When I first started working as a financial coach, many people would mistake me for a financial advisor or financial planner. They thought I was someone who would help them learn how to invest their money for retirement.
And while financial advisors and financial planners are dear colleagues of mine and are very talented professionals, my work is very clearly in a different space where I’m helping people with their budgeting and money management skills so that they can focus on getting out of debt and saving money with the hope of building a financial plan to support their goals.
So in order to help people better understand what I did (and what I didn’t do), I created what I like to call “The Financial Health Spectrum™” which includes the 3 phases of Build, Protect, and Grow your financial assets. These 3 phases simply reflect different levels of financial health, and while none of the phases are “bad” there is an increasing level of financial health as you move from the “Build” phase through to the “Grow” phase. In helping people to understand what type of financial support they need, I encourage people to take a few minutes to assess where they fall on this spectrum so that they can properly identify which financial expert can help them with their goals and with improving their level of financial health.
In order to help you determine where you might fall on the Financial Health Spectrum™, let me explain each phase a bit further along with the respective professionals that you might want to connect with:
1) Build phase – This phase is typically where the 70% of people living paycheck to paycheck who are feeling out of control when it comes to their finances will land. When building your financial assets, you’ll be looking to do such things as establish a budget (or what I like to call a “savings and spending plan” because budget is such a restrictive word), develop more proactive money management skills, get out of debt, and save more money. To me, this phase is about improving your financial stability and strengthening and repairing your financial foundation so that in the future you can grow your financial assets. In this phase, you might look to work with someone who can help you increase your income, decrease your expenses, or perhaps do both! This is the phase where I work with my clients, and some other colleagues who can help you in this phase include CPAs, money mindset coaches (to help you understand if you have money beliefs that are holding you back in some way), and salary negotiation coaches (so that you can maximize your earnings).
2) Protect phase – This phase is generally exemplified by wanting to either insure assets (property and casualty insurance, life insurance, health insurance, disability insurance, or long-term care insurance) or planning to have your wishes known about what to do with your assets in case anything happens to you. Experts in this phase include licensed insurance professionals who can help you determine the right type and amount of insurance that you need and estate planning attorneys who can help you with drafting all necessary legal documents such as wills, trusts, family planning/guardianship paperwork, health care directives and proxies, and also Medicare/Medicaid paperwork.
3) Grow phase – At the end of the spectrum, once you’ve strengthened your financial foundation and protected the financial assets that you do have, you’ll also want to think about putting your money to work for you and growing it through investments and other financial vehicles (i.e. annuities, etc.). The financial professional you’ll want to consider in this phase is a financial advisor or financial planner who will take the time to understand your future financial objectives and design a plan customized just for you to grow your money over time to achieve your goals.
As mentioned before, there is no “right” or “wrong” phase to be in, these phases are simply an opportunity for you to recognize where you’re at right now and determine the next steps that you’d like to take for yourselves to improve your financial health. I also encourage people to think about moving along the spectrum as a longer-term process since strengthening your financial foundation and building financial independence is often a multi-faceted journey that takes place over time and with attention to progress (and not perfection). It is also important to note that you may be in more than one phase at the same time (i.e. saving for retirement while looking to more proactively manage your monthly cash flow and put the proper legal paperwork in place).
So if you’re ready to get more information on how you can assess your financial health, make sure to stay tuned for more details coming soon on “The Financial Health Telesummit” coming in January 2014. It’s a free event that you can attend from the comfort of your home phone, computer, or your favorite listening device (iPod, iPhone, etc.) with some of my favorite colleagues and financial experts who will help you to decide on the next steps to take in improving your financial health!