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Financial Counseling: What, Who, When, and Where
Kathy Prochaska-Cue, Consumer Science and Education Extension Specialist
This NebGuide explains what financial counseling is, who needs it and why, when it is needed, where to find a qualified financial counselor, and more.
Financial counselors help people learn to manage their own financial resources. As a process, financial counseling involves at least two people--the person who counsels, and the person or persons being counseled.
Financial counseling usually extends over a period of time, since most true change does not take place immediately. Ultimately all decisions are left to the person being counseled.
Financial planning involves setting financial goals and objectives, developing an action plan, and using assets to implement the financial plan.
Financial counseling, on the other hand, involves reorganizing financial management attitudes and practices so assets can be found for financial planning purposes. Financial counseling may be needed before financial planning can take place.
Financial counseling typically involves financial problem solving, setting immediate and long-range goals, cash flow budgeting, record keeping, and perhaps debt restructuring through negotiation with creditors.
Whenever a change occurs, planned or unplanned, financial counseling may be needed. Better yet, seek financial counseling when change is anticipated, such as a new job or move to a different location, or retirement. Since change is inevitable, the need for financial counseling exists for almost everyone at some point in life.
Often there is more than one reason to seek financial counseling. Many people lack the knowledge and skills necessary for successful financial management.
Personal financial management is generally not part of our education; most of us learn to manage finances through the school of "hard knocks" or personal experience, and from observation of how others manage money.
There are four financial reasons that motivate people to seek help. First are income-related problems, including unemployment, layoffs, underemployment, illness or accident, family abandonment, retirement, death, divorce, and irregular income.
Expense problems are the second of the four financial reasons to solicit financial advice. Expense problems include the lack of a financial "cushion" to help during an emergency, unplanned increases in regular and irregular expenses, and change in a person's or family's situation. Such changes include divorce, a new family member, a new home, or a different job for a breadwinner.
The third financial reason is credit use or general debt management. Using credit as an alternative source of income, setting up housekeeping, impulsive/compulsive spending, lack of sales resistance, and uninsured property loss are some of the credit-related reasons people want financial counseling.
The fourth reason to seek financial counseling is that society is more complex. We face a greater number of alternatives and choices when making financial decisions, and we seek help with financial decisionmaking.
Now that we have discussed what financial counseling is, who needs it, when and why, we should consider how to judge a financial counselor, and where to find a financial counseling service. Remember, there are no legal restrictions on using the title "financial counselor." Anyone can claim that title.
Financial counseling as a service may be offered by:
How successful financial counseling is depends upon three factors: the person counseling, the person counseled, and the sponsoring business, agency or organization.
How effective the counselor is depends upon her or his personal philosophy and skill in relating to the particular person or people being advised. Training, education and experience, both personal and as a counselor, also affect the counselor's effectiveness.
The person being counseled brings past and present experiences, values, attitudes and skills to the counseling experience. All these factors impact on the success of counseling.
Finally, the counselor's sponsoring agency, organization or business affects the success of counseling. Every sponsor of a financial counseling program has a philosophy related to that program.
For example, some programs are more consumer-oriented than creditor-oriented, or vice versa. Sponsoring entities may focus on short-term solutions rather than on long-term education to help clients learn new attitudes and behaviors related to money management.
Quality financial counseling is based upon these unbreakable laws:
Financial counseling is necessary for most people at some point in time. Since anyone can call themselves a financial counselor, this publication serves as a guide for finding quality financial counseling when needed.
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