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Building Wealth through Saving and Investing

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Common Q & A about Financial Coaching





I started coaching in a kind of unconventional way. A number of my friends knew I had an interest and a passion for personal finance and began to ask me for advice. Most of the advice they needed was extremely basic even though these were teachers, executives, and other well educated people.

When no one taught them about banking, saving, how much to save for retirement, how to live below their means, how much to spend on a house, etc, etc they just did what everyone else around them did. They used credit cards and lines of credit and got themselves in over their heads in debt.

When I would sit down with them to ‘do the math’ they would be shocked at how much they were spending on interest and misc bank fees and credit card fees. With a few tweaks (changing their cell phone plans, canceling extra cable packages, quitting the gym they never went to, switching to a no fee credit card, canceling credit card balance insurance and other miscellaneous useless fees) they were able to free up money to begin their emergency fund and begin investing once the emergency fund was full.

Then I found out about http://www.crown.org/ and while I don’t agree with some of their advice, they do provide certification and training for volunteer (non-professional) coaches. We never sell students anything or talk about specific investments. We can refer them to a professional for this type of help. Most of what we do is walk them through the steps, very similar to the steps outlines in Dave Ramsey’s Total Money Makeover (an excellent beginner book if you haven’t read it!).

People like the accountability and find it motivating. They often need a bit of tweaking in their finances or just someone to talk to about something they’ve never shared with anyone. Most of the people I work with are either referred through friends or referred through the church who provided the training. I get everything from newlyweds wanting to start out right to executives (usually women or couples).

Many are heavily in debt and just need some advice on how to start paying the debt off. Some have more money than they know what to do with and just needed some advice on how much to spend on a mortgage and what percentage to put away for retirement.

Basically I encourage them and walk them through the steps.

  1. $1000 emergency fund.
  2. Have an up to date will.
  3. Have enough term life insurance.
  4. Pay off all debt except for the mortgage.
  5. 3-6 months fully funded emergency fund.
  6. 15% pre-tax income automatically going for retirement (either through TFSA or RRSPs depending on their income).
  7. RESPs for their kids if they have kids and hope to help with their education.
  8. Pay off the house.
  9. Live debt free! This frees them up to invest more, give more, buy real estate and live the life of their dreams however they see that carried out.

I give homework every time .. getting them to figure out their net worth, lists of debts and how much is owed plus interest rates for each debt as well as a list of all of their monthly expenses.

I also have them begin writing down EVERYTHING they spend for the whole time we meet. (I usually meet with them once a month for 6 months and then how often they like after that). Each month they need to show me their updated spread sheets. As they watch their net worth going up and their debts going down, they are often highly motivated to keep working at it.

I really try to encourage them along the way and make myself available through e-mail for any questions they have throughout the month. As they write it all down, we continue to tweak things that they can change.

I had one person who was spending $5 every day on diet coke and a chocolate bar the gas station across the street from her work. When I suggested she buy a case of diet coke and a pack of chocolate bars from the grocery store and keep them in the fridge at work, she had never thought of that and began saving nearly $4 a day .. and not changing her daily snack at all!

Almost everyone I’ve worked with pay huge amounts of bank fees. One person had 4 accounts with different banks all with monthly fees over $12.95 a month. She just thought this was normal. Once we got her switched to PC Financial and canceled all her other accounts, she had nearly $50 a month extra to pay off her debt with. She was pretty happy!

Editors Note:  As described in Kathryn’s profile below, she volunteers as a financial coach.  Question for personal finance beginners – Would you be willing to pay for basic financial coaching/education?

Kathryn works in public relations and training for a non profit. In her off hours, she volunteers as a financial coach helping ordinary Canadians with the basics of money management. Her passions include personal finance and adult education. Kathryn, along with her husband and two children live in Ontario.





26 Comments, Comment or Ping

  1. Great post Kathryn. Question for you, if you were to pick your favorite frugal strategy, what would it be?

  2. Love the idea of a financial coach, But the ministries thing, you got to be kidding me.

  3. 3. Kathryn

    FT: Hard to pick just one. I would say for the average Canadian it’s to stop paying bank fees. Most people reading here get that but millions of ordinary Canadians just thing bank fees are normal.

    Daniel: I know and I agree. I was hesitant to even bring it up which is why I mentioned there was a lot I didn’t agree with it. It did provide good training for case study scenarios. If anyone else knows any other training for non-professional coaches, please let me know. I’ll love to refer people to it!

  4. 4. Tim Landry

    Great start – but I wanted to scream when I saw one comment that was there – Have enough term life insurance (no disagreement with that) and one that was NOT – no mention of have proper disability insurance. Just a couple of comments – I will not argue that the death of a bread winner – of a loved one – is horrible for all involved BUT A DISABILITY IS WORSE. With death you have one less mouth to feed – with disability your costs go UP – not down. We have a 3% chance of dying before age 65 vs a 16% chance of being disabled for 90 days or more prior to age 65 – and if that disability goes beyond 90 days the average duration is just under 5 years. How well will you live after your 6 month emergency fund is exhausted? We can no longer count on group insurance – companies must cut costs to be competitive and this is one area where costs can be cut. PRIVATE DISABILITY INSURANCE IS THE FLOOR FOR ANY FINANCIAL PLAN. This is how you guarantee the income will be there to meet your objectives

  5. 5. Kathryn

    Tim: Very valid point. I’ll add this in, in the future. Many of the people I’ve met with are offered it through where they work but I need to follow up more and make sure everyone has adequate disability insurance. You are right on the mark.

  6. 6. Mark in Nepean

    Good post!

    Although I’m somewhat concerned that many “well educated” people don’t have any financial basics. They don’t know or even understand what they pay in banking fees? yikes…

    All in all, sounds like you are providing a good service Kathyrn.

    Given the coaching you provide to others, a have a question for you and others here if they want to chime-in:

    What financial advice do you give, that YOU wish you would take more often?

  7. 7. Kathryn

    Mark: That is such a good question: What financial advice do I give that I wish I could take more often?

    For people with a variable income, I highly recommend 6-9 months emergency fund. Our income is variable and our EF is at 3 months and has been for months. I know I would sleep better if I got it back to six but in the last year we had a car purchase and to avoid going into debt we dipped into the emergency fund after we emptied the ‘car savings’ fund.

    Anyone else not taking their own advice as well as they’d like?

  8. Thanks for volunteering to improve basic financial literacy, Kathryn.

    Your points seem “obvious” yet they clearly aren’t based on your experience. Since we learn about finances while growing up, there must be
    (a) poor teachers
    (b) poor students
    (c) all of the above

    I wonder whether Canadians are saving for retirement adequately (#6).

  9. Volunteering as a financial coach would be an exciting job, but not without potential legal situations – disclaimers everywhere!:) In light of Jon Chevreau’s recent post about diversifying among money managers, seems a good idea to have a financial coach, too – someone totally removed from managing your money.

  10. 10. Tim Landry

    I am NOT a coach but I am a STRONG supporter of the concept. Most of us fall into two groups – one group is quite good at whatever it is we do but somewhat to the exclusion of other issues – finances among them. Others include “finances” (at least their own) in their area of “excellence”. The first group would obviously benefit from a financial coach and the idea of getting a “second opinion” from a neutral source seems excellent to me. As a general rule, I support the idea of coaching in every important area of our lives – because we have so many distractions today and life is so much more complex than it was a mere 20 years ago

  11. 11. Kathryn

    MoneyEnergy: Good point about disclaimers everywhere.

    As I meet with people I repeatedly explain that I am just a coach, that I can give them suggestions and help them find answers but the decisions are ultimately up to them to make. When it comes to investing we refer them to a professional.

    Tim: This is so true. The people I meet with are surprisingly brilliant in their area of expertise and are somewhat embarrassed at their lack of knowledge. One top notch teacher with 15 years experience teaching challenging students recently e-mailed me with this question.

    _______________________

    What is a GIC and is it something I want to purchase? If so, how many? Why are they good and/or bad? My brother has them and claims I should too, but when I asked why all I heard was “blah, blah, blah”

    ______________________

    My role as a coach is to explain the basics while respecting that the questions are coming from extremely bright people with very little financial knowledge.

  12. 12. Tim Landry

    I have actually had a nurse who worked full time in a hospital tell me that she had never known anyone to be disabled. She actually felt that if you could leave the hospital you were not disabled.

  13. 13. Tim Landry

    I am going to split this into two parts because I have tried to post it twice without success.
    Recognizing the all important issue of “budget” for all normal human beings, why would someone purchase individual Disability Insurance when they have a Group Plan in place? Tw key reasons – forgetting the whole issue that individual policies are more generous in their terminology. (1) as an employee we can probably get a better occupational classification – read better terminolgy and a lower price – than we will be able to obtain in our first years of self-employment plus we are younger and healthier. (2) “Employment” has changed since my father’s time. He went to work for Bell Canada in the late 30′s and retired in the eary 70′s – his only other employer was the Royal Canadian Navy during WW II. Things are not like that any more

  14. 14. Christine

    Hi Kathryn – great post.

    I am looking to get certified as a Financial Coach – I agree with the disclaimers comment – however, I’m hoping I won’t be dishing out advice that is going to get people into a lot of trouble where they would need to make a claim against me.

    However, that’s why I would like to get certified, than I can feel like I have a backing and solid education and can be confident in my suggestions to others.

    Also – I do not plan to sell anything (except perhaps my services) but no ‘investments’.

    Anyways – I am looking into the OACCS – http://www.oaccs.com

    I talked to the admin this morning and it seems like a great program.

    Christine

  15. 15. cannon_fodder

    Kathryn,

    Do you find when discussing the costs of credit card “loans” (which is a great way to think of it rather than carrying a balance) or not packing a lunch, do you often have to aggregate the costs over a year before people understand how detrimental it is?

    I think of young people who use anyone’s ATM to grab a quick $20 or $40 and pay $2 or more in total fees. They probably just think that it is $2 here or there and maybe totals $75 for the year. So, aggregating that cost might not hit home. But reflect it as a percent of the money – you are giving the banks 5% or even 10% of your money when they don’t give you 0.25% on a $1,000 in your chequing account MIGHT strike a note.

    How much did it cost you to become certified?

  16. Kathryn,

    At what age would you advise a person should have a will?

  17. 17. Kathryn

    Ms Save Money: Good question. If they have assets or dependents, I’d say any age. The youngest person I’ve coached was in their early 20s.

    Others?

  18. 18. Arti

    Hi Kathryn,

    I’ve been looking for a financial coach for a few months now and was wondering if I could work with you (for a fee, of course).

    I’ve looked all over this blog for a contact email id for you but cannot find one.

    Can you please send me an email, if this is something you’re willing to help me with?

    If not, could you please recommend someone who can help us?

    My partner and I make a good living together but need to start planning our retirement and a way to pay off our mortgage and her student loans quickly.

    We also have no clue about how to invest and so most of our savings are languishing in pitiful low interest savings accounts.

    Thanks in advance.

  19. Kathryn,

    That’s a good article. I have found it tough however to offer financial advice to friends/relatives who are having financial difficulties. They simply get defensive and irritable. How would you approach such a situation where it seems to me that they don’t want to admit they have a problem.

  20. 20. Tim Landry

    A comment from the outside (BUT I have been in the financial services business for 40 years) – personal connections make it very difficult for a relative to admit to a problem and to accept advice from somene close. This is a HUGE part of my reason for supporting the “coach” concept. It is almost identical to a medical situation. Generally it is NOT a good idea for a doctor to treat a relative – and most certainly NOT him (or her) self

  21. 21. Kathryn

    Blogging Banks: I would never bring the topic up if I thought a friend needed help. I like talking about personal finance so they sometimes as me questions. Now, friends know I coach and will often ask for help / suggestions. I’m very non-judgmental and encouraging so people generally feel comfortable talking about their finances with me.

    I don’t coach family. I referred someone in my family to someone else when they asked.

    It helps when I open up about my own struggles with weight loss and having to use a weight loss coach to reach my weight loss goal. I just stress that we each have our own strengths and I’m happy to help out in whatever way they’d like. People tend to open up more as the trust builds from session to session and I am open with them about my struggles an areas where I needed improvement / tweaking.

  22. 22. Kathryn

    Arti:

    I was away for a few days and missed your post. You didn’t leave an e-mail. I can always be reached at kathrynthecanadian@gmail.com I should probably include that as part of my biographical information.

    Cannon_fodder:
    I missed your post too. I liked how you explained the total cost of the credit card loan. I often try to find ways to simplify the math for people so the impact of their total purchase is crystal clear. I had someone else who was ‘renting’ a laptop with a 3 year contract at $100 a month. This was a cheap $600 laptop. She’d never done the math on it. When I showed her what the total amount was over 3 years she was shocked.

    My costs for certification were covered because I was a volunteer. I’m finding Christine’s suggestion tempting but can’t justify the $1000 when there isn’t much of a market to make money off it. Ideally an employer who saw the value in such a certification might pick up the tab.

  23. 23. cannon_fodder

    Kathryn,

    Do you have to (or feel the need to) go back for ‘refresher’ training? Or, because you are dealing not at a very granular level, the fundamentals of what you are teaching don’t change thus allowing you to still be relevant years later?

  24. 24. Kathryn

    cannon_fodder

    I don’t feel the need for a refresher. I read about personal finance constantly and keep up to date as much as possible. I have a small fear that one day on the verge of being offered a dream job of working as a financial coach for employees of a large corporation, having a more ‘official’ designation / certification may be required. At this point I can’t justify the expense of the official designation but I’m tempted by it.

  25. Kathryn,

    Would you consider writing a series of articles that are aimed at the younger demographic just entering into the world of work, credit cards, bank accounts, etc.?

    I’m just starting to have conversations with my teenage daughters but I’m doing it ad hoc and haphazardly. Materials I’ve seen before are geared for very small children or adults. And, I know that I have to do this face-to-face – pointing them towards websites and books won’t work.

    If that is not possible, do you have any particular resources that would help me achieve my goal?

  26. 26. Kathryn

    CF: You are absolutely right. The young adult / teen years are the most crucial when it comes to financial literacy and yet there aren’t a lot of good resources out there geared towards that age. I’d be happy to include articles that cover some of the issues young adults face.

    I will continue to keep my eye out for other resources geared towards that demographic.

    If personal finance becomes mandatory for high school, I’ll be the first in line to apply for teacher’s college!

  27. 27. Shaf

    Here are some other ways to save money:

    1. Switch to VOIP. I was paying over $30 a month with Bell for basic phone service with no features at all. I switched over to Freephoneline.ca and Voip.ms. I pay $0 (yes ZERO) for my phone line and use Voip.ms for long distance.

    2. Ditch your cable service and move to OTA (Over the Air) antenna. You get free HD (legally) and don’t have to pay for cable.

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