully capable of understanding the related basic principles and developing a household financial plan for themselves. The challenge is – being capable of doing something doesn’t mean it is going to get done.

A financial coach cannot perform miracles

If you want a quick and easy fix or a get-rich quick scheme – then a financial coach isn’t for you.

A financial coach can likely make some suggestions that will have some immediate positive impact on your financial situation, but achieving true financial freedom takes time.

Getting out of debt and building wealth is not a sprint activity – it is more like a marathon.

A financial coach can also often guide people to improve their income situation, through career advancements, changes, or sometimes “side gigs” (sources of additional income) but there too this is an extended journey to maximize these results.

Popular Financial Coaching Topics Covered

Here are some typical services that financial coaches are trained to help people with. This isn’t comprehensive but does reflect the most common areas a financial coach helps their clients.

Emergency Funding

More than 60% of Americans have less than $1,000 in their savings, and 8 out of 10 people live paycheck-to-paycheck.

A financial coach can help clarify the risks, a recommended level of emergency fund savings, and some ways to reach this level of savings – achieving the first step toward removing stress from your financial situation.

Budgeting and Cashflow

Budgeting is “simple” but not necessarily “easy”.

The ideas and concepts are not very hard to understand but putting together a budget (also known as a cash flow plan) can be a challenge – especially trying to do it on your own without proper guidance and tools.

Financial coaches have the resources and experience to help develop a cash flow plan so that you can tell your money where to go and make sure that expenses line up with your personal priorities.

Debt Management and Elimination

Debt and related payments are the biggest drains on someone’s cash flow planning. They’re also often the biggest obstacle preventing people from becoming wealthy.

Having a plan to deal with debt, and ultimately eliminate it from your life, is key to financial fitness.

Saving for Retirement and Other Big Goals

Have a child? They’re likely going to need money to attend secondary education (college or otherwise) at some point.

Don’t want to work until you are 90? You’re going to need an adequate retirement account to enjoy a retirement you can enjoy.

Too many people don’t have written goals for these types of events. Nor have they spoken with a financial professional to help map out a plan.

A financial coach can help clarify these types of big goals, help align then with overall personal priorities, and help you put together a plan to achieve success in these big areas.

Investment topics education

If someone is just a financial coach, they do not recommend specific investments. A financial planner who also coaches their clients might, but you should confirm. (We recommend and manage investments for clients.)

Regardless, a financial coach should educate clients on different types of investment plans – taxable, 401k, Roth-IRA, 529, etc. We can also cover the historical performance of different asset classes – small-cap stocks, international, bonds, real estate, and other classes.

We can explain diversification, risk, dollar-cost-average investing, and all the common investment topics that intelligent investors need to know.

Additionally, we can help clients understand their specific investment options, for example in a 401k plan, and show how to easily find information to make the best choices for their individual situation.

Clarifying Insurance

Some people are underinsured; some are actually overinsured.

A financial coach doesn’t sell insurance but they are educated on the different types of common industry recommendations.

They can help you understand your options so that you can make smart decisions to mitigate risk, while not getting taken advantage of.

Is Financial Coaching Right for Me?

Financial coaching isn’t for everyone, but it would definitely benefit most people.

Maybe you are a true do-it-yourself person who is financially savvy and has been managing your own budget and investments for years. In your case, financial coaching might not be necessary for you (though there might also still be some benefits too).

On the other hand, perhaps you are like most people who don’t have the time or interest to research financial topics then integrate those topics on your own. Or perhaps you would just like to accelerate your financial success. Having a financial coach come along and walk with you through this process can be extremely beneficial.

What’s the Next Step?

The first step is realizing that your financial fitness level isn’t quite where it should be. And that a financial expert’s assistance might help you achieve your goals. The next step after that is to Start Here so we can discuss your specific situation and see how we can help.