Financial Life Coaching

Lesson One:

Introduction to Financial Coaching

David Murphy, Ph.D., CPA, CFP®

Introduction:

I. God Cares About Money

A. Money is only mentioned about 140 times in the Bible

B. Money-related topics are mentioned over 2,000 times

C. God cares about you and money

· Matt 6:33

· Matt 6:31-32

· Matt 6:24

II. AACC Cares About People and Their Money

A. Program Overview

1. Introduction to Christian Financial Coaching

2. Psychology and Money

3. Understanding Personal Financial Statements

4. Understanding Interest

5. Developing spending plans

6. Spending and debt

7. Investing

8. Major Purchases – Automobile

9. Major Purchases – Home

10. Protecting Assets

11. Retirement Planning

12. Taxes

III. Introduction to Christian Financial Coaching

A. The Role of a Christian Financial Coach

1. Definition of a CFC

· A CFC is a Christ Follower who has been called to the special ministry of helping others develop the skills needed to make wise financial decisions, and to lead those facing financial burdens to a place of financial wholeness.

2. Role of a CFC

· Coach

· Teacher

3. Mission

· The AACC is committed to assisting Christian financial counselors and the entire ‘community of care,’ financial professionals, pastors, and caring church members with little or no formal training. It is our intention to equip Christian financial counselors with Biblical truth and financial management knowledge and skills that ministers to persons experiencing financial stress and helps them move to personal financial wholeness, financial management competence, mental stability, spiritual stability and wisdom.

4. Vision

· The vision of the AACC is a world in which all Christians serve only one master, Jesus Christ, and are free of all forms of financial bondage and stress. The AACFC envisions a world in which every Christian has access, through their local church, to quality financial counseling, and training in financial management skills.

5. Christian Financial Coaches Are Not . . .

· Lawyers

· Registered investment advisors

· Sales representatives

6. Ethics

· Standard 1 – Integrity. A CCFC shall offer and provide professional services with integrity.

· Standard 2 – Objectivity. A CFC shall be objective in providing professional services to clients.

· Standard 3 – Competence. A CFC shall provide services to clients competently and maintain the necessary knowledge and skill to continue to do so in those areas in which the CFC is engaged.

· Standard 4 – Fairness. A CFC shall perform professional services in a manner that is fair and reasonable to clients, principals, congregations and employers, and shall disclose conflict(s) of interest in providing such services.

· Standard 5 – Confidentiality. A CFC shall not disclose any confidential client information without the specific consent of the client unless in response to proper legal process, to defend against charges of wrongdoing by the CFC or in connection with a civil dispute between the CFC and client.

· Standard 6 – Professionalism. A CFC’s conduct in all matters shall reflect credit upon the profession.

· Standard 7 – Diligence. A Board Certified CCFC shall act diligently in providing professional services.

7. Model for Ethical Decision Making

a. A good model for ethical decision making

· Identify the ethical dilemma

· Identify the possible alternatives

· Evaluate the positive and negative outcomes of each alternative

· Make a decision

b. A better model for ethical decision making

· What would Jesus do?

B. Financial Literacy in America

1. The financial literacy quiz

a. What is 10% of 1,000?

b. How much would each person received if you divided a $2 million lottery equally between five people?

c. Assume that you invest $200 in an account that pays 10% interest compounded annually. How much money would you have in the account at the end of two years?

d. Troubling statistics

· Americans are number one, out of people in 38 countries, in feeling that they have no money left after paying for their basic living expenses.

· Only one in four Americans with income of at least $75,000 per year feel they are doing well financially.

· The United States has the lowest savings rate in the industrialized world.

· Only 28 percent of Americans think that they will be able to afford a comfortable retirement (May 2008).

· 76 percent of undergraduates have credit cards with an average debt of $2,000. In addition they will amass about $20,000 in student loans before they graduate.

· According to TransUnion (December 2008) total bankcard debt per bankcard borrower was $5,710.

· The average credit card indebted young adult household spends about 24 percent of its income on debt payments.

· Total U.S. consumer debt in 2007 reached $2.55 trillion in 2007. You would have to pay about $1,275,000 per year, every year, since Christ’s birth to pay that debt off (assuming no accrued interest).

· There were 819,115 personal bankruptcy declarations in 2007. In 2008 that number rose to 1,086,130.

· In 2008 over 1 million families lost their homes in foreclosure, a 63 percent rise over 2007.

IV. Life Phases

A. Early-Earning Stage

1. 20s to 35-40s

2. Post college years

3. Pay off student loans

4. Learn to manage money and budget

5. Short and Medium term savings objectives

6. Major acquisitions

· Car

· First home

7. Begin thinking about educational funding for children

8. Insurance is used to provide income security

9. High level of risk tolerance

B. Established Earning Stage

1. 35-40 to 55

2. Planning priority is usually educational funding for children

3. Lower level of risk tolerance

· Percentage of equity investments in portfolio begins to decline

C. Preretirement Phase

1. 55 to retirement

2. Planning priority is adequacy of retirement fund

3. Begin thinking about legacy planning

4. More conservative asset allocation

D. Retirement

1. 65+ to death

2. Cash flow becomes the financial focus

3. Long-term care issues develop

4. Legacy planning (estate and gift)

5. Insurance is used to an estate planning tool

6. Very low risk tolerance

V. Conclusion