The ultimate guide to financial coaching
Financial coaching is gaining momentum as more and more of us want to understand more about our money. But the term is often confused with financial advice.
What Is financial coaching?
To sum up what financial coaching is, just break it down into each word.
Financial – relating to money.
Coaching – getting better at something with somebody’s help.
Therefore, financial coaching is the process of getting better at stuff related to your money.
Think about other things that you could have a coach for.
Sports are a common example. If you want to get better at tennis, you might hire a tennis coach to help you with certain aspects of your game.
And the concept is the same with financial coaching. If you’re struggling with financial matters, a financial coach can help you through a mixture of education and support to help you feel confident about your finances and guide you to make important decisions about your money.
What can I hire a financial coach for?
Getting to grips with budgeting
Helping you save more
Getting out of debt
Help with investing
Financial goal setting
Lifestyle goal setting
Guidance on products like pensions, ISAs and saving accounts.
Guidance on tax
Feeling more comfortable managing your finances
Dealing with personal issues related to your finances
The aim of financial coaching is to improve your relationship with money. And this is achieved by supporting positive changes to your behaviour and educating you.
Technical guidance and behavioural changes
Financial coaches may specialise in specific areas, and you might want to hire a financial coach for a specific reason.
Some coaches are more technical and are great for helping you understand your options regarding financial products.
Other coaches focus on the emotional side of money and are great if you think your behaviour with money is a problem that needs fixing.
A top-tier financial coach can do both very well, offering a holistic approach to coaching you.
What can’t a financial coach do?
A financial coach can’t recommend specific financial products or tell you what exactly to do with your money. This then becomes financial advice and is a different type of professional support that comes with regulation and strict rules.
A financial coach can’t make things happen for you. Coaching is about empowering you to get better at something and encouraging you to independently manage your finances.
Why would I not just hire a financial adviser?
A financial adviser is a great option if you need specific advice on your finances, want somebody to do everything for you and you can afford to pay for it.
The problem with financial advice is the cost involved.
It typically requires you to pay a one-off fee, an ongoing fee or both. These costs can run into thousands of pounds (partly due to regulation costs) and financial advisers usually expect you to have a minimum amount of wealth.
This is why many people are priced out of the financial advice market. It is known as the ‘advice gap’ and is a big problem in the United Kingdom.
So, while you may want somebody to deal with your pension for you, or handle your investments, you may not be able to afford to do so or even want to pay the costs even if you can afford to.
Financial advice means somebody does something on your behalf or tells you what to do. So there is very little education involved or help with underlying issues.
To summarise the difference in your relationship with a financial adviser vs a financial coach:
You pay a financial adviser to deal with your financial problem for you.
You pay a financial coach to help you deal with the financial problem yourself.
Common examples of financial coaching
Implementing a budget plan and holding you to account
If you’re the sort of person who struggles to figure out where your money is going, then a financial coach can help.
They will support you with tips and guidance to plan a budget and make the most of your income.
This could involve setting specific goals to pay off debts, save money for something specific or cut back on things you are overspending on.
A great financial coach will then check in with you and make adjustments and see how you're feeling about the changes you're making.
Help with investing
More and more people are intrigued by the concept of investing their money. A financial coach can educate on how to get started with investing, explain your options and coach you once you’ve got started.
Investing comes with risk, and often the behavioural element of investing is overlooked. This is where a financial coach can add enormous value.
Money is not the end goal. It simply allows you to do things with your life. So setting goals can help make your money work as hard as it can for you.
A financial coach will help you figure out what’s important to you and how your money supports your life values.
Education on technical areas
Financial products, rules and laws come with all sorts of technical jargon that is really difficult to understand.
If you just want to be clearer on something technical, a financial coach can educate you so that you’re comfortable making your own decisions.
I regularly help people understand what they can and can’t do with their pensions, ISA or mortgage or explain the latest changes to financial laws.
This is all to empower you to have confidence in managing your finances by yourself.
A sense check
Lots of people just want an impartial view on their situation or confirmation they have the right information.
Like anything in life, a chat with a professional can ease your mind. And that alone can be valuable to your finances.
How much does financial coaching cost?
A financial coach costs between £40-£75 an hour.
A financial coach, like myself, with specific qualifications with the FCA (Financial Conduct Authority) will charge at the upper end of this.
Ways you can pay for financial coaching with myself:
Pay for a one-off session.
Pay for a series of sessions spread over a certain timeframe.
Pay a yearly fee for a package including coaching sessions and email contact.
As already mentioned, financial coaching is an affordable way of getting professional support regarding your finances.
It might seem odd to pay somebody to help you with you finances. Particularly if the aim is to actually save money. But the improvements a financial coach can bring to your overall relationship with money can set you up for years, giving you long-term prosperity.