I have a friend who had mentioned she was hiring a money coach (I believe that’s the title), but she’s had her for over one year now and said this was one of the best decisions they have made together as a couple. They recently got married and after the advice of their money coach, they decided to put all their money in one pot (even though there is a bit of income inequality). With the help of their coach, they paid off all their debt (I’m not sure how much debt there was, I didn’t want to pry too much) within one year.
They make good money as a couple (over $100,000 household income) but were having trouble spending less than they earn.
What is a Money Coach?
The term money coach is quite recent in Canada. According to Globe and Mail, a money coach helps with money management and budgeting and day-to-day household finances. They are a fee-for-service financial professional. Money coaches help clients see the bigger picture and they don’t provide investment or insurance advice. They help with basic budgeting.
I asked her how much they paid when hiring a money coach, and she said they paid for a package initially (I think $1000+) and then the rate was hourly but in the past months it hasn’t been costing very much at all, something to the tune of $100 a month for weekly phone calls.
Here’s their money coaching process in a nutshell from what I gathered.
Money Overhaul
First, they went through a complete money overhaul in a few sessions. She reviewed all the accounts, all their debt, all their financial goals, their relationship style, their personal goals. She then suggested that they stop paying for their debt separately (e.g. adopt the mentality of ‘my debt is your debt’ and work towards paying off debt together and working more as a team). My friend said this was revolutionary for their relationship. She felt that this was probably the most helpful thing and feels even closer than ever to her husband. Then the money coach implemented the cash envelope system and put away their credit cards.
Their money coach helped them spend less than they earn.
Cash Envelope System
Their money coach set them up with a cash envelope system. They have allowances per week for personal spending and for cash that they can use on themselves.
What’s the cash envelope system?
Here’s a post from The Financial Diet explaining what a cash envelope system is (it is explained better than I ever could). Basically, your spending is categorized, and you get a budget or limit for each category. You are given let’s say $50 for clothing for a week and that’s put in an envelope. If you don’t use it, you can save it. If you go overboard then you can pull from another category or you just have to deal with it and make do with what you have left. The cash is put into envelopes so that it is visible.
The money manager also took care of all their bills and pays it for them (through their online banking) when they come in and calls them to tell them how much money they can withdraw from the bank for the week. I didn’t get a chance to ask more in detail how this is done because I would worry about confidentiality and safety of sharing your password with someone. Perhaps she would tell them how much to pay or remind them to pay. I’m not too sure. She even deploys cash from each of their paycheques to saving.
This sounded very intriguing to me, but the cash envelope system is not something that I would adopt for myself. Just like dieting, I personally don’t like to budget.
I guess that’s what makes personal finance, well, so personal… everyone has a different way of going about things that work best for them.
15 Minute Phone Calls to Check-In
After the major overhaul, their money coach calls them weekly to check-in and updates them on their debt payoff progress (which has been completely paid off within one year of hiring this money manager). She continues to help pay the bills and also provides an update for their progress towards their new financial goals now that their debt is paid off.
The phone call has been getting shorter and shorter now that my friend and her husband is less dependant on their money manager or money coach and they feel more confident about their money.
Weaning From the Money Coach
I asked my friend if she had considered tapering or weaning from the money coach. She anticipates she will soon since they have learned about the cash envelope system and seem to be doing everything very well lately. She felt like she would do so in the next few months once they hit their financial goals and targets. I think their monthly charge is around $100 now for the 15-minute phone calls per week and the online bill payments and transfers.
My Verdict:
Personally, I think it’s pretty cool what this money coach has helped my friend do. She’s definitely come a long way.
She feels more confident with her money and more in control of her money now. She also seems to be more cognizant of her purchases before spending money on things that might lead to regret. I would probably pay for a money coach to help get me out of a rut if I didn’t like personal finance as much as I do.
I view hiring a money coach akin to going to counselling, except for your money portfolio and household finances. Counseling is usually (in my eyes) a good thing because you look for different viewpoints and they provide you with tools to improve yourself.
Improving yourself is never a bad thing and lifelong learning is one value in life that I hold dear.
Here’s another article from the Globe and Mail about whether you should hire a money coach.
Readers, would you try hiring a money coach and pay someone to budget for you?
I may be preaching to the converted here (since readers are likely personal finance savvy) but I wanted to know your thoughts.
GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.
Hi GYM,
We always pooled our finances together. Plus we do not budget. I have used the envelope system for a few months in the past. It worked really well for my dining out category which is often my highest.
Would I ever hire a money coach? No. But it is a good idea used whatever resources one needs to reach their goals.
@Dr. MB- Thanks for visiting Dr. MB! We don’t budget either but we do have different pots of finances. That’s a good idea to use the cash envelope system for a certain area where there needs to be a bit more focus.
Definitely wouldn’t pay someone to budget for me…feels similar to paying fees at a bank for an “expert” to tell you which mutual funds to buy – only to realise later on – you can do a better job yourself if you actually put a tiny bit of effort into it.
Just my opinion though – glad it worked out for your friend!
@JOrdan- Yeah, that was my sentiment! I’d rather be more ‘active’ than ‘passive’ but I guess people need coaches for certain things. I don’t pay for a personal coach with fitness either!
Personally I would not hire a money coach because I’ve become self-aware of where my money goes especially these last 5-10 years. I think if you put in the time and effort to figure out your financial situation whether it’s how to pay off debt or creating a budget, you should be okay on your own. But everyone is different and your friend has seemed to find out that a money coach is great for her financial needs. It looks like it is working out for her
@Kris- Yeah, she’s really pleased with it. I should check in with her to see if she’s weaned herself off from the money coach.
Nope, I’d neber hire a money coach. I would consider being a money coach though!
I’ve tried to give advice to friends when they say they need advice or help. That can be tough though because they can often seem resentful of “difficult” suggestions.
Plus I’ve never really budgeted because we’ve made good money or are good at just not spending other than what we have to, do I may. It be able to give great advice there.
And.. on the envelope system.. I understand some people need to do this to take control and ownership of what they’re spending. But dang! All the credit card perks you lose out on (2% effective cash back for me).
@That Frugal Pharmacist- I considered it too!! Haha. But then I don’t have the ‘credentials’ so who would listen to me anyways. I know, that’s why I could never do the cash envelope system- I love credit card points! But I think people who use the envelope system have tended to run into trouble with credit card debt in the first place.
A money coach seem to be very suited for a lot of people I know! Definitely not for me:)
I may consider it for my next job!
Glad your friend got the help she needed and it worked out.
@Caroline- You should totally do it! Have you talked to people you know about what they think? You should do that and the realtor stuff on the side for your next gig, it would be two nice projects. AND walk dogs on Rover too! Who needs an office job!!
It seems like a money counselor was a great idea but gosh would I not want to give someone access to my bank accounts to pay my bills!!! Budgeting together has been really helpful for my husband and I. Cash seems to work for some people but it would drive me crazy! I pay with Apple Pay as much as possible. YNAB does a digital envelope budgeting system which I really like! I can’t live without it with how many irregular bills we have.
@Leigh- That’s cool to hear that budgeting together for you guys has been working out well! I didn’t know that YNAB has a digital envelope budgeting system- neat! I have never paid with Apple Pay, but we are definitely moving towards a more cashless society nowadays.
Of course I would not. I’m a DIY money guy. But I don’t think there is anything wrong with it. Your counseling analogy is a good one. Here’s another. I’m not handy, so I don’t hesitate to call a plumber, electrician or handyman when I need one rather than let my house fall apart or not function adequately. So why should a person who is not “money handy”, let their financial situation fall apart by ignoring it.
I’d love to know the ins and outs of the the money coaches business. How do they get clients? Do they have liability insurance? It always seems to be that there are plenty of advisors for people with money. But for those that do not have money or can’t manage it, how can they afford a money coach? Which is maybe why it’s a field that has never really taken off to my knowledge.
Interesting topic…..
Tom
@Tom- Good point about that. I guess us being ‘money handy’ is just second nature. I think this money coach got my friend through word of mouth. For those that do not have money or can’t manage it- they pay for a money coach even though they may not be able to ‘afford’ it, but then after the money coach works their magic, they realize they have more money than they thought they did, so then it justifies the expense I guess!
i might be a money coach in retirement, or maybe sooner. i’ve had people ask me to do it for them but always hesitate. mrs. me just went to work for a guy who needs exactly that. i.e. he doesn’t know his cost of living or can’t/doesn’t pay bills on time and incurs late fees and all the stuff you should never do if you have the income. i was astounded. i offered to help her set it up for him, especially for irregular (not monthly) bills like house taxes, car insurance for some, and maint. on houses/cars. you can and should anticipate these things, as you know, GYM.
i think a lot of people could benefit from that common sense approach without all the responsibility that comes with the investment and insurance parts.
@freddy smidlap- I’m happy to hear that you and Caroline are both entertaining the idea. I mean, you are both walking the talk so of course people would listen. That’s fantastic you have someone who asked you for help already! I had talked about the idea with my friends (though they do not know of this blog) and they seemed a bit hesitant to try out my services for free lol. They felt uncomfortable disclosing what their assets/ net worth was to me which is totally understandable!
Yes, the investment and insurance part of ‘financial advising’ are wrought with a lot of landmines!
Hi GYM, very good topic. Some people probably do need help to get their finance to the right path. The money coach might be a good solution for them. The key is to make sure they hire the right person, and really execute the plans. I’m glad to hear it works well for your friend.
@Helen- Yes, it worked well for her it sounds!