Once every few months, I get an offer from someone who thinks that I would be a perfect fit for being a "personal finance coach" or a "financial independence coach." Usually, this idea comes from someone who has made some money doing that very thing - they've worked as a professional coach or a life coach, made some money doing it, and likely helped out some people.
First of all, what's a personal finance coach? What's a financial independence coach? For that matter, what's a life coach?
All three of those things boil down to the same thing: a person whose job it is to help you identify some goals you have in your life, develop a plan to get there, and then motivate you to actually execute that plan.
In all honesty, it's not really that different than hiring a coach or a trainer at the gym, except those coaches are focused on physical fitness. A life coach is focused on helping you develop the overall life you want. A personal finance coach is focused on helping you develop the kind of financial success that you want. You get the idea.
What differentiates a personal finance coach from a financial advisor? Generally, a financial advisor is going to be directly responsible for your investments and that comes with a great deal of additional regulatory oversight. A personal finance coach almost never has anything directly to do with your finances; instead, they're focused on analyzing your life and looking at the day-to-day choices you're making related to money and making suggestions for how you can improve them.
In general, that means that there's a much lower threshold for someone to become a "personal finance coach," because they're not actually making financial decisions on your behalf. While there are certification and training programs for personal finance coaches, they're not required - pretty much anyone can be a personal finance coach and you have to filter through them yourself.
So, let's ask the big question here: do you actually need a personal finance coach?
Even though this answer probably cuts off a nice income stream for me, my answer is no, with a few small caveats. Let's dig into why that's the case.
What a Coach Actually Provides
A personal finance coach or life coach or professional coach or speaking coach - any type of coach you might hire - exists to help you figure out how to perform at your best with regards to the area that person is coaching.
Typically, a coach's most valuable aid comes in the form of motivation. That coach is going to help motivate you to make financial changes in your life. They're going to use persuasion to get you to spend less and to do smarter things with your money. Really, it's not that different than a personal trainer motivating you to go that extra mile and push through the pain for the reward of having a healthier body. A personal finance coach is going to encourage you to make seemingly hard personal choices to build a strong financial foundation.
A personal finance coach will typically help you figure out changes that will bring the most benefit for the time and energy invested. Again, this is much like a personal trainer - they'll both sit down with you, figure out where you're at, figure out your goals, and then help you determine what you need to work on to get to your goals.
Usually, a personal finance coach will help you work out some goals and some practical life changes you need to make to achieve those goals, and then keep checking up on you and motivating you to stick to those changes or modify those changes as needed. Again, it's like a longer relationship with a personal trainer. You're going to see success with some of the things you're doing and you're going to struggle with other aspects. You also might start to lag in the self-motivation department. A coach helps keep you motivated and also uses the stuff you're successful at and the stuff you're not successful at to mold your new habits and tactics into something better.
One last thing: a truly good coach inspires joy from mastery. In other words, a good personal finance coach will help you to find the joy in making tough financial choices on your own. They'll accentuate the pleasure you feel when you succeed due to overcoming hard challenges. Not only that, they'll make you want that feeling more and more, and they'll make it clear that the path to that feeling comes through making continuous good personal finance choices. In other words, they're cultivating your own internal success.
What a Coach Doesn't Provide
So, what doesn't a coach provide?
A coach doesn't force you to do anything. If you don't think that a coach's suggestion is the right move, you don't have to do it. Of course, if you think that a coach is out of line, you can quickly move on to a different one. A coach shouldn't make you do anything - instead, they should be helping you to see the moves you need to make and drawing out that focus and self-motivation from within you to do those things.
A coach doesn't make financial moves on your behalf. That's what a financial advisor / financial planner is for. A coach is all about encouraging you to make your own moves, not to make moves on your behalf. They shouldn't ever have access to your accounts or be making any financial moves on your behalf, ever.
A coach can only provide useful help if you lay everything on the table - and most people are unwilling to do that (and probably shouldn't do that). It's pretty rare that people are willing to lay all of their financial cards on the table - and the truth is, you probably shouldn't do that. For a financial coach to really suggest what you should do, they should be able to see bank statements and credit card statements and mortgage statements and lots of other financial details that you're probably not willing to share. It's like going to a personal trainer and not revealing that you have an old knee injury and are strongly pre-diabetic. A coach who doesn't know the full picture isn't going to give you the best advice, but a mix of unwillingness (and some smarts about protecting your identity) can result in an unclear picture being presented to that coach.
There's another key part of this equation, too.
Doing Your Part
In the end, any personal finance changes you make are going to be up to you. You're going to have to do your part. You're going to have to make the hard choices to spend less and to pay off debt. A coach might be able to motivate you, but they can't do it for you.
Furthermore, whenever you make financial moves, you should really understand what you're doing and why you're doing it beyond what your coach or advisor is telling you. This is your future. You owe it to yourself to understand why you're doing what you're doing and whether it makes sense beyond the mere word of your coach or advisor.
Together, those things mean that you're going to have to work hard to make financial change happen, regardless of whether or not you have a coach. You need to know the basics of personal finances on your own so that you're making smart moves. You're also going to, in the end, have to have the willpower to make good choices, especially when your coach isn't present.
Think of a fitness coach. That fitness coach isn't going to be standing beside you when you're at the ice cream shop, encouraging you to get just a single scoop of fro-yo. You're going to have to make that call on your own. With a personal finance coach, you're not going to have that coach standing beside you when you're thinking about buying something frivolous. You're going to have to make the right call on your own.
In the end, even with the best coaching in the world, success really is up to you.
The "Secret Information" Issue
One element of all of this is that many personal finance "coaches" often suggest that they have this secret strategy that will help you turn around your financial situation if you pay their high fees. Anyone who listens to a talk radio station has probably heard ads for such services, which tend to be repeated quite often - you've probably got a name or two in your head, in fact, if you're a frequent radio listener.
Here's the reality: there are no "secrets" of personal finance. Anyone who is telling you that they know some secret plan is feeding you a story in order to get you to buy an overpriced product or is trying to execute some kind of multi-level marketing scheme.
Don't get me wrong - almost all of those people will give you some personal finance coaching. However, the message of such programs boils down to one (or more) of the following elements:
+ It simply presents traditional personal finance material repackaged in a new way. It's the same info you'd get on The Simple Dollar, printed up in a nice "workbook" or something similar. Sometimes, it's tied to seminars or one-on-one coaching programs where someone talks to you about the same personal finance principles you'd find everywhere else.
+ It involves shifting money around in a way that appears to provide huge returns because of fuzzy accounting. Many systems involve using debt as leverage to make it appear as though you have a lot of assets. However, such systems usually involve really strange accounting practices - your actual simple net worth (your total assets minus your total debts) doesn't really improve. It just looks better from some particular angles, angles that are largely meaningless in the reality of personal finance.
+ It hinges on really speculative investment or specific short-term loopholes. These types of tricks often end up backfiring on you. The speculative investment fails, or the loophole closes with your finger in the trap. If it involves moving money into things that you can't find information about on your own, you shouldn't be putting your money in there unless you're fine with just losing that money.
+ It involves completely unrealistic returns on investments. Some coaches offer suggestions that sound really great on paper, but they only work out if you're getting a 12% or 14% per year return on your investments forever. Those types of returns can happen over a few years, but they don't happen forever. Eventually, there's a market correction. Over the long haul, most solid investments end up averaging around a 7% to 8% average annual return. You can beat that, but it involves a lot of work, a very large amount of money to invest, and a tolerance for some major risk (like losing your whole investment).
Basically, if a personal finance coach is pitching something to you that involves "secret" information or things "they" don't want you to know about, run away. That person is peddling snake oil and you don't want to put your money into snake oil.
There's a Ton of Good Free "Personal Finance Coaching" Already
The reality is that, between personal finance sites like The Simple Dollar and the personal finance section at your library, there's a ton of great personal finance coaching material already available to you. There are tons and tons of motivating and inspiring websites and blogs and books. There are tons and tons of websites and books out there that spell out the plans you need to follow and the strategies you need to use to get where you need to go. Best of all, those tools don't cost anything.
While you might not find plans that are strictly personalized just for you, it's pretty easy to find books and websites geared toward people in similar life situations to your own, with similar values to your own. Often, those books and sites talk about personal finance issues from that perspective, which is useful if it matches your own perspective and situation (but it can also be useful if you're in a different place, too).
The only difference is with books and websites, you have to be motivated enough to go find this material yourself. You don't just sit down in a room and have someone explain it to you, as you would with a coach. You have to find the material on your own by going to the library or using Google and reading through a site's archives.
You also have to have some degree of self-motivation to apply that material. You don't have someone in your face talking directly to you. Instead, you have a book or a website - while those things might be communicating directly to you (or people like you), it's a little different than a coach in your face.
The point is this: if you're self motivated, everything you need for personal finance success is already out there for you, on The Simple Dollar or other websites or in books at the library.
Do You Need a Personal Finance Coach?
In the end, the real value of a personal finance coach is in motivation. If you're lacking enough self-motivation to make the change yourself, a coach might just be enough to push you over that threshold.
However, if you're motivated enough to have found a site like The Simple Dollar, have read through a lot of articles here, and have read all the way through this one, you've got a healthy start in the self-motivation department. You probably have a strong sense of what you need to do.
The question then is how you translate that into action in your own life.
It's simple: once you know the principles, reflect on them regularly. Think about what you need to do today to achieve the success you want, and make that kind of thinking part of your morning routine and let it pop up throughout your day. Regularly read websites like The Simple Dollar, not because you're getting tons of new ideas, but because it's reinforcing the good principles and sometimes providing new angles you might not have considered.
In other words, keep your goals and the principles of personal finance fresh in your mind on your own.
For many people - myself included - that's enough to put yourself on a much better financial path without paying for a coach at all. If you're motivated enough to regularly think about your finances and your future and to regularly read and absorb material on good personal finance behavior, it's very likely that those things are feeding your decisions each day and moving the scale toward good financial choices without needing a coach.
So, my answer for anyone who has read this whole article is that they don't actually need a personal finance coach. They already have all the tools they need for success, and the additional benefits of a coach aren't going to be worth the extra cost.
That's not to say personal finance coaches are useless. They provide a useful service, and there are definitely people who find motivation from being nudged constantly by a coach to make better choices.
The thing to always remember is that there are other ways to find that motivation and to find that information outside of a coach, and if you're reading The Simple Dollar regularly, you're likely on that path anyway. A coach might provide an additional push, but you're already jogging, and the cost of that additional push is likely not worth it for you.