You may have heard the term financial coaching, but you might think it just relates to setting goals. The truth is, setting goals is just the first step. For both consumers and businesses, reaching your financial goals also takes support and motivation and that is where financial coaching comes in.
What is Financial Coaching?
Simply put, financial coaching increases financial well-being on three levels, money management, financial health metrics such as debt levels and savings and how one feels about their financial situation and their overall confidence about their finances.
This is done by taking financial education and adding goal setting, motivation and support. It is by zeroing in on a company’s or individual’s behaviors and holding them accountable for developing and implementing ways to change their behaviors that help them achieve their financial goals. This approach is particularly successful when someone is motivated to make a change but needs assistance in devising a plan and sticking to it.
In the end, financial well-being, obtained by using financial coaching is defined as:
1.) You are on track to meet your financial goals
2.) You can deal, financially, with an unexpected expense – large or small
3.) You have control over your finances, daily and monthly
4.) You have the financial ability to make a choice that allows you to enjoy your life.
Although most financial coaches are not normally credit counselors, they can bring in and work with other experts such as debt management programs to create a program that will meet all of their client’s needs.
What are the Advantages of Financial Coaching?
A first of its kind 2016 study by the Consumer Financial Protection Bureau (CFPB) on the impact of financial coaching found that those with access to a financial coach did better financially than those without access. In fact, one meeting with a coach saw improvement in their financial outcomes and money management skills.
There were three areas where the study found improvement. The first was money management behavior. Those in the test group that met with their coach increased their savings deposits, paid their bills on-time and were able to bring past due accounts current.
The second area of improvement found was debt management. The study found that the control group was able to decrease their amount of debt while at the same time increase their savings. They were also able to increase their credit scores by up to 33 points.
The third area of improvement was on the person’s self-perception of what their financial condition was at the time. There was a greater sense of making progress and an increase in confidence that they would achieve their goals. This ended with a greater sense of well-being due to the changes of behavior these individuals made.
Who can Benefit from Financial Coaching?
Because this type of coaching takes a flexible approach it works well for all types of clients, from a family that is looking to save for college expenses and retirement to a business owner that wants to get a handle on cash flow and needs the ability to save money to reinvest in the business.
Coaching programs help define the goals of the client and then focuses its activities on targeting those goals whether they are debt reduction or money management.
For individuals a financial coach can help you with all aspects of your financial life including:
2.) College savings
3.) Debt management
4.) Increasing your credit scores
5.) Increasing your savings
6.) Building an emergency fund
7.) Paying off past due bills
For business owners, there are several areas where you can benefit from having a financial coach.
1.) Defining your financial goals
2.) Having a retirement strategy that deals with both accumulation and distribution of capital
3.) Risk management plan that will help protect your company’s assets
4.) Tax reduction plan to minimize the impact of taxes on your business
5.) Asset allocation strategy to address your investment objectives
6.) Exit strategy if you plan on one day leaving your business.
What is most important to understand is that whether you’re a company dealing with financial issues or an individual that needs help, financial coaching will provide you with the education, support and motivation to get you where you want to go.
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