Whether you are in your 20s, 30s or 40s, a good starting point to assess your financial health is a financial coach.
This is a relatively new option and works like a personal trainer for your money. Financial coaches take a holistic view of your money and work with you to plan your financial goals and future.
While coaches can’t advise you on actual products, they can help you to clarify your goals, find relevant information and explore some of the options available to you.
Here are key questions people commonly ask financial coaches.
If you want to see a financial adviser, it’s a good idea to speak to a few so you can compare the service they offer and find out if they’re right for you. Most will offer you a free initial consultation, where you get the chance to ask some questions. Here’s a few to get you started.
What do you charge and how much am I likely to pay?
A financial adviser must tell you how much they charge before you’re taken on as a client. It’s part of the rules that all advisers have to abide by.
Some might charge by the hour, others might charge a fixed fee or a percentage of the value of your pension pot if you want retirement advice or if you want general advice on investments.
But that might not help you work out how much you could end up paying. It depends on factors including your needs and the kind of service you want.
The adviser might not be able to tell you exactly what you’ll pay, but they should be able to give you an indication and perhaps even an upper limit.
What services do you offer? Are you independent?
The adviser must tell you what services they offer, including whether they’re an independent adviser.
The phrase ‘independent financial adviser’ has a particular meaning that’s set out in the rules that financial advisers have to follow.
To be called independent, a financial adviser must be able to offer a range of products from across the whole market and provide unbiased and unrestricted advice based on a comprehensive and fair analysis of that market.
An adviser might be what’s called ‘restricted’ if they only recommend certain types of investment products and/or products from a limited number of providers.
How much should I be saving for retirement?
As a rough guide, to fund a basic lifestyle, where all the essentials like groceries and bills are covered, you’ll need an income of roughly £13,000 per year for a single person. If you’re living with someone else, you’ll need to bring in £18,000 between you.
If you’d prefer a ‘comfortable’ lifestyle, which gives you a little extra for foreign breaks, leisure activities and the odd drink or two, you’ll need £19,000, or £26,000 per year for two.
And to fund a luxury retirement, where you’re free to embark on long-haul trips, purchase new cars and live life to the fullest, you’ll need £31,000 for one or £41,000 for a couple.
A coach can help you work out what that means for your retirement pot and the options you have to achieve it.
How do I stick to a budget?
The first thing to do is to keep a spending diary for a couple of months to find out where your money is going.
Split it into bills (rent or mortgage, utilities, council tax and TV licence, phone and internet), groceries, essential transport or commuting costs, subscriptions (gym, film or TV services) and non-essential spending (leisure, eating out, clothes).
Also identify any one-off annual costs (e.g. insurance premiums) and divide by 12 to get a monthly cost recorded.
Once you have a better understanding of your outgoings, you can work with a coach to identify where you can make savings and what a realistic monthly saving goal looks like.
How do I get out of debt?
If you have a few different pools of debt, combining them all may make your life easier and help you pay less in interest.
There are two main ways to do this. Firstly, you can take out a new loan and use it to pay off your existing debts. You will now only have one payment (and interest) to worry about. Alternatively, you can look at 0% transfer credit deals. This means that you won’t be charged any interest on transferred debts for a set period.
Whether your goal is to reduce or eliminate debt, a financial coach can help you work out the steps you need to take to make progress.
Am I ready to start investing?
There are a number of key things you should have covered before you begin investing.
From working out your investment goals to understanding your attitude to risk, a financial coach can help you get ready to start your investment journey.
How much should I have in savings?
A three-month savings buffer is best for peace of mind against unexpected expenses like car repairs or home emergencies. It’s also wise to have this in place before you start on any investment journey.
Talk to a financial coach to work out what non-essential spending you could live without. Just a few small lifestyle adjustments could enable you to save more than £1,500 a year and build a comfortable emergency fund.
How do I get on the property ladder?
There’s no doubt that getting your first property has become increasingly difficult over recent decades.
In 1981, nearly one in three 16-24-year-olds was a homeowner. By 2016, it was one in 10. Meanwhile, the proportion of renters in younger age groups has increased by 14% among 16-24-year-olds since 1996.
This trend may mean you’ll have to wait a little longer to become a homeowner. Since 2007, the average age of first-time buyer in the UK has increased by six years, with people turning 34 by the time they’ve bought their first property.
However, with planning, research and a little know-how, one day you too can have a home that you own. From boosting your credit score to sorting out your deposit, a financial coach can help you put a plan in place to get you from renter to owner.
Remember, a coach isn’t the same as a financial adviser and can’t recommend specific products or platforms. However, their expert guidance can be invaluable for getting your financial plans in place.
We’ve partnered with Claro, the UK’s first financial coaching app. Find out more and book a financial coaching session today.