Financial coaching: It is an income issue

When helping a member with their budget how much time are you spending discussing their income? I think many times we, as financial coaches, ask them for their take-home pay for use as the starting place in the monthly budget and then we move on to the expenses. Most counselors are quite creative when helping members face their expenses. They have endless ways to save money by reducing usage, substituting a less expensive alternative, foregoing the item. There are ideas for meal prepping, buying in bulk, sharing items with neighbors, couponing, cancelling subscriptions, reducing energy usage, changing insurance companies, packing your lunch, making your own coffee, and using the library. But the truth is, you cannot cut your way to profitability, sometimes, it really is an income problem.

This became clear to me when I was doing a “financial counseling on-site” with a large credit union. I had a dozen sessions with their members over the course of two days. At least 80% of the members I worked with had an income problem not a spending problem. As we worked through their budgets, I learned they were excellent at stretching the dollar and they had a “home” for every penny. Controlling expenses was NOT their problem.

As I dug into the income portion a bit I learned even more about the members. Some of them were too scared to even entertain the thought of switching jobs. They were comfortable where they were and were not keen on change, it did not seem to matter that their skill set could earn them more. They did not want to “upset the apple cart” so to speak. One said, “I know I am underpaid but switching health insurance coverages is not something I want to do right now.” A few of them acted with surprise that I thought they could earn more than they were earning. They said, “you really think so?” We would do a search on Indeed or Zip Recruiter for the very role they had, and it would return jobs paying $3-7 more per hour than their current job. They got excited and made plans to apply. One young woman, who was highly credentialed and well-spoken was just too timid to launch out into the world. She was comfortable in academia, but the business world scared her, she needed encouragement and interview practice.

Collaborating with members face-to-face confirmed, more than ever, that personal finance is PERSONAL, and it comes with all the emotional trappings too … shame, fear, guilt, confidence issues, to name a few. Yes, we need to be experienced, certified financial counselors to serve our members properly, but we also need to allow space for their humanity … it is not just about “running the numbers.” They come to the financial coaching session with emotional baggage because money issues are often accompanied by emotions of shame, fear, and guilt. Until we reach the member in that place, money issues will not be resolved. As counselors, we need to be brave enough to hold space for them, be an active listener, and provide an empathetic human response to their current situation. Partnering with a workforce development agency and/or a local recruiting firm can help you refer your members to resources that can help them improve their situation by increasing their income. If they need a resume revision or interviewing practice, that help is available in most communities through community agencies and non-profits. And sometimes, we need to be a cheerleader and offer words of encouragement because when others believe in us, we can gather the courage to believe in ourselves.

Offering financial coaching is about building a relationship that will span time. Our own research at BALANCE has shown a correlation between the number of coaching sessions and the increase in measurable financial outcomes. The clients reach more financial goals with more coaching. Financial coaching is not about a “one and done” session. The member’s financial path will require guidance at multiple touch points throughout the distinct stages of life and throughout varied financial goals. Being a trusted financial coach who has an ongoing relationship with the member makes your credit union their first choice when they have a need.

When a member has an income problem instead of a spending problem, traditional financial budgeting tips may drive them crazy because we talk about eliminate, reduce, reuse, forego. They have done that already and could teach the class! As financial coaches, we must address the income side of the equation with as much passion as we attack a daily Starbucks coffee expense! Skipping coffee is not the answer to every budget issue but earning more can solve many issues!

Ideas for Increasing Income:

1. Switch jobs. As an HR professional in the “great resignation”, I groan at this one, but I do know it has been true in my own career. My largest pay increases have been from taking new roles. The average annual salary increase for staying at your current job is 3.1%, compared to job-switchers at 5.8%.
2. Look at your paycheck. Are you taking advantage of pre-tax deductions that lower your taxable income? Are you contributing to a 401K? Are you using a flexible spending account (FSA)? Are your deductions correct for your dependent count?
3. Ask for a raise. If you find that your skill set is worth more on the “open market” than you are currently being paid, it is worth a conversation. If you are a good employee, chances are they will hear you out, they do not want to lose you. However, asking for a raise is not about making a threat to go elsewhere unless demands are met, it is a conversation about the work being done and the market value of that work. Smart employers will perform annual salary surveys that provide the national/regional salaries by percentiles (25^th, 50^th, 75^th, 90^th) for the roles they employ. They will use that information to pay competitively to attract and keep the best talent. Even if your organization does annual reviews and cannot activate a raise immediately, having an initial conversation should be welcomed. That conversation creates an opportunity for understanding and could lead to other opportunities.
4. Monetize your expertise. Are you a master gardener? Do your culinary creations “wow” your guests? Do you speak Italian? Do you draw? Play the piano? Consider sharing your expertise by blogging about it, teaching a class in your community, tutoring another person 1:1, or teaching an online class to earn more money.
5. Turning crafting into cash. Do you quilt, knit, make jewelry, woodwork, or do calligraphy? You may be able to make money selling your crafts at fairs or online.
6. Get a side gig. No, it does not have to be Uber. You can get paid to run errands, detail cars, walk dogs, grocery shop, do home repairs, babysit, be a cater waiter, clean homes, mow lawns, do laundry, just about any task that busy people do not have time for.
7. Work a temporary job. The holidays usually mean additional retail and delivery jobs. Many offices need help during their peak sales times too. Setting a time frame for extra work makes it seem less daunting.
8. Sell stuff. Look around your home and see if you can find anything of value that you are not using anymore. Is there a hobby you have abandoned? Clean out that garage and attic, look for unused assets that can be sold to bring in extra cash. You can sell them online or host an “old fashioned” garage sale. Are you a fashionista? Sell last season’s wardrobe on consignment and get some money back for next season.
9. Rent out your place or space. If you have a spare room or can crash elsewhere to rent out your whole place you can turn your home into a producing asset.

None of these options will fit everyone’s lifestyle but maybe one of the ideas will work for the member you are working with. As financial coaches, we should challenge the income area of the budget with as much fervor as we challenge the expense area. Our clients may need a nudge to consider other earning options. They need our encouragement to think creatively about income because with inflationary prices and interest rate increases – they have cut all they can cut already … they are stretched to the limit. It is time to brainstorm ways to increase income.