Financial Counseling Principles and Practices

Essence of Financial Counseling ► What is it all about ► An urgent growing need ► A rewarding endeavor ► A challenging field

Purpose... ► To define income versus expenses ► To detect problem areas ► To provide a written plan for spending and saving ► To aid in communication and accountability ► To schedule money in and out of the home

What it will do... ► Help visualize goals ► Provide a written point of reference for the family ► Help family communications ► Provide a written reminder ► Reflect spend habits

Every Financial Counselor is Unique ► Has a unique style ► Best style is a natural one ► Essentials of a good style ► There are few absolutes

What it will not do... ► Solve all immediate problems ► Make a person use it ► Eliminate all decision-making ► Balance by itself

Misconceptions ► Similar to Psychological Counseling ► Driven by a preconceived agenda ► Primarily a non-directive process ► Only for people in financial trouble ► Appropriate for any financial need ► Seeks to assess fault and blame ► Focuses on giving specific advice ► Similar to other financial services ► Provides comprehensive financial plan

What is Financial Counseling? ► Assist clients in clarifying issues, resolving problems, and pursuing goals ► To empower clients with the information, education, and guidance they need to act appropriately on their behalf ► To support clients in their efforts to identify, access, and utilize resources that can help them address their needs and promote their ultimate financial wellness.

Two Most Essential Ingredients ► Sincerity ► Reality

Six Hallmarks of Financial Counseling ► Honest ► Informative ► Concrete ► Egalitarian ► Focused ► Confidential

Issues Prompting Financial Counseling ► Budget shortfalls ► Credit abuse ► Job loss ► Divorce ► Widowhood ► Retirement ► Investing ► Estate transfer

Three Basic Approaches ► Classic psychological approach  Help clients overcome their problems by freeing them from the control of unconscious forces rooted in past unresolved conflicts  Not simply addresses the symptoms but remedies the underlying cause

► Behavioral Approach  Attempts to help the clients modify or extinguish inappropriate behaviors by altering the conditioned stimuli that cause or maintain them  Replaces inappropriate responses with more suitable responses

►P►P►P►Pragmatic Approach HHHHelps clients clarify issues, resolve problems, or pursue goals by providing practical information, education, and guidance. BBBBest approach for financial counseling

► Psychological and behavioral approaches offer practical insight and strategies that can be applied within an educative approach ► Two ways:  Useful in identifying symptoms that may indicate the need for a therapeutic treatment and an appropriate referral  Provides certain techniques and strategies helpful in addressing attitudinal or behavioral issues within an educational framework.

What is the first step in financial planning? Why?

Getting Started ► Understand current financial position  Track expenditures  Checking Account Ledger  List all debts with amount due, monthly payment, due date, and interest rate

Getting Started ►C►C►C►Create a plan CCCCalculate income CCCCalculate fixed expenses CCCCalculate variable expenses DDDDesign a plan with categories

Using the plan ► Keep it visible ► Set achievable goals and estimates ► Keep records up-to-date ► Establish a set time and day to review plan with spouse or family ► Make changes as circumstances and plans warrant

Motivational Reminders... ► Think before you buy  Is it necessary  Is it the best buy  Is it an impulse item  Would my spouse (family) agree with the decision to purchase  Does it add to or detract from the family  Is it a highly depreciable item  Does it require costly upkeep ??????????????????????????????????????????????????????

Fail to Plan Plan to Fail

Key Elements to Planning ►D►D►D►Decide a career path ►P►P►P►Plan for children and other dependents ►H►H►H►Have a surplus plan ►H►H►H►Have an estate plan