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financial coaching v. financial counseling v. financial planning v. financial education

What is financial coaching? Is it the same as financial counseling or financial planning? Are those different from financial education?
It’s a pretty basic question of financial terminology, but an important one. After all, these terms – financial coaching, counseling, education and planning – are often used interchangeably.
The field identification guide helps clarify what service an organization or professional is delivering. It also helps potential clients understand what service to seek out. Someone who needs financial coaching but calls a financial planner won’t get the right help – and may only be frustrated by the interaction.
Of course, much of the fault lies in the interchangeability of terms used by organizations and professionals. Also, the paper does not tackle the various certifications, standards, licenses and accrediting organizations that define each role and title. Although the CFP designation is well known and understood, other titles like “financial coach” are used more generically and certification, training and experience can vary widely.financial coaching counseling education planning

Here’s how Money Habitudes is used in each scenario:

Financial Coaching:

  • Used to build rapport; a good way to make a first interaction feel less threatening.
  • Helps financial coaches understand clients’ financial habits, attitudes, values, behaviors and emotional triggers.
  • Allows clients to pinpoint their own strengths and challenges and identify changes they want to make; goal-setting
  • Used one-on-one or with couples.

Financial Education:

  • Used in financial class settings, often as a first full class or as an ice breaker activity as part of another class (on a topic like budgeting).
  • Done individually with class activities or group discussion after.
  • Often used as a lead-in to identify issues so people decide on other classes to attend (reducing debt, investing, etc.) or as a foundation for financial counseling or coaching.
  • Acts as a hook to get people to engage on the topic of money without the stress of dealing with numbers, how-much-you-make, examining expenses, etc., right away.
  • Sets a tone of engagement, fun, conversation and sharing in a class environment.

Financial Counseling:

  • Helps identify issues and establish rapport.
  • Helps client take ownership; decreases focus on prescriptive solutions to some degree
  • Get partners to start a non-threatening dialogue.

Financial Planning:

  • A good, non-threatening way to have a “getting to know you” conversation or as a supplement or other intake and discovery tools.
  • Serves as a method to understand investing styles, comfort zone, and to tailor plans to a client.
  • Also used to help couples align their financial goals.

Additionally, Money Habitudes is often used to train all of the above professions. It’s typically used to help people understand how different clients see and use money and to help people talk about habits and attitudes as opposed to just talking about skills and facts. It’s also used as a sensitivity training tool: to help people who are, for example, very comfortable with financial plans and numbers and spreadsheets to work with people who are not like them, but who have other strengths.

Emotional triggers and financial stress

financial stressFinancial stress is serious.  It was identified as the number one cause of stress in a 2009 study by the American Psychological Association. Financial stress is associated with increases in:

  • suicide attempts and suicide rates
  • physical illness
  • divorce rates
  • domestic violence
  • poor cognitive decisions.
  • (Financial stress is also associated with a decrease in productivity in the workplace.)

When people are in crisis, they may seek help and resources through community, military and faith-based programs.  The focus is often on addressing the immediate need for food, shelter, medical care and safety. But then what? People who have received help may then find themselves in a similar situation again even. This is true even if they had been lucky enough to receive training on financial management skills: how to budget, get out of debt, shop wisely and save. Knowledge, alone, may not be enough. Today there is more awareness that emotional money triggers have tremendous influence on our financial choices.
Recently there has been a lot of focus on understanding emotional triggers and how they influence financial behaviors. For example, a single mom works two jobs. She’s exhausted and feels guilty that a sitter is putting her kids to bed each night. She commits to saving $20 a week for an emergency fund. What are the emotional triggers that will sabotage her good intentions?

  • Will she slip because she spends impulsively and needs help with strategies to avoid or resist temptation?
  • Will she automatically give money to friends or family when they ask for help?  Then she may need to learn how to set priorities and say “no” or get some help with her fear of being rejected or hurt when she doesn’t please the person asking for the money.
  • Will she end up spending that money because her friends have different priorities and she doesn’t want to jeopardize her relationships by not joining them for a good time?  She may need counseling on self-esteem and speaking up.

Once we can help people identify their emotional triggers, we can help them find the right strategies to be prepared for the times their emotions will kick in. By helping them be prepared, they are more likely to be successful!
Money Habitudes cards will identify their emotional triggers and provide suggested activities if any Habitude is being overused.  The Professional Guide includes: (1) How to set SMART goals; (2) how to predict and overcome obstacles and (3) 67 Action Steps classified by the Habitudes they work for.

6 tips for Financial New Year’s Resolutions

Financial New Year's resolutionsOne of the top New Year’s resolutions is always improving one’s finances. Of course, we do a lot of thinking about how people relate to money so we wanted to share a few thoughts …

  1. Be specific with your financial New Year’s resolutions. Instead of, “I want to pay off my debt this year,” restate it to something like, “This year I’ll use $20 from each paycheck to pay off $1000 on my credit card bills.”
  2. Have a good, non-threatening conversation about money. Research shows that it’s the #1 issue causing stress in relationships. First, pick a time when you’re relaxed (maybe a nice dinner). Don’t talk about money if you are HALT: Hungry, Angry, Lonely, Tired. If the time is good, instead of talking numbers, try a conversation starter like, “What was the first big thing you bought with your own money?”
  3. Spend money on making memories, not just buying more stuff.  Happiness research has shown that spending money on experiences reduces stress and increases happiness more than purchasing things. So take a vacation, visit people you enjoy, take a painting class and be happy! Your kids and your parents will also likely cherish time spent having fun together more than another gift or gift card.
  4. Do something each day. You don’t need to make huge changes overnight with financial New Year’s resolutions. In fact, we often sabotage ourselves by making unrealistically big commitments to change. Focus on small changes you can make that will add up over the coming year. A good resource for ideas and motivation is the daily messages from Inspired Savings.
  5. Know where you are now. You’ll feel much more in control if you take an hour or two to know what you have and what you owe. Review your credit cards, bank accounts, investments, mortgage, 401k, insurance, etc. You may be surprised that you’re in better financial shape than you realized. You may also discover some easy ways you could cut back on spending that wasn’t obvious to you before.
  6. Check your credit report. It’s free, won’t hurt your credit score and might save you a lot of money! The official site for your free reports is: annualcreditreport.com. Look for any mistakes. Having inaccurate information on your credit report could lower your score and cost you a lot of money in higher interest rates if you apply for a loan, credit or insurance.

How to discuss money in a good way

It’s important to know how to discuss money. This is true if you are discussing money with a friend, sibling, parent, partner or spouse. It’s also important for professionals like financial planners, financial educators and therapists to be able to discuss money with clients and patients.

How NOT to discuss money

First of all, people often pick the wrong time and place to discuss money. The the money discussion doesn’t go well. That only reinforces the idea that it’s hard and not productive to discuss money. Here are some tips so you can avoid discussing money at the wrong time. Think about the acronym, HALT. Don’t discuss money if you are:

  • Hungry
  • Angry
  • Lonely
  • Tired

In the same vein, it’s not a good idea to talk about money when you spring it on someone. Instead of trying to discuss money with your spouse when you are upset about a charge on your joint credit card, put the issue aside for a bit until you are calm enough to talk about it.
comfy chairs help you discuss moneyAnd research has shown that your environment can have a big effect. In an experiment conducted by Sonya L. Britt and John E. Grable, professors at Kansas State, it was found that just installing comfy chairs or a sofa in a financial planner’s office improved the interaction by reducing financial planning clients’ stress levels. What’s the takeaway from this professional setting for those at home? Be comfortable. Think of the dynamics of sitting across from each other at a table, interrogation style, versus sitting next to each other on the couch.
Also, think about discussing money as walking up a set of stairs:
At the top of the stairs are money discussions that are big and serious and have the biggest chance of causing discord. This might be bringing up a prenuptial agreement. It might be getting your credit reports and going over them before getting married or buying a house.
At the bottom of the metaphorical staircase are money discussions that are much less charged and easier to have. Discussing money here might look like talking about the first purchase you remember making on your own. Was it a doll, a bike, a basketball, a car, etc.?

The first time you discuss money

Many people don’t discuss money until they have to discuss money. Think about the couple where one person manages all the finances and everything is going swimmingly … until someone loses his or her job. Then they have to discuss money and it’s a really stressful situation.
If you don’t talk about money unless there’s a problem, it’s easy to connect “talk about money” and “problems.” (That’s true too for a therapist, financial educator or financial planer who only talk about money when they need to “fix” something.)
Therefore, plan to progress through various levels of difficult money discussions over time. Start with the easiest conversations. And have those conversations at good, healthy, convenient times. Think about the different conversations that come out of setting up the conversation in these two ways:

  • “Let’s plan to share some of our early money memories over a nice dinner next week.”
  • “We need to talk about our finances tonight!”

Although Money Habitudes was specially designed to get people to discuss money in a good way, here are a few low-risk money conversation starters that you can also use:

  • Remember the first time you bought something with your own money? What did you buy? How did you get the money?
  • What was your first job and what did you do with your money?
  • What did you learn from your religion about money?
  • Growing up, how was money talked about in your home? Who paid the bills? How were big financial decisions made?
  • How would you know when your parents disagreed about money?

Even with low-risk money conversation starters and a good environment, it’s still good to start a money discussion by acknowledging to your partner that talking about money can feel awkward, but it builds trust and lays a stronger foundation for your relationship.
Finally, it’s good to get into a practice where you discuss money on a regular basis. It doesn’t have to be weekly. Think about having a check-in every quarter or every six months.

How understanding your money personality helps you discuss money

It can be hard for someone to discuss money because you bring your own biases, values and attitudes to the discussion. For example:

  • buying habits - money discussionIf you grew up in a family that was very generous, you may have a strong belief that one should use money to help others. If you are discussing money with someone who doesn’t feel the same way, it can cause problems. You may think that your friend, partner, spouse, etc. is cheap or uncaring about others. That person may think you are irresponsible and unrealistic when it comes to providing for yourself and your family. Those feelings can easily boil over into offensive and hurtful words that make it hard to have a productive conversation about money. Imagine how hard it is to recover from a money conversation that starts with, “You’re so irresponsible! All you ever do with your money is give it to your brother who never seems to be bale to hold a job! And you’re always pending our money on gifts for other people and then we have to do without!”
  • If you are very good at not spending money it can be hard to discuss money with someone who finds it easy – too easy, you might think – to part with money. It’s easy for people to label money behaviors different than their own as being “cheap” or a “spendthrift” and having a money discussion devolve into a money fight.

How Money Habitudes helps you discuss money

Money Habitudes was designed to help people discuss money. It looks and feels like a money game but offers serious results. It is one part money conversation starter and one part money personality test.

  • First, as an activity, it gives people an excuse and a framework to talk about money. It is easier to say, “let’s do this conversation starter game” versus a more open-ended, “let’s sit down and just discuss money.”
  • Second, it helps start conversations around money. Each of the 54 statement sorting cards acts as its own non-threatening ice breaker statement.
  • Third, it helps people understand their own money personality – and that of the person with whom you want to discuss money. If you know where you’re coming from, it makes it easier to listen, be less judgmental and understand your own tendencies, attitudes, and financial biases.
  • Fourth, it gives people non-threatening, non-judgmental language to use when they discuss money. It’s easier to talk in terms of, “Oh, I see how us spending that money would affect your need for security,” versus, “Why are you always so cheap whenever we need to spend any money?”

Resources for professionals to discuss money better

Even professionals who discuss money all the time can still have trouble with the conversation. For example, it’s not uncommon for a financial planner or financial educator to jump right to discussing dollars as soon as someone steps into their office or classroom. No doubt you’ll have to talk about money and you’ll even probably do a budget. But left-brained, “numbers people” can forget the basic step of getting to know a client or student and get to know him or her. It’s harder to get to know people in a group or class, but it’s still an important step to let people work up to the numbers part.
bringing money into the conversationThink about how socially off-putting it would be if you met someone at a party and the first thing you asked was “How much money do you make and what are your expenses?” Just because you’re in a financial office or classroom only soften that blow a little. And handing someone a budget worksheet when he or she walks in is basically asking that same question in a different form. Ease into the money discussion.
Also, we recommend three resources to help people discuss money:

  • The Guide for Couples offers some more guidance and structure for couples doing the Money Habitudes activity on their own.
  • The Guide for Professionals is a companion to using the Money Habitudes cards in professional settings.
  • Bringing Money Into the Conversation is a guide about how to talk about money that only briefly mentions Money Habitudes. It is an aggregation of tips, conversation starters, activities and methodologies for professionals to have good money discussions. It’s geared for therapists and counselors.

How to talk about money: tips & advice

How to talk about money? Because it’s so difficult to talk about money, people often don’t talk about it. After all, it’s often said that people find it easier to talk about sex rather than talk about money.

Tips about how to talk about money

how to talk about moneyOne of the big challenges is that people rarely talk about money until they have to talk about money! So, for example, a couple may be married for 10 years and don’t talk about money – but then when someone loses a job, the sudden change in income requires talking about money. Or imagine the couple that will not talk about money day-to-day but then gets into an argument when the credit card bill comes. Or, consider a couple that’s getting married and their first real talk about money is when one wants a small, frugal wedding and the other wants a lavish affair. In such cases, talking about money isn’t easy and enjoyable. Instead, people make the association that it is frustrating, embarrassing or threatening to talk about money. As a result, people often come to this conclusion: If talking about money feels bad, then I’m best to not talk about money.
Therefore, when thinking about how to talk about money, a secret is to start off with easy, non-threatening, small conversations about money. By contrast, here are some big money conversations:

  • How will we ever save enough for retirement?
  • How should I structure my will?
  • How will we combine our finances when we’re married?
  • Can I pay for my child’s education?
  • Why won’t my spouse keep to his/her money promises?

It’s not that you should avoid these money conversations. But if you aren’t in the habit of having good conversations about money, it can be jolting to start with such big money questions. Similarly, dating or re-marriage articles will often suggest that you talk about money early in a new relationship. While that may indeed be good advice, it can feel weird, uncomfortable and accusatory to have someone demand to see your credit report or ask how much you have in the bank or how much you make. Even when presented in a very careful manner, these money questions can seem threatening. When people feel threatened, they tend to have fight or flight reactions. That’s not good for conversation.
Another hallmark of these big money questions is that they often quickly become conversations about numbers. Of course, when you talk about money, it’s hard to not talk about numbers. However, the figures can usually wait a bit. Also, many people lack the financial expertise required to address the numbers correctly; and lack of confidence, competence or knowledge is a good recipe for a money conversation that goes off the tracks and isn’t enjoyable. In general, build the interpersonal relationship, rapport and trust before doing the spreadsheet.
In addition, many of these questions have answers that are right or wrong – or there is an implied right and wrong. If you start by focusing on the fact that you need to save $1000 a month, it can seem overwhelming and frustrating. Or, if you think your husband or wife (or child or business partner, etc.) is spending foolishly, leading with that probably won’t lead to a productive money conversation. Would you want to talk about money with someone who begins by saying, “You’re really stupid and irresponsible with money”?
Instead, try starting a money conversation with sharing formative experiences. But, first, make sure you’re giving yourself environmental advantages to have a good money talk.

How to talk about money: setting the scene

This seems self-evident, but try to talk about money when you’re not already feeling down. Those cases are sometimes grouped together by the abbreviation HALT. In other words, you shouldn’t talk about money (or other serious topics) and expect great results when you are:

  • Hungry. Even when we’re no longer toddlers, we get cranky when we need food. Imagine you’ve been running around and haven’t eaten all day and then walk in the door and your spouse confronts you about a charge you made on the credit card; even innocuous money questions can turn into conflagrations on an empty stomach.
  • Angry. Consider that you got assigned an impossible deadline right before leaving work, then sat in traffic for an hour before arriving home. Then you’re asked whether you’ve paid the mortgage. Probably not the best moment to talk about money. Unfortunately, if you have a history of unsuccessful money talks, there can be built in anger or resentment that’s triggered when money comes up.
  • Lonely. In this case, one feels bad or drained because of a lack of attention, companionship, etc.
  • Tired. Again, even adults are subject to feeling bad and making poor decisions when operating with a lack of sleep.

Is there a perfect environment or a perfect time to talk about money? No. However, if you avoid these HALT times, you give yourself an advantage. Some tips about picking a good time and place to talk about money:

  • Plan ahead. It’s easier to say, “Let’s have this conversation on Thursday night” than “We need to talk about money right now!!!” Surprises are usually bad when it comes to talking about money.
  • Talk over food. A better conversation may happen over a nice meal, or coffee or a glass of wine. Some couples plan a regular financial check-in date night every 3-6 months and incentivize themselves with a nice dinner or dessert.
  • Be comfortable. Research shows that financial planners have better conversations about money when they simply have more comfortable chairs in their office.
  • Finally, start by acknowledging that talking about money can feel awkward. However it builds trust and lays a stronger foundation for your relationship.

How to talk about money: what to talk about

When thinking about “how to talk about money” realize that you have to crawl before you can walk before you can run. The first conversations will seem very basic. However, they are meant to be non-threatening. They are meant to build trust. It helps if you can first prove that you can talk about money and that conversation can be ok. This is true for a couple talking about money at home or a financial planner meeting with clients or a therapist meeting with clients. While it may be practical to start immediately with “Let’s fill out this form with all of your assets and income,” better results come when people feel they relate to each other on a personal level and have a real conversation as opposed to just talking numbers.
Here are a few money conversation starters to try:

  • Remember the first time you bought something with your own money? What did you buy? How did you get the money?
  • What was your first job and what did you do with your money?
  • What did you learn from your religion about money?
  • Growing up, how was money talked about in your home? Who paid the bills? How were big financial decisions made?
  • How would you know when your parents disagreed about money?

The goal here is largely to have a money conversation that goes well, feels calm, and leaves a good taste in your mouth. Secondly, you should come away with a deeper understanding of the other person with whom you’re talking about money. This may be a spouse, a financial planning client or a counseling client. You’re giving the other person a chance to open up and talk about money where there is no right or wrong. One of the main reasons people don’t like to talk about money is because those conversations often feel so judgmental: “I’m bad with money.” “You’re irresponsible.” “I’m right. You’re wrong.” The conversation starters above are meant to get people away from right/wrong answers and start a dialogue. If you see that someone never had much money growing up and always felt it was important to hold on to money, it can change the nature of the conversation from “You’re so cheap and tightfisted,” to “I understand why you don’t want to spend that money.”

How to talk about money: using Money Habitudes

Money Habitudes - money personality testOf course a great way to talk about money is to use a tool specifically designed to generate money conversations. Money Habitudes is one part financial personality test and one part money conversation starter. Still, using the tool feels like playing a card game. It’s designed to be non-threatening and easy-to-understand.
Again, if you’re going to use the cards in addition to or in place of the conversation starter questions above, remember to give yourself the advantage of a good environment. Don’t start using the game when you’re Hungry-Angry-Lonely-Tired and do it in a space that’s comfortable. That’s true if you’re using the cards at home or using them in an office environment (or classroom) with clients.
What people like about the cards over just spoken money conversation prompts is:

  • They provide a framework or an excuse to talk about money. It can often be easier to say, “Let’s try out this game” versus “Let’s talk about money.” That’s a simple but important distinction.
  • The cards are hands-on and tactile. Many money conversations can quickly take on an interrogation tone where one person is asking questions and the other person is answering them. (That’s especially true of financial professionals and therapists.) Using the cards is more participatory. Therapists note that it gives some of the power to the client to do something versus sit and answer questions.
  • The hands-on format also gets people to relax. It feels like a social card game and not a test or an interview.
  • Between the 54 statement cards in each deck, one’s money personality results and interpretation cards, there are many, many conversation starters. Conversation usually flows naturally from people’s curiosity to understand themselves and their results, as well a the results of the person or people with whom they’re doing the activity.
  • Because of the nature of the statements and the interpretation process, much of the conversation starter questions above come up, but more subtlety. Instead of asking how someone’s parents used money, the person doing the Money Habitudes activity may see his or her results and volunteer a comment like, “Wow, I’d never thought how much my mother’s saving nature affected the way I’d relate to money as an adult.”
  • The cards often prompt storytelling and sharing – real conversation – versus simple question-and-answer.

Couples who use Money Habitudes cards have remarked that it’s sparked the best conversation about money they’ve ever had. That’s true for couples who are still dating, engaged or newly married – as well as those who’ve been married for decades. Professionals who use the cards find that they start a different kind of conversation that quickly builds trust, rapport and understanding. It’s a far different process than just sitting behind a desk and asking money questions or asking someone to fill in intake forms with lots of numbers.

Psychology of Money – Money Personality

The psychology of money can be hard to understand. Why do we spend the way we spend? Why do we save? Why might two siblings see money so differently? What do you think about money? How do you feel about money?

What influences the psychology of money?

Although it’s a big topic, Money Habitudes makes the psychology of money easy to understand – for professionals (therapists, financial planners) and for laypeople. Money Habitudes feels like a fun card game. However it is actually a structured conversation starter and a money personality test in one. The assessment cards explain the psychology of money in terms of one’s money personality. It is a practical, applied use of the psychology of money.
Money Habitudes helps people see what influences the way they see money. Typical money psychology influences include:

  • family - psychology of moneyCulture (including religion)
  • Parents and influential people; family of origin
  • Media
  • Personal experiences

People rarely think about their own money psychology. Therefore, it can be a breakthrough to understand why they see money the way they do. While this is true for individuals and couples, it’s especially true for people whose work touches on the psychology of money: therapists and mental health providers, financial planners, financial educators, life planners, and money coaches.

Implications of money psychology

brain - psychology of moneyUnderstanding the psychology of money is not only about understanding formative factors, but also how this affects one’s life today. The Money Habitudes money personality test clarifies one’s:

  • money habits
  • money attitudes
  • money values
  • financial behaviors

This is important because so many of the issues around money deal with behavior change: How to save more money? How to spend less money? How to not fight about money?
When one understands money psychology, it opens the door to positive behavior change.