Sense & Centsibility Blog

Financial Coaching vs. Financial Counseling

What’s the difference between financial counseling and financial coaching?

LSS Financial Counseling provides personal financial recommendations to help you deal with a specific financial issue. We meet with people who are struggling with debt, credit, student loans, or housing issues. We get the necessary data (income, expenses, credit report, delinquency information, etc.) and devise an action plan for client: where to cut, who to call, what to write, and so forth. It’s kind of like going to the emergency room with a broken ankle (which I’ve done twice so I am quite qualified to make the comparison – and just so you know, both happened in pursuit of physical fitness, not stumbling out of a bar at closing time.) The ER staff get the x-ray, confirm the problem, put on a temporary cast, hand you some crutches, and tell you to set up an appointment with an orthopedic specialist. Only we don’t hand out crutches.

Financial Coaching is more like the physical therapist you see after the cast is off. They work with you over a period of time, meeting regularly, give you suggested exercises, ask how they are working, and discuss ways to prevent breaking more ankles.

If this analogy seems a little weak, here’s a concise and clear explanation from Karen Murrell and J. Michael Collins with the Center for Financial Security, University of Wisconsin, Madison: “Coaching is differentiated from counseling in that coaches provide advice and encouragement, and do so in a process largely driven by the client. Coaching is not designed to be a therapeutic relationship or to aid clients in a more acute crisis resolution.

Why have a financial coach?

The great value in coaching is the ongoing relationship—not just one or two appointments. A coach can be a sounding board, your accountability person, your brainstorming partner, your cheerleader.

You determine your own goals, maybe with a little help formulating them from your coach. Together, you and your coach map out the action steps and time frames. Knowing you have to check in with your coach helps prompt you to complete those steps!

Financial coaching is a fairly new and growing field. While financial counseling has been around for decades (the National Foundation for Credit Counseling was formed in 1951!), financial coaching is a single decade old. UW-Madison Center for Financial Security reviews studies and literature on this evolving field and reports that coaching is showing promising effectiveness. As the field grows, techniques and strategies continue to improve.

Do I need counseling or coaching?Couple

Seek financial counseling if:

  • Finances are making you feel stressed and anxious
  • You are falling deeper into debt
  • Your credit cards are maxed out
  • You are spinning your wheels on your debt with high interest rates or late fees
  • You’re late on your mortgage or other payments
  • You’re applying for more credit to try to resolve the situation

You can start your financial counseling today ONLINE!

Seek financial coaching if:

  • Any crisis has been stabilized and you are ready to look to the future
  • You have a goal or multiple goals (like buying a car or home, changing careers, maintaining a realistic budget, building savings, etc.)
  • You're ready to commit to the ongoing work
  • You're ready to welcome support in your efforts

How do I find a financial coach?

Many non-profit organizations that offer services such as job readiness, free tax preparation, or legal services have instituted financial coaching programs. United Way 211 is a good place to start for referrals to local organizations. Your local Community Action Agency may be able to provide other suggestions. In the Twin Cities metro area, contact Prepare + Prosper.

If you do a Google search you’ll find lots of fee-based financial coaches. I would urge caution before spending your hard-earned money on a financial coach. Remember, this is a new industry and is not regulated. Do your homework, find out:

  • What training do they have and from where? (Then look up those sources.)
  • How long have they been coaching?
  • Can they provide references?
  • Is there a free introductory session?
  • Can you meet in public places?

Is there other help out there?

Sometimes our financial woes are a symptom of underlying issues. If you think you might have a problem with compulsive shopping, for example, there are reputable support networks available.  Spenders Anonymous and Debtors Anonymous are two such organizations, operating much like Alcoholics Anonymous or Gamblers Anonymous. Learn more:

I’ve had several clients who reported to me how helpful their anonymous group was for them. Keep in mind individual groups might have their own personality. If it doesn’t feel like a good fit, try another group.

Remember, see us for the urgent financial issue causing you to lose sleep. See your financial coach to move forward with your dreams.

Author Mary Ellen Kaluza is a Certified Financial Counselor with LSS Financial Counseling and she specializes in budget, credit, and debt counseling.