A Real Life Coaching Session
What you might expect if you decide to work with a financial coach
Last week, I met with Jennifer O., who is 56 and would like to retire sooner rather than later. Jennifer is a fellow author here on Substack and we thought it might be fun to collaborate, so we agreed in advance that we would each write about our session together from our perspectives as coach and client.
As a coach, I take a client-centered perspective. I see my role as helping the client articulate and explore their goals, and then brainstorming with the client to create their step-by-step plan to reach their goals. I have my area of expertise, and the client is the expert on the client—their values, their goals, their financial and other resources, what they are open/not open to doing.
Jennifer had two goals for our time together, for us to look at her numbers together and to get my thoughts on a couple of financial decisions.
First we looked at the numbers—I had previously sent Jennifer a copy of my Money Forecasting tool that I like to use with clients to get an overview of their cashflow. While she called it a budget, I don’t think of it in those terms. Cashflow is simply the money you have coming into and going out of your checking account every pay period.
The money forecast tool allows you see and project into the future just how much money is scheduled to be paid into your checking account over a roughly 2 week period and then what bills and expenses will need to be paid during that time frame. Pay periods vary across people—some people get 2x a month, others every 2 weeks, and some people have additional sources of income.
It also looks forward in time, not backwards as many budgeting tools do. What I like about money forecasting is that it feels more realistic to me—it reflect the actual money coming in and going out of my account and is linked to specific dates. Budgets have always seemed to me somewhat idealized, and looking back at what you already spent has limited utility. You can’t change the past. And all of us are making the best decisions we can with the resources available to us at the time.
Also, when we look back at our past spending, most of us tend to have our inner critic start mouthing off. Forecasting prevents that from happening. I’ve never found shame to be a useful motivational tool. I’d rather look at the here and now, and plan out together where you want your money to go as you move forward. A forecast means being intentional with your spending.
From my perspective as a coach, your cashflow is the starting point. An accurate picture of your essential, ‘keep the lights on’ expenses is critical. No matter what your goal is, whatever is left after essential expenses have been paid is how much money you have available every pay period to put toward these things:
Money that makes life more enjoyable now
Longer term goals for future you/your family
Debt repayment
Emergency savings
Retirement savings and investing
Short-term savings for planned but irregular expenses
Jennifer’s numbers
Jennifer earns an above average income, and is contributing aggressively to her tax-advantaged benefit accounts at work, including an HSA and long-term care insurance. Her housing cost takes about 61% of her take-home pay. Including HOA fees, utilities, transportation and gas, her essential expenses are taking about 75% of her paycheck. That’s not necessarily bad, it just means she has less money to put toward those other things. If housing is where she is choosing to spend, that’s cool. If she has other goals she wants to pursue, then it’s a limitation.
She also has multiple debts she is repaying. About a third of that is a 401(k) loan, where she is paying interest to herself. Another third is on two 0% balance transfer cards, with slightly different time limits on the 0% interest. The last third is some credit card debt shared with a family member. She also has some large expenses coming up this fall in conjunction with a family event. While she does have some additional income from bonuses at work, plus a side business, this income is less predictable. It’s a complex picture with multiple moving parts.
One issue we discussed is that her housing cost is high, and is limiting the amount of money available for other purposes. Ideally I like to see all essential expenses coming in under 50% of take home pay but with everything currently being so much more expensive, I think 60% is realistic, with the other 40% going toward saving, debt, and fun in whatever proportions a client wishes.
Jennifer is aware that her expenses are taking up a lot of her take home income and is looking for ways to reduce her housing cost, for example, seeking someone to rent a spare bedroom/bath suite. She also just cancelled a number of subscriptions too, which will free up a little more money every month. She has some resources available to work with—not only her income but also her positive attitude and determination. Just before I finished editing this, she updated me that she was able to secure two new consulting gigs that will pay off a big chunk of that remaining debt.
Next steps
Going forward, I would like to look at her total financial picture, so we can build a savings and debt repayment plan that can work within her money forecast. While a lot of personal finance journalism focuses on only goal at a time, my experience is that many people work toward multiple goals at the same time. For example, it’s possible to build savings while you are paying down debt. It’s always important to allow for some money to make life more enjoyable now—otherwise, people are more likely to feel deprived and then rebound spend more than they can afford in that area.
I encourage people to build a buffer of savings while paying down debt. Having some kind of buffer is key for being able to handle an unexpected expense without using a credit card. You don’t have to build it all at once. Just setting up an automatic transfer of $10-$20 from checking to savings every paycheck will start to add up, and you can increase the amount over time as you get comfortable. When an expense comes up, you just transfer the amount from savings back to checking. That step alone can help relieve a lot of financial stress and anxiety.
During coaching sessions, we may also take a look at a client’s beliefs and attitudes about money. We all inherit these from our families, from noticing how our family talks about money, and what they do in terms of saving and spending. These are often unconscious, and we are unaware of them until we bump into someone with different beliefs and attitudes. Simply bringing these into conscious awareness can go a long way toward considering whether they are still serving us.
Jennifer and I are planning to meet one more time. We’ll see how the forecasting tool is working for her and what needs tweaking, where the debt stands currently, and maybe get into some beliefs around money.
I hope this post is useful for anyone who might be considering working with a financial coach. It can save you time, potentially save you money, and it can actually be fun, not to mention increasing your sense of self-efficacy with money. I have a a broad referral network, and am happy to connect you with an experienced financial counselor. I have a limited number of openings for new clients, and I especially like to work with women who are ready to change their relationship with money and start building wealth. Schedule a complimentary discovery call with me and let’s see if we’re a good fit.