BACK

fizkes / Shutterstock

Debt Management

How a financial coach can help you get out of debt

A financial coach won't judge you for dropping $200 per month on fake eyelashes. But they may encourage you to refocus your spending

Summary

A financial coach or counselor helps clients develop healthy spending habits, reduce debt and build both short-term and long-term savings. Here’s how financial coaching works, and how it can help you pay off credit card debt.

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

If you can’t give up your daily latte, your twice-a-month false eyelashes or weekly fresh flowers, a financial coach won’t judge you.

But that coach or counselor will stress that you won’t reach your financial goals if you don’t give up most of your splurging.

“I had one client who was spending $200 a month to have people glue eyelashes on her lashes every two weeks,” said Christine Lane, an accredited financial counselor. “Until I met her, I didn’t even know that was a thing.”

“Everyone has different things that are important to them,” said Bridget Todd, head of trainer development at The Financial Gym, a credit coaching business. “A big one for people is often personal or mental wellness. Some people pay for an Equinox membership and they don’t want to go to a cheaper alternative. For others, an acupuncturist or a chiropractor is important to them to feel their best. We find the non-negotiables and ask them what expenses can come out.”

See related: How to match your spending with your values in 2021

What a financial coach does

A financial coach or counselor helps clients take a comprehensive look at all of their finances, bridging the gap between a debt counselor, who focuses on reducing your debt, and a financial advisor or planner, who focuses on helping you build wealth, Todd said.

“We focus on your entire financial life,” she said. “We take a deep dive into the day-to-day, how you’re spending your money. We give you different scenarios: if you do this, this will happen. We allow you to improve your finances and also help you feel comfortable and live your life.”

No matter how bad your debt or how frivolous your spending, financial coaching is a collaborative, judgment-free zone. A coach or counselor helps clients develop healthy spending habits, reduce debt, and build short-term and long-term savings. The goal is long-term financial wellness, said Rebecca Wiggins, executive director at the Association for Financial Counseling and Planning Education.

“A financial coach views the client as the expert in their own life, collaborating with them to define their goals, create solutions and an action plan that helps them achieve their goals,” Wiggins said.

Like many coaches, Lane uses a “spending, debt and savings” spreadsheet to open her clients’ eyes to their true financial picture. She shows clients how much they can spend every week or month on wants without going further into debt. Entering higher or lower spending or savings numbers in the spreadsheet immediately changes the long-term picture.

“The key is telling them what the number is,” Lane said. “I tell them, ‘Here are your fixed expenses and here’s what you have left. Focus on spending no more than $200 this week.”

Clients initially push back on limits

“They say, ‘Really, I have only $200 to spend on everything else?’” Lane said. “I tell them, ‘Type in $600 and see what happens.’ I let them play with the numbers.”

Some clients also are upset when they realize they can no longer keep up with the proverbial Joneses. “People making six figures can’t believe they can’t spend the money to get the lifestyle of their friends,” Lane said. “The reason is they have run up a lot of debt. I tell them, ‘The past version of you spent today’s paycheck.’ You have the power now to make life better for future you.”

Common personal finance misconceptions

  • Good budgeting is about categorizing expenses.
  • Amassing credit card rewards and points is more important than paying off the balance every month.
  • Investing in individual stocks is the best way, even for financially inexperienced people, to invest.
  • Supporting your adult child financially is a good idea, even if you haven’t saved for retirement.

Techniques to curb spending

Like many coaches and counselors, Lane asks her clients to give up all credit card spending for a set period – in her case, three months.

“I once had a woman who was $10,000 in credit card debt and was paying a ton of interest say she didn’t want to give up earning her points and that she’d already gotten two free hotel rooms,” Lane said. “I told her, ‘You’re going to pay in interest so much more than those free hotel rooms.’”

Another technique Lane uses is asking clients to set just one so-called buy day a month: all other days are window shopping, or more likely now, screen shopping.

“You can shop any day you want, go in person, take pictures, put things on Pinterest,” Lane said. “But there’s only one day a month where you’re actually allowed to make the purchase. If you have anything on the list that you haven’t thought of, then you don’t really want it.”

See related: How to stop overspending during the pandemic

Bottom line results

Lane has worked with clients with credit card debt up to $60,000 and total debt, counting student loans, up to $200,000. Most are in their 30s to early 40s and have $20,000-$30,000 in debt.

Many can get out of debt in about two years, she said. But these reforming spenders start feeling better about their financial life and life in general much earlier, Lane said.

“Generally after six weeks, they say a weight was lifted from their shoulders,” she said. “They say, ‘I’m running more. I have a better relationship with my girlfriend.’”

On average, their first year, clients at The Financial Gym see their credit scores go up more than 100 points, save $5,000 to $10,000, and pay off $5,000 to $10,000 in debt, Todd said.

How much does financial coaching cost? 

At The Financial Gym, coaching rates are about $99 a month for individuals, $150 a month for couples and $250 a month for business owners, Todd said.

Fees for accredited coaches and counselors range from $50 to $150 an hour, Wiggins said. Some coaches offer packages or work on a sliding scale based on income, she added.

See related: What is credit counseling, and how can it help you?

How to become a financial coach

To become a counselor accredited through AFCPE, students take one to three years to meet the education requirements and complete the exam, Wiggins said. The most common pathway is self-study with books and materials. This pathway’s cost is $1,455, including a $50 registration fee, $675 for books and materials, and a $730 exam.

To become a certified financial coach through Sage Financial Solutions, applicants complete three modules, which can be done in as little as six months, at the cost of $1,200 and about 30 hours for the first module, $550 and 15 hours and for the second module and $750 and 22 hours plus 100 experience hours for the third module.

The Financial Gym prepares its own coaches, which it calls trainers, with a two-week training session, then an interview with several team members, shadowing current trainers, creating mock financial plans and passing an exam with a score of 80 or higher, Todd said.

Back to lattes and lashes

Lane’s client still spends $200 every month on false eyelashes, which for her are nonnegotiable. But the client gave up her weekly fresh flowers, cut back on her dog walker and improved her financial picture from overspending her income by $200 a month to saving $1,000 a month, Lane said.

“Different people have different blind spots,” Lane said. “That’s an advantage of counseling; you get a really personalized look at your needs. We try to work toward their goals, not ours. Accountability without judgment is our superpower.”

“At the end of the day, it’s just math,” Todd said. “You have to be honest with me about what you’re willing to give up to get there.”

Case study: From $15,000 in credit card debt to zero

When Moira Sedgwick started working with a Financial Gym coach, her debt topped $250,000, with about $110,000 in student loans, $15,000 in credit card debt and a mortgage.

“The bad surprise was how much debt was staring at me,” said Sedgwick, 39, who works as the director of The James Beard (Culinary) Awards and also consults in hospitality and event management. “I had always been messy at all of this. This was a way to stop being messy and own my finances.”

Sedgwick already was paying extra on her student loans and was thinking about saving more for retirement, but her coach told her paying down debt, especially the high interest credit card debt, was the top priority.

The next bad surprise was putting a cap on her spending. “I had only $100 a week for my fun money,” she said. “I had been spending everything that was coming in. I’m in the restaurant world, so a lot of it was dining out. I would justify it by saying, ‘This is my industry. This is my job.’

“But no one on my job was reimbursing me. Cutting that out was a huge difference. I was getting real about how much eating out was really costing me and getting real about how much that was keeping me from my goals.”

She still does takeout on Fridays and Saturdays – that was her nonnegotiable.

Sedgwick, who didn’t have a lot of financial guidance growing up, said she feels like she has a partner to guide her decisions. “I finally have a support system,” she said.

A few years in, Sedgwick has cut her credit card debt to zero and cut her student loan debt by nearly half, and paid her mortgage down to $68,000. Her credit score has improved from a respectable 740 to a nearly perfect 800. She saved up $30,000 in her emergency fund but recently used about half to buy a rental property, a longtime goal. She talked to her financial trainer first.

“I talk to my trainer before I do anything,” she said. “That’s the only way I feel safe.”

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

What’s up next?

In Debt Management

Grocery shopping and COVID-19: What’s changed and how to save money

Amid product shortages and long lines to enter stores, consumers are adjusting to their new grocery shopping routines. Here’s how to make sure yours keeps you safe – and saves you money.

See more stories
Credit Card Rate Report
Business
14.22%
Airline
15.51%
Cash Back
16.10%
Reward
15.90%
Student
16.78%

Questions or comments?

Contact us

Editorial corrections policies

Learn more