What Is a Financial Coach and Are They Worth the Investment?

What is a Financial Coach and Are They Worth the Investment?

A financial coach, also called a financial consultant or money coach, can be very beneficial for anyone who needs help managing finances or getting out of debt. If you need help with finances, a good financial coach could save you time and money, as they will guide and teach you better financial habits.

A financial coach is very different from a financial advisor. Financial advisors focus on investments, and they work under specific federal regulations. If you have your finances under control and excess money to invest, that’s when you may want to work with a financial advisor. For budget coaching, debt management, and financial education for better money-spending habits, a financial coach is your go-to professional. 

Who Could Benefit from Financial Coaching?

It’s safe to say the majority of Americans could use a financial coach. Currently, about 340 million Americans are in debt.¹ Over one-third of Americans have no more than $100 in their savings accounts.² Financial literacy is not widely taught in schools. We have automated our finances with things like automatic bill pay to the point that we’re often unaware of where our money is going. On top of all that, we have social pressure to have more and spend more to fit in.

It’s not a sign of weakness or failure to get help from a financial coach. It’s smart. You are surrounded by forces that work to separate you from your money, that encourage spending beyond your means, or mislead you about the true cost of your choices.

Financial coaching can help people who are drowning in debt, all the way to people who are running a small business and want to increase their income. It’s for people who would say they’re in an all-around financial mess, and for people who just have one area they need to improve. Financial coaches understand money, and the best ones also understand people.

Just as you’d call a plumber to fix a leak that’s causing water damage, most of it hidden behind walls, it makes sense to call a financial coach when your financial pipes are leaking. If you don’t know where the leaks are, more money is draining out than flowing in, or you can’t seem to save any of it, you need a pro. 

Financial Coach Service Areas

Money Management

This is usually the starting point because the ability to manage your money is far more important than your income or expenses. It’s a skill to learn and get better at over time. People who have mastered their own money management are able to do well even in difficult circumstances.

Budgeting
Your financial coach will help you put together a realistic budget based on your unique circumstances. It becomes your roadmap for spending and saving and paying off debt. It’s easier to create and use a budget when you have a financial coach helping and keeping you on track. You may think sticking to a budget would be confining, but once you get used to it, it’s actually freeing. 

Tax Implications
Unless you have a lot of wealth, you may not think much about the tax implications of your financial decisions. This can cost you. Your financial consultant will help you avoid mistakes that will create an ugly surprise at tax time.

Purchasing and Selling Homes and Cars
Often people turn to financial solutions or even a debt consultant when they discover they’re unable to qualify for a loan to buy a house or car. These are two of the most expensive items people need and want, and are also the very items that get people into the most financial trouble. 

A good financial consultant can help you make wise choices in your purchases and get you qualified for loans. In some circumstances, your financial coach will encourage you to rethink the house or cars you currently own, and potentially advise you to sell to purchase something that’s easier to manage.

Retirement Advice
Even if you’re a young adult, it’s not too early to plan for your retirement. In fact, the sooner you start, the less you need to put into retirement savings because time is on your side. If you’re in your 50s, you need to solidify your plans. If you’re nearing 60, you really need to know your Social Security and Medicare benefits. A financial consultant who knows these programs can help you determine the best time to start taking your benefits, and how to navigate the system.

Debt Management

Debt is brutal but not impossible to escape. Debt affects our emotional well-being, which prevents people from seeking the help they need sooner rather than later. Debt happens, and it’s almost inevitable unless you learn to navigate life in ways to avoid it. A good financial coach will never judge but seeks to help you get out from under it. Debt management services financial coaches often offer include:

Debt Counseling
The first step a financial coach will take is to help you figure out how much debt you have and what is causing it. Often, it’s not a matter of living beyond your means or not having enough income to cover your expenses. It can be a lack of visibility into your finances. Credit and debit cards, subscriptions, auto bill pay, pay by phone, and other conveniences remove your ability to easily see where your money is going. A financial consultant will help you get a clear picture of your finances and work with you on a plan to get out of debt.

Debt Solutions
There are plenty of debt relief options available, but whether they’re good or bad depends on your specific circumstances and the reputation of the debt relief agency. A good financial coach will never sell you on a specific debt solution, as their advice needs to be unbiased and in your best interest. They should help you compare debt relief options so you can make the best choice for yourself.

What adds to the stress of debt is the debt collectors. Their solutions are typically unmanageable and relentless. A financial coach will teach you how to engage with them productively, so they go away while you work out your plan.

Debt Management Plan
Your financial consultant should work with you to come up with a debt management plan that includes your debt solutions and becomes part of your budget and money management plans. You can use a Personal Financial Planner to organize your finances and track your plan.

This plan can be more creative than just budgeting and managing. A really good money coach will help you with some side hustle ideas to earn additional income and look for other opportunities to improve your situation.

Risk Management

When you’re already struggling to manage your money, especially if you have debt, the last thing you may want to think about is – what if we lose what we have? What if something unexpected happens, like the death of a spouse, a disability, or an auto accident? 

A financial coach will open up a discussion on this, so you’re aware of your risks and how you can prepare. They will guide you to solutions, which may include insurance to cover your life, home, auto, health, disability, and long-term care. They may suggest ways to prevent identity theft. And they’ll talk about the importance of having a will. 

These decisions are often difficult to face on your own or with your partner. A good financial coach will be there by your side to help you navigate your choices every step of the way.

Wealth Building

This may seem like an impossible dream from where you’re standing right now, but with the right financial coach, it’s very attainable. If you and your coach develop a workable plan, and you follow it, you will be able to start building that financial cushion that frees you up and makes life easier.

Savings Plans
Part of your financial plan will be putting your own savings at the top of your budget. A financial coach will help you get into the habit of saving, and guide you on when and how to use your savings.

Estate Planning
Especially if you have children, it’s wise to plan where you want your assets to go when you’ve completed your life. 

Starting a Business
Depending on your own goals and dreams, your financial coach may encourage you to start that business you’ve always talked about. They’ll help you work out the plans and see if it’s feasible. 

How Financial Coaches Can Help

Just as in sports, coaches don’t take the ball and run with it; they teach, encourage, and guide you to play your best. They help you get in shape, gain good habits, and put strategies into action. A financial does not manage your money, make or implement decisions, or recommend investments or other products.

Is a Financial Coach Worth the Investment?

The whole point of a financial coach is to help you reach your financial goals, and get there faster than you could on your own. Generally speaking, a financial coach will more than pay for itself in just a few months. The long-term benefits should continue for years after the coaching and could pay off for the rest of your life.

The bigger question is, can you afford to continue down the path you’re on?

What If You’re in Debt?

If debt is your biggest struggle, it may seem like a foolish move to add one more expense. But debt is a monster and doesn’t go down nicely. It gets worse, causes more problems, and costs more money the longer it’s alive. A financial coach will help you tame that beast and get it out of your life. In interest saved alone, a financial coach is worth the investment. Having a real savings, the end of debt collectors, and enjoying financial freedom could make it the best investment you’ve made.

What If You Don’t Need That Much Help?

A good financial coach customizes the plan for whatever your goals are, even if you’re doing ok but not really getting ahead. You may need just a few sessions to figure out a plan and get it on track. It becomes a very small investment that continuously pays off.

Knowledge Saves You Money

According to the National Financial Education Council, the lack of personal financial knowledge costs the average American $1,200 per year. As we said at the beginning of this article, most people were not taught financial literacy in school. We don’t know what we don’t know and that costs a lot. Investing in a financial coach will give you that one-on-one financial education that could save you money and help you get ahead.

How to Find a Reputable Financial Coach

There are great money coaches who work earnestly to get you to your goals, and there are not-so-good ones who may have ulterior motives. You need to have a lot of trust in your money coach, as you will be sharing your personal and financial information. Ideally, you form a trusting relationship with them and turn to that person for future financial guidance down the road as your life changes.

From this interview, you should be able to pick up on how knowledgeable and caring this person is. Do they have a passion for helping people? Do they seem to know what they’re talking about? Are they open to your questions or put off by them? Are you comfortable with their answers?

Financial Consultants to Avoid

When you’re in a vulnerable financial situation, you need to watch for signs that the help you seek could make your situation worse. You need an advocate, someone who has their heart and business practices in the right place and is not just in it for the money. Watch out for these red flags:

Coaches Who Sell You On Products or Services

A good money coach has no interest or incentive to sell you on anything. What you are purchasing from them is their knowledge and advice, not additional products or services. They may recommend a type of product or service because they feel it would benefit you, but if you feel pressured to buy something, this is a red flag.

Coaches Who Provide Specific Investing Advice

If you need investment advice, you should work with a licensed financial advisor, not a financial coach. If the financial coach encourages you to make investments through them, run!

Coaches Who Lock You Into Lengthy Contracts

Coaching does take time and you should not expect to achieve your goals in one or two sessions. But the length of time should be dictated by the level of help you need, as well as how well you’re able to learn and follow the steps to reach your goals. If the coach wants you to sign a contract for a specific amount of time or number of sessions, that’s a red flag. You need the flexibility to end the coaching either when you’ve achieved your goals or if you determine this coach is not helping you.

¹ https://www.debt.org/faqs/americans-in-debt/demographics/
² https://www.nasdaq.com/articles/heres-how-much-americans-have-in-their-savings-accounts-in-2023