exists in the place between financial services (those who sell financial products) and personal development (therapy, counseling, and life coaching). Depending on their focus, a financial coach could be going over your budget with you and/or giving you tools to combat things like procrastination.
What to expect from a financial coach
What you expect from your coach depends on whether their focus is financial literacy or financial wellness. So let’s talk about the difference between financial literacy and financial wellness.
Like all other kinds of literacy, financial literacy is simply the ability to understand receptively and express concepts and definitions. Financial literacy is also called financial competency or financial education. Understanding how compound interest works is a great example of this. The calculation of compound interest isn’t complicated.
But knowing how compound interest works has never changed anyone’s life.
If you’re after real change in your life, financial literacy is a great start, but will fall short when it’s time to implement. If you are an agency, school, or employer, financial literacy is low barrier to implement for those you serve. Because it’s easy to teach and typically one-directional, a literacy-focused curriculum can be created once, recorded, and then deployed many, many times.
If your coach is focused on financial literacy, your sessions or classes will be mostly one-sided, and some of your lessons may actually be recorded webinars. To be clear, a financial literacy class may be exactly what you need, but it’s important to know the limitations. Financial literacy is only about the understanding and comprehension of financial concepts. The implementation of those concepts, behavior change, and changes to your daily spending routine are largely left to you to sort out.
Because financial literacy is widely available for free on the internet, you might check out these resources before you enlist a financial literacy coach.Here are some of my favorite resources:This young genius who teaches the rule of 72 better than anyone I’ve seen. Another youtube channel with great economics and financial literacy courses is Crash Course!
Financial Beginnings, a nonprofit that specializes in some fantastic financial literacy.
Full disclosure, Pacific Stoa and yourworthcoach.com is in the business of financial wellness. Financial Literacy sits within every financial wellness endeavor, you can’t have one without the other. You may hear the two confused, but the distinction is critical depending on your needs. Speaking ONLY for the Pacific Stoa curriculum, if you were to remove the financial literacy components, it would be a resilience and awareness curriculum.
In truth, approximately 10% of my clients and I have never talked about financial concepts, and yet their finances have improved. Why? Because they’ve been able to learn important tools that have strengthened their trust in themselves (resilience), perspective/awareness, and provided them with decision and change strategies.As financial literacy was one-directional, financial wellness is two-directional. Your work with a financial wellness coach will be conversational, as the coach is adapting their tools and curriculum to where you are.
Your life looks very different from anyone, even if they have the same basic demographics as you. Financial wellness must be fitted to your life, while financial literacy can be more global.Being financially healthy is not just understanding financial concepts, but implementing and incorporating those concepts into your life. Financial wellness includes building systems (budgets), replacing maladaptive habits with health routines and setting goals for the future.
Wondering what else you should be looking out for in a financial coach?
Download “The Five Financial Coaching Red Flags” pdf here: