What Is a Financial Coach?
Having someone on your side helping you figure out what to do with your money is real!
It's called a financial coach, and they can help you make better financial decisions.
They aren't financial advisors, but they are the next best thing and sometimes more helpful because they help you make basic and important money decisions.
Financial Coach Definition
If you've always wanted someone in your corner, whispering in your ear what to do with your finances, you want a financial coach. Like any other coach, a money coach helps you make smart decisions, only these decisions pertain to your finances.
Purpose of Financial Coaching
A financial coach is like a teacher. They can help you learn how to budget, save, get out of debt, or create new financial goals. The purpose of a financial coach is to have someone cheering you on, helping keep you motivated to reach your financial goals.
Just like weight can feel impossible, reaching financial goals or making heads or tails out of your finances can feel just as challenging, but with a coach by your side, it's a lot easier.
How One-to-One Financial Coaching Can Help
One-to-one financial coaching services give you insight into what you should or shouldn't do with your finances. Like behavioral therapy, you'll have one-on-one meetings with your coach to get personalized recommendations for your financial situation (or one-on-two if you’re a couple!).
Depending on the financial coach you choose, you may also have the option for quick check-ins between sessions, the chance to text or 'Voxer' your coach, and a Facebook group to join with other like-minded individuals in similar circumstances.
Finding a Personal Financial Coaching Business
Finding personal finance coaching is like finding any other type of counseling or coaching. It's a personal decision, especially since they'll be helping you with your finances. Here are some factors to consider.
Cost of Financial Coach Services
Each money coach charges differently. Some charge by the hour, and others have a flat monthly fee based on how long you sign a contract to work with them. The key is to find a coach you're comfortable with and whose fees you understand and can afford.
Process of Working With a Financial Coach
Each financial coach works differently, but here's what you might experience.
You'll discuss various aspects of your financial life, including a budget, spending habits, financial goals, and current financial situation. Then, together, you'll create a plan that may include revamping your budget, setting more financial goals, learning how to tackle debt, and creating steps to reach your goals. If you'd like to see examples of what I do with my clients, check out my programs page.
Credentials You Want Your Financial Coach to Have
Unlike CPAs or financial advisors, financial coaches don't need specific licenses or credentials. However, because you choose who you want to work with and who deals with your finances, consider someone with accreditation from the Financial Therapy Association or the Association for Financial Counseling and Planning Education. You can search their site to find a financial coach near you.
Financial Advisor vs. a Financial Coach
Financial advisors and coaches have some similarities, but there's one major difference.
What They Do
A financial coach is like the first step in achieving financial freedom. You partner with a coach to get your personal finances on track, working on budgeting, saving, and getting out of debt.
You won't get advice about investments, though. Financial coaches don't have the certification required to advise about investments, i.e. in stocks or mutual funds, as a financial advisor does. A financial advisor must themselves be registered as an investment advisor to give investment advice or help you create an investment portfolio.
Qualifications
Financial coaches don't have any specific licensing requirements. While most study finances and have experience in the financial industry, there aren't any regulating authorities.
Financial advisors, however, are regulated by the Financial Industry Regulatory Authority. They typically have a degree in finance and work for a specific company or product.
Client Restrictions
Financial coaches educate and explain but can't execute any trades or any other financial transactions. While they can’t execute anything for you, they are there to ensure you carry through on your plans set by the financial advisor.
Cost
Financial advisors usually charge a percentage of your assets under management, meaning the dollar value of the assets they manage for you, annually. They may also have a monthly fee or charge a commission for each trade.
Financial coaches usually work on a flat fee or as-needed basis. Since they don't manage your investments, they don't charge a percentage of your assets under management.
Signs You Should Work With a Finance Coach
So who should work with a finance coach? Here are some scenarios to consider.
New to Money Management
If you don't know anything about personal finance and want to start on the right foot, consider a financial coach. You'll get advice and become financially literate to make solid financial decisions moving forward.
Unsure Where or How to Begin
If you've set major financial goals but can't figure out where to start, or you have a lot of capital but don't know what to do with it, consider a financial coach. You can create 'plays' that will help you achieve your goals, breaking the steps down into baby steps as much as necessary.
Struggling With Money Management and Impulse
If you're constantly going over budget or spending money you didn't plan to spend, a financial coach can help you create better spending habits. You'll learn how to stop impulse buys and make smarter money decisions.
Making Big Life Decisions
If you're at a crossroads, unsure where to spend your money, or don't know how to reach a major financial goal, a financial coach can help. You can run your ideas past the coach and learn how to create the steps to help you reach your goals.
Working Towards Specific Goals
If you've reached a stalemate with your financial goals or wish you could reach them faster, a financial coach can guide you. Think of your coach like a football coach, creating a strategic play to help you score a touchdown.
The Pros of Working With a Finance Coach
There are always good and bad sides to any financial decision, so here are the pros of working with a finance coach.
Financial coaches are neutral third parties that can look at your finances and goals and help you better understand how to reach them.
You'll likely pay much less for a financial coach than a financial advisor.
Financial coaches make great accountability partners to help you stay on track with your goals.
The Cons of Working With a Finance Coach
Of course, there are downsides to consider, including the following:
There aren't specific credentials financial coaches need, so you could end up with someone who doesn't truly understand finances.
Like counselors, coaches have different personalities and aren't a one-size-fits-all answer.
Financial coaches cannot provide advice or recommendations, so you might feel the information is generic.
How to Become a Financial Coach
If you wish to become a financial coach, here are the simple steps.
Educate Yourself
For financial coaches, certification or training isn't necessary, but you'll increase your chances of success by becoming as educated as possible. Consider getting a FINRA license or any other education you have time to handle.
Choose a Niche and Connect Personal Experience
Consider your experiences and what you bring as a financial coach. For example, did you get out of thousands of dollars in debt, grow up with a single parent, or build an empire for yourself?
Choose niche areas in which you have extensive, personal experience so you can let your clients know you're in the trenches with them.
Marketing Your Services
Market your services very carefully, as there are many regulations regarding how financial coaches advertise themselves. For example, you can't claim to be a lawyer, accountant, or investment advisor unless you have the credentials to be one.
Determine Your Cost
Check out what other financial coaches in the area charge, and be competitive. Base your costs on what you provide compared to what others do. You don't need to be higher or lower than the competition. Instead, base your costs on what you think you're worth.
Who Is a CFP?
A CFP or Certified Financial Planner is a step up from a financial coach. They have the training and licensing to advise, handle investments, and create financial reports. They must operate as fiduciaries and pass a tough exam from the CFP Board.
FAQs
How Do You Know if the Advice a Financial Coach Is Providing Is Good or Bad?
The hope is that all financial coaches provide good advice, but always follow your instinct. If something doesn't feel right, do your research, or don't follow the advice. It's your money at stake, so don't follow blindly.
What Is a Financial Coach Salary?
Financial coaches make an average of $51,981 per year. The salary earned depends on experience, services, and areas served.
Can a Financial Coach Help You Retire Early?
A financial coach can guide you to the steps necessary to retire early. However, you may need help from a financial advisor to execute the plans.
How Does a Financial Coach Receive Training?
Financial coaches don't have any formal training they must undergo, but they can get educated from any source, including FINRA.
Can a Financial Coach Provide Debt Coaching for the Best Way to Pay off Debts?
If you have a lot of debt, a financial coach can guide you through the steps to pay it off. Of course, they can't do any of the legwork for you, but they can help you understand what must be done to get out of debt.
How Does Someone Create and Manage a Successful Budget?
Creating and managing a successful budget takes a lot of trial and error. First, you must know your income and expenses and work the numbers to make everything fit. This includes goals such as saving for an emergency fund, retirement, or other goals. Then, the key is to follow through on your budget and carefully evaluate how it goes, making any changes as necessary.
Can I See a Financial Coach if I Do Not Know What My Own Financial Goals Are?
A financial coach can help you understand your goals by asking questions about your financial life, what you've achieved, and what you might have delayed. Working with a coach, you might get more insight into what you want to do with your money.
Is a Financial Coach Worth It: The Bottom Line
If you don't know how to handle your money or feel like your money habits are out of control, consider a financial coach. There isn't a lot of commitment, but you can learn valuable habits from financial professionals that can help you reach your financial goals.
Want to level up your game around money in your relationship? My free quiz will help you learn your Couple’s Money Personality Type AND how you can grow from there!
Adam Kol is The Couples Financial Coach. He helps couples go from financial overwhelm or fighting to clarity, teamwork, and peace of mind.
Adam is a Certified Financial Therapist-I™, Certified Mediator, and Tax Attorney with a Duke Law degree and a Master's in Tax Law from NYU. He is a husband, dad, and musician, as well.
Adam's wisdom has been shared with The Wall Street Journal, the Baltimore Ravens, CNBC, NewsNation, and more.
