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What is a Financial Coach?

If you need help getting your finances in order or learning the basics of budgeting, you might consider seeking the help of a financial coach. A financial coach is different from other financial professionals. They spend more time helping their clients understand the fundamentals of finances, rather than recommending investments and managing portfolios like financial advisors.

What Is a Financial Coach?

A financial coach helps their clients with the basics of money management. They work with clients who may have a bad relationship with money or who have other obstacles keeping them from managing their finances well. Their goal is to help their clients develop healthy money habits that will last. Financial coaches educate their clients on the basics of personal finance and work with them to create a financial plan that reflects their goals. They also empower their clients to take responsibility for their decisions and provide accountability as their clients work to implement the lessons they learn.

Financial coaches work with their clients over the period of several weeks. Often, they meet with clients weekly or biweekly to provide advice and check on progress. The full process consists of a number of steps. The first step is building awareness around spending habits, usually by tracking daily, weekly and monthly spending. The next step is defining the client’s financial goals, whether it’s setting a budget, creating an emergency fund or paying off debt. A financial coach will help clients develop plans to achieve their goals, then act as an accountability partner as clients enact their plans. Ultimately, after six to 12 months, clients should have improved their financial literacy and be well on their way to achieving their financial goals.

When Should You Work With a Financial Coach?

You do not need to have thousands of dollars in assets to work with a financial coach. In fact, most clients are in debt, have little in savings and have poor spending habits. Perhaps you’ve tried to make a budget, but just cannot stick to it. Maybe you make enough money, but cannot figure out how to build an emergency savings fund. Or maybe you have so much debt between credit cards and loans that you don’t know the best way to pay it off.

A financial coach can help you structure your budget, build a financial plan and hold you accountable throughout the process. Often, clients have deep-seated emotions around money. Financial coaches help their clients to identify, understand and work through those emotions.

The Difference Between a Financial Coach and a Financial Advisor

In general, you would turn to a financial coach for help saving money and a financial advisor for help investing and growing money. A financial coach works with clients who have few assets and need general financial help. A financial advisor works with clients who need help managing and investing their assets. An advisor provides options for developing an investment portfolio to build wealth for their clients to meet future financial goals. They typically charge their fees based on a percentage of asset under management, as opposed to coaches who typically charge a flat retainer fee. Advisors often require a minimum asset level to begin service.

Another important difference is that financial coaches are not licensed to sell financial products (insurance, stocks, or bonds) like advisors , and therefore do not have a conflict of interest when providing you advice. Coaches can provide basic advice on the concept of investing.

Coaching also differs from advising in that coaching tends to be a limited time arrangement, with the goal of helping the client to achieve financial literacy and learn to manage their own finances. Advising, on their other hand, is an ongoing relationship in which the advisor meets with their client once or twice a year and continually manages their financial portfolio for them.

The Bottom Line

A financial coach works to educate their clients on the basics of personal finance and build their financial literacy. They work with people who need help making budgets, paying down debt and creating a livable financial plan. Their goal is to empower their clients to make smart financial decisions and take responsibility for their choices. A financial coach is not licensed to sell financial products or give specific investment advice, which makes them different from financial advisors.

Tips for Getting Your Finances in Order

  • Start by taking stock of your current situation. Figure out your total monthly income and monthly expenses and look for areas where you can cut back. Even if it’s far away, ensure you’re putting enough away each month for retirement, so you save enough to retire comfortably.

  • Make it a priority to pay off your debts. Consider tackling your high-interest debts first. Once your debts are paid off, you can focus on creating an emergency fund. Then you can move onto building an investment portfolio, so your money can grow over time.

  • Set some goals. Sometimes it’s easier to save money and spend responsibly if you have a greater purpose in mind, such as buying a house or sending your child to college.

If you are looking for a Financial Coach that can work with you to develop a strong strategy for next year - contact Stephen Westurn (214.240.0701) or for a get acquainted session.

Guiding People Towards Financial Security