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.
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.
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 40 something millennial writing about personal finance since 2009 and 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 a free dividend yield spreadsheet and the free Young Money Bootcamp PDF.