What Is A Financial Coach? And Is Hiring One Worth It?

As much as you might want to handle your personal finances on your own, sometimes you just need help getting organized. 

Understanding everything about your budget, debt, and investments can definitely be overwhelming and especially if you are pressed for time and have very little experience with finances. 

And if that is the case, it might make sense to work with a financial coach. These are experts that you can hire and work with to get your financial health in top shape. A financial coach can provide strategies, unique perspectives, and create a plan for your money. 

Let’s learn more about financial coaches, everything they can do, how to find one for you and your family, and when it might be worth hiring one.

What Is A Financial Coach?

A financial coach will empower their clients with financial knowledge and help them with better money management techniques. Coaches will also help their clients reach their specific financial goals and milestones. Although they cannot give specific investment advice, financial coaches can improve your overall financial literacy.

Financial coaches do not tend to handle their client’s assets under management; which is a key fee that other financial services professionals usually take.

Instead, they typically charge by the hour (up to $300), or have their own set packages. Financial coaches can expect to make around $43,000 annually on average in the United States but can make up to $65,000+.

This is a bit lower than say a financial advisor, but a financial coach requires less rigorous certifications.  

What Does A Financial Coach Do?

When you work with a financial coach, you will generally begin to share with them your financial goals and start to track your spending and overall expenses so the coach can start to understand your financial health. From there, a financial coach can start to help with:

  • Your overall spending habits
  • How to organize and build your budget
  • Create a financial plan that covers multiple areas
  • Tips to build your savings and emergency fund
  • Work on your money mindset and emotions towards finances
  • Analyze your debt and create a plan to pay it off

The Process of Financial Coaches

Typically, financial coaches will consult their clients to find out where the major issues lie and what money goals their clients are hoping to achieve. Then, the financial coach will implement certain strategies in order to reach those goals. 

For example, let’s say that I’d like to save for vacation but right now, but my spending is out of control and I rely heavily on credit cards. The financial coach could start me on the 30-day rule to manage my impulse spending and encourage me to switch to a prepaid credit card to control my budget.

After these habits are set over a couple of months, they’ll probably look at building an emergency fund and turn your attention to that all-important vacation. 

Since coaches get paid for their time, you can be sure that their interests are highly aligned with their clients. They have no incentive to recommend certain products nor get a fee based on investment performance like some financial advisors would.  

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How Does Someone Become A Financial Coach?

Although you may have no interest in becoming a financial coach, it’s important to know how these money coaches end up with this title and offer their services. This can help you ensure you are choosing the right person for your needs and someone with experience you can trust!

Financial coaching is a relatively new industry, which means that there is little regulation around qualifications needed. It also means that just about anybody can become a financial coach. It is therefore up to the client to do their due diligence. 

While no formal education is required, many financial coaches will still undergo a rigorous financial education, which might also involve aspects of psychology. There are a number of financial coach education programs that offer courses. 

For example, finding a professional with a certification from AFCPE’s Accredited Financial Counselor or Financial Fitness Coach can help ensure your coach has the knowledge and skills you need. You can look on the AFCPE website and find a coach through there.

How Do I Find A Financial Coach Near Me?

It’s important to remember that all coaches will work in their own way, with some preferring more holistic approaches while others work traditionally. So before you begin searching for a local money coach, decide which type of style you prefer.

Think back to your teachers at school, which ones you preferred, and why that was. It’s also useful to think about why exactly you need a financial coach. 

Next, research and screen potential candidates are searching online. Someone with a great online presence may not be completely legitimate, so ensure you sit down for a free consultation or find out as much information as you can about potential candidates.

Try to find out if your financial coach has a background in education or finance, for example. As mentioned in the previous section, check out the AFCPE website for those with more credentials or who have been certified.

Another good indicator is when one has been certified from the National Financial Educators Council, which can also prove the legitimacy and knowledge of a potential coach.

Finally, you can also try out a sample session with a number of coaches to determine which one is your favourite. Luckily, most coaches should offer a “try before you buy” option. In any case, one session should cost between $100-$300, so don’t commit to anything until you’re certain. 

Financial Coach Vs. Financial Advisor

Financial coaches are extremely different from financial advisors. Financial Advisors and financial planners deal with the money and handling assets directly. Their goals are focused on specific products and strategies. Whereas financial coaches work with the people behind the money and help you build solid money habits. 

The financial advisory industry is highly regulated and controlled by its governing body. This means that financial advisors really have to watch what they’re saying, in terms of marketing materials and guarantees. Otherwise, they could be at risk of fines.

Financial coaching requires no set qualifications and is not bound by regulation. Because they are not licensed, financial coaches cannot give you specific investment advice or recommend useful products. So while they are a partner, you are wholly responsible for the failure or success of your finances based on their guidance.

When working with a financial coach, that means you are still going to make decisions and will have to manage specific assets on your own. This may hold you back if you wanted to be hands-off, so if you want someone to manage everything you will need to look into a financial advisor, certified financial planner, or if you have significant wealth you’ll potentially want a wealth advisor.

Finally, pricing varies between financial coaches and financial advisors.

This involves pricing structure too, with many financial advisors opting for assets under management fees. And this can also mean they own 1-3% of your overall wealth and also have a stake in how well it performs. On the other hand, financial coaches take hourly rates which tend to be cheaper in the long run. 

Is A Financial Coach Worth It?

A personal finance coach’s value comes in helping you build a plan and stay motivated throughout the process. The goal is to help you save time but also build a plan that will benefit you and your family the most. However, the main legwork will still be on you, but this can help educate you and ensure you stay focused.

Finding a good financial coach can be worth the time and money as it will simplify your money management and get you organized so you can take action. If you have no clue where to start, limited on time, and lack motivation — then working with a financial coach for a period of time is worth it.

However, if you are motivated and eager to learn, you should have no problem teaching yourself personal finance and managing your money on your own. But there is nothing wrong with needing help and the money you pay for a coach can pay huge life dividends for you in the future.