Coaching is a personal development process in which a client partners with a professional coach in order to make progress together in a chosen life area in a relatively short time (e.g.: 5-15 weeks). There are different types of coaching that have gained loads of attention in the past few years, like business coaching or career coaching.
In our article, we’re going to explore the concept of financial coaching, a relative newcomer in the world of finance and investment services.
What is financial coaching?
Financial coaching is a series of one-on-one sessions between the coach and the client.The purpose of the process is to identify the client’s finance-related priorities, goals and to make sure there’s aligned action toward achieving those objectives, explains Katie Oelker, a US-based financial coach and writer.
A coaching process is considered successful when either the client achieves his or her goals, or there is a shift from the baseline situation toward the main goals. The range of possible goals is quite wide: we may talk about someone wanting to keep track of their spending and save more, a person aiming to set up a strategy for paying off their debts, or investors who want to build a great portfolio and maintain their motivation to look after it.
Financial coaching is not to be confused with financial advisory, meaning that a coach will give you neither direct instructions regarding your aims nor specific financial advice. A coach’s job is to make you understand your baseline situation, help you visualize your future financial goals and keep you focused and accountable during the whole process. A financial coach usually helps clients in everyday money management, budgeting, saving and debt payoff, adds Oelker.
What makes a good financial coach?
The main task of a good financial coach is to ensure the client is heard, motivated and properly informed about the possible actions that can be taken to achieve their goals. It’s equally important for the coach to monitor the client’s progress and keep them constantly accountable - much like a personal trainer in the gym. With a good coach by your side, you can accomplish your goals with less wasted effort.
A professional coach has to be empathic, energizing, creative and well-prepared. Recognised and successful coaches work with a toolkit of coaching questions, which lie at the heart their coaching methods. These well thought out questions will help clients change their perspectives when assessing a certain situation.
According to Oelker, a financial coach you can trust is one who takes the time to get to know you and your financial situation, doesn't pass judgement or offer you a ‘quick fix’. Working with a financial coach to reach your goals takes commitment and effort on both sides.
Officially, financial coaches are not required to have any certificates or financial licenses to maintain a financial coaching practice. However, it’s undoubtedly more convincing and safer from the client’s point of view if the coach holds qualifications either in the field of coaching or finance. Preferably both.
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When do I need a financial coach?
Have you ever experienced difficulties to work up and maintain your motivation when it came to managing your own money? Were there times when you knew exactly what to do - like opening a bank account or making an investment and keeping track of it - but didn’t feel like doing it on your own? Do you ever feel that all you need is a guiding hand to get you moving in the right direction?
If you answered yes to any of the questions above, chances are you would benefit from working with a financial coach. Financial coaching might be the right choice for you if you feel the urge to do something with your personal finances but you haven’t made up your mind yet. If you worry that you spend too much, if you want to save more money or pay off your debts, your motivation may need a little boost. This is where a competent financial coach comes into the picture, nudging you toward your objectives. Remember that the later you set your finances in order, the more money you lose.
What is the difference between a financial advisor and a financial coach?
Financial advisors come equipped with finance-related hard skills: they create personalized investment strategies and financial plans, and - as the name suggests -, give concrete advice on a range of finance and investment related topics and actions. Meanwhile, financial coaches focus on the motivational and behavioral side of your attitude to your own finances and address questions like ‘how-to’ and ‘why’. Financial coaching makes you more focused on your goals and accelerates your progress towards financial success while also shielding you from some common pitfalls.
Where can I find a trustworthy financial coach?
It’s very easy to get lost in the barrage of financial coaching services advertised online. Unfortunately, there are quite a few gold diggers out there, so you need to be very careful when deciding whom to trust with details of your personal life and finances. We recommend you always check the following: the content and quality of the coach’s website, Facebook page and other social media platforms (especially whether there’s reliable information on education and experience), as well as the feedbacks and ratings of other clients.
How much does it cost to hire a financial coach?
Financial coaching is not a cheap service, however it varies from coach to coach how much they charge. If you check some US websites, you will find fees ranging from about $200 to $2,000 per month for three to five sessions. Despite the rather steep prices, remember that the longer you procrastinate in setting your finances in order, the more money you stand to lose. Ultimately, financial coaching saves you a lot of time and money.
What does financial coaching look like in practice?
A classic coaching session (e.g.: 30-90 minutes) is face-to-face, however it’s no surprise that the service is also available online. Especially in 2020, due to the effects of Covid-19 (job loss, uncertainty and stress), more than ever people are getting interested in cleaning up their financial situation, preferably online. In this sense, coaching has become borderless: we can live in France and hire a financial coach in Australia. Still, it’s important to note that by nature, coaching requires an intimate, trusting space where both client and coach can resonate with each other. Odds are that a physical encounter would facilitate this more. After all, it’s you who got to make the decision: would you feel as comfortable online as in person?