Is Financial Coaching Worth Paying For? The Proof Is In the Data!
People stressed about money want a way out. They are dying to let someone in to help carry the burden of what can feel like a dirty little secret. However, when they find out financial coaching is not free, have second thoughts.
The stated objection is, “where will I find the money”? The real objection is, “How do I know I won’t fail again, and this time for a fee”?
What is the truth about Financial Coaching? Is it worth the money?
First, let’s define Financial Coaching. A financial coach provides information, guidance, and support to help people make a transformational financial change and reach financial goals. This graphic from the Consumer Financial Protection Board (CFPB) lays it out nicely:
Models of Financial Education
Financial Information: Information ———-> Decision
Financial Counseling : Information ———> Problem ——-> Decision
Financial Coaching : Goal ——->Support <—-> Decision —-> Behavior
(7 Collins, J. M., & O’Rourke, C. M. (2010). Financial education and counseling—Still holding promise. Journal of Consumer Affairs, 44(3), 483-498.)
As you can see by the graphic, financial coaching focuses on helping clients reach financial goals by providing support in decision-making and ultimately changes in financial behaviors.
What Are The Outcomes?
According to a study conducted in 2016 by the CFPB, Financial coaching: A strategy to improve financial well-being, Financial Coaching has the greatest impact on financial well-being.
Financial well-being is defined as:
- have control over day-to-day, month-to-month finances
- have the capability to absorb a financial shock
- are on track to meet financial goals, and
- have the financial freedom to make choices that allow one to enjoy life
In this study, participants in financial coaching made 36% more deposits into their savings accounts. They also had a 60% increase in emergency funds, and total debt decreased by $12,412.
They also reported a much more positive financial outlook. “Specifically, in addition to observable changes in financial behavior and outcomes, (access to) financial coaching was related to improvements in participants’ self-perception of their financial condition.
Study participants offered financial coaching reported higher rates of forming financial goals, a sense of making progress toward goals, and confidence in achieving their goals, compared to control group members not offered coaching. In addition, these individuals reported greater satisfaction in and less stress related to their financial situation, compared to the control group. It is noteworthy that the average income of the participants in this study was $22,100.”
To Sum It All Up
The best way to relieve financial stress, reach financial goals and create an overall better life is to engage with a financial coach when you need it. Any decent financial coach will be able to work with your numbers and find a way for you to afford it for the short duration of most coaching programs.
Access to Free Coaching
There is free financial coaching available to those with lower incomes. For example, I worked with the Eden Savers Program with Eden Housing to provide coaching at no cost to a client. You can also find help at your local Impact Community Action center. Consumer Credit Counseling is also a great resource if you are struggling with debt.
If you achieve financial transformation or just curious to know more, contact me!