Credit counselling, financial planning, money coaching, oh my! If you need help with your finances, there’s an endless amount of support — but they can each serve different purposes.
For example, if you’re looking for professional debt services or different ways to get out of debt, you may want to consider non-profit credit counselling. But some financial concerns and situations need a different set of professionals, like money coaches.
Learn what you need to know about the unique financial services of a Money Coach, how they work, when you’ll need one, and how to get the most out of money coaching.
What Is Money Coaching?
Money coaching (sometimes referred to as “financial coaching”) helps you gain clarity on the state of your finances and habits. A Money Coach helps you become more confident about your financial decisions, giving you the tools to create good money management habits that will help you get your life in order, grow your wealth, and improve your overall financial well-being.
Sometimes a lack of income isn’t the problem. Look at celebrities like MC Hammer, Mike Tyson, and Lisa Marie Presley. All three made tens of millions of dollars every year — yet somehow declared bankruptcy and lost millions, be it from divorce, poor investments, or trusting the wrong people with their finances.
We can also see this happening in situations a little closer to home.
For example, some people earn great incomes that place them in a higher tax bracket, but they don’t seem to make any financial progress for years. Poor money management can destroy the financial well-being of even those with high incomes, leaving ostensibly successful people scrambling to plan for the future.
So, money coaching helps people:
- Establish financial goals
- Better manage their income
- Strategically invest
- Plan for the future, including recognizing risks and preparing for a rainy day
- Feel more confident about making money decisions
How Do Money Coaches Work?
Like most financial services, a consultation is the first step. Clients and coaches get to know each other, discuss the client’s financial scenario, and assess whether money coaching is a good fit for what the client wants to achieve. Some money coaches offer a free consultation, while others might charge a fee.
Some money coaches work like an insurance broker, where they are paid via sales commissions on financial products, referral fees, or assets under management versus charging the client a fee for their services.
Other money coaches work with an “advice-only” or “fee-for-service” model, where they do not earn any commission from sales, referrals, or assets they manage but rather charge a clearly stated fee for their services.
An “advice-only” model works in the client’s favour because it ensures full transparency and an unbiased approach to money coaching, including the advice and recommendations they receive.
What's It Like to Work with a Money Coach?
When you work with a professional Money Coach, here’s what that service typically looks like:
- You provide your coach with information about your finances, and you both discuss your financial goals and areas in your finances to work on.
- Your Money Coach will work with you to create a detailed action plan to bring you closer to your goals and build good money management habits.
- You and your coach will meet regularly to ensure you’re staying on track with the plan and to help keep you motivated.
- Your coach will continue to offer you advice as you need it and as you set new goals, or if your circumstances change.
When Do You Need a Money Coach?
Now, money coaching like this sounds like a great plan! But how do you know if your particular financial scenario warrants the service?
Here are a few situations where finding a Money Coach is something you may want to consider:
Retirement Planning
Some people earn a steady income throughout their entire careers, only to be left with next to nothing when retirement creeps up. Money coaches help you avoid this difficult situation with sound advice and planning to prepare you for retirement.
Some money coaches even provide specialized retirement planning coaching.
Divorce
One of the biggest culprits for severe financial downward spirals is divorce. In Canada, divorce rates continue to go up, with about 2.74 million Canadians currently divorced and not remarried.
Uncontested divorce (also known as “easy” divorce), can cost between $1,000-$3,000. Contested or “difficult” divorce can cost upwards of $74,000. Oftentimes, divorce results in losing half of your net worth, which is something worth preparing for with a Money Coach.
Legacy Planning (or inheritance)
A Will isn’t always enough to ensure your estate is managed the way you want it to be after you’ve bid adieu (permanently). A Money Coach can help you with leaving inheritances to your children, or deciding how to transition ownership of your assets and/or operations of your business.
Debt Reduction
If you have a good income but struggle to get out of never-ending debt, a Money Coach could help you find a way out. Like the detailed action plan mentioned earlier, money coaches can help you create a customized budget that works for your lifestyle and priorities that will reduce and eventually help you eliminate your debt.
Building Strong Financial Habits
It’s easy to make a decent income and still not save any of it, especially when you live in a city where the cost of living is high, like Toronto or Vancouver. Money coaches help you take your money further by using behavioural coaching practices to teach you to build strong financial habits and curb spending.
Understanding Your Finances More
Some people get so overwhelmed with their finances that they ignore them completely. Maybe you’ve been guilty of ignoring a credit card statement, giving up on tracking your spending or living your financial life on autopilot.
Money coaches help you take a hard look at your income and spending, understand both down to the last dollar, and then help you feel more confident and aware of the decisions you make when it comes to your money. They help keep you accountable to yourself.
Money Coach vs. Credit Counsellor
You might be thinking that money coaches provide similar services to credit counsellors. Indeed, money coaches can help you manage your money, pay off debt, and achieve your financial goals, like a Credit Counsellor. But they differ in a few ways:
Future Planning: A Credit Counsellor can help you set and achieve financial goals, like getting out of debt. A Money Coach can also help you plan for future life events, like retirement, purchasing a home, a divorce, and legacy planning.
Debt Consolidation: Money coaches can help you create a debt repayment plan, but they don’t offer debt restructuring services, like a debt consolidation program.
Review of Investments and Insurance: A Money Coach can provide an unbiased review of your investment portfolio and insurance policies that is independent and has your best interests at heart.
Creditor Negotiation: Money coaches can offer advice on how to manage creditor obligations but they do not negotiate with your creditors on your behalf as do non-profit credit counsellors.
Price: Money coaches either charge a fee for their service or earn commission on sales, so their clients tend to be in a higher income bracket (at least $100,000). Non-profit credit counsellors offer free professional debt services, like credit counselling, which caters to those earning more modest incomes.
How to Choose the Right Money Coach
Like with any industry, there can always be a couple of bad apples. Pick the right money coach by looking out for the following qualities:
Accreditation or Certification
Most money coaches aren’t bound by national standards that regulate the profession (except in Quebec). So, most people can provide financial advice and consulting services in Canada without a license as a Money Coach. The only exception is if the coach offers financial products, like insurance or investments.
Look at your potential coach’s credentials before signing the dotted line. Are they Certified Financial Planners (CFPs)? Do they have any other certifications that would qualify them to help with your specific concerns?
Just because money coaches don’t have to have certification, doesn’t mean you shouldn’t look for one that does!
Fee Structure
Commission-based fee structures don’t always put the client’s interests first. Look for money coaches that offer advice-only or fee-for-service pay models.
Testimonials and Referrals
Does their website list reputable testimonials from people like yourself who benefited from the coach’s services? If not, is the coach willing to provide you with a few referrals? If not, that’s usually a bad sign.
Diversity of Service
A Money Coach should take a holistic approach to their services, helping clients feel more confident in various aspects of their financial health. Avoid money coaches who seem to rely solely on one particular financial product.
Improve Your Financial Wellbeing with a Money Coach
When it comes to financial health, income and debt levels aren’t the only factors. Money coaches recognize the many moving parts that come with financial literacy and financial well-being, like financial confidence, sound planning, and strategies to advance.
Interested in learning more about money coaching? Check out Money Coaches Canada’s services.
