Basics of Financial Literacy for LGBTQ+ People

In partnership with Jennifer Barrett, President of Comerica Bank LGBT Business Resource Group

No matter how much you earn, financial literacy is an essential life skill. Financial issues affect everyone, and members of the LGBTQ+ community face disproportionate challenges.

According to a recent survey published by Experian, 62% of LGBTQ+ respondents said they had experienced financial problems as a direct result of their gender identity or sexual orientation. From workplace harassment to being passed over for a job or facing higher housing costs due to discrimination; LGBTQ+ people are at acute risk of facing financial instability.

There is also evidence of an LGBTQ+ pay gap. The Human Rights Campaign Foundation found that LGBTQ+ workers earn 90 cents for every dollar earned by a typical worker, with transgender women earning only 60 cents for every dollar earned by a typical worker.

Despite these challenges, making smart decisions can make a big difference. In partnership with Comerica Bank, here are some important financial basics for LGBTQ+ people.

Track your expenses

One of the first steps in taking care of your personal finances is to make a budget and track your own expenses. Tracking income and costs — like in a banking app or even an (old-school) checkbook — can be a powerful way to understand where your money is going. And don’t forget to check your monthly statement to make sure all those expenses were even yours.

Checking your statement should also include something more real than the “just cut the coffees” rhetoric: watch for small recurring expenses. How many subscriptions do you have in progress? If you’re not sure, it might be time to use your new budget to remind yourself what you’re paying for.

Many LGBTQ+ people call themselves spendthrifts. According to a study by Experian, 34% of LGBTQ+ people agree that they have bad spending habits, with many gay men aged 25-34. admit overspending regarding clothing, grooming and personal care.

It’s called personal finance

There are several ways to improve your personal financial situation, including saving, managing your credit, and managing your debt smartly. Not all debt is bad debt, but it’s important to keep it under control. LGBTQ+ families have on average credit card debt $12,085, or 16% more than the average American family. Credit cards cost interest every month when you carry a running balance.

Setting up an emergency savings fund for unexpected expenses can help you stay in control of your finances when difficulties arise. Cars break down. The air conditioning decides it’s done. Potholes in January… You get the idea. Equally important, if you work for an employer that doesn’t offer protections for people who identify as LGBTQ+, it’s essential to have a financial cushion to fall back on should the worst happen.

The earlier a plan is in place to deal with unpaid debt, the sooner it can be dealt with. Not paying off credit cards can damage your credit score, making it harder to get low-cost credit in the future. If you’re unable to pay off your credit card balance in full each month, try to cut unnecessary spending and focus on paying as much as possible to eliminate this costly form of lending.

Consolidate and ask for help

If immediate cost reduction isn’t an option, consider consolidating high-interest debt with a single lower-cost loan or 0% interest offer (if eligible). Compare your debt and its interest rates to the cost of consolidation – this can make a lot of sense and can open up huge cash flow to those with limited income. If you are concerned about not being able to meet the minimum repayments, consider contacting a debt counselor who can offer advice on budgeting and ways to repay.

Check out the tax benefits you may be entitled to

Getting married (very obviously) changes things. The historic 2015 Supreme Court Obergefell v. Hodges decision, which established that the fundamental right to marry is guaranteed to same-sex couples, opened up many tax benefits for married LGBTQ+ people. From spousal Social Security benefits to joint tax filing, tax benefits that non-LGBTQ+ people took for granted are now available to members of the LGBTQ+ community.

However, inequities still exist in the tax treatment of LGBTQ+ people, which are often complicated by the unique financial goals of many LGBTQ+ people. For example, starting a family often works differently than most heterosexual families. Since adoption, fostering, and surrogacy are three of the main ways LGBTQ+ couples can start families, building up the wealth needed to pay for the often high costs of surrogacy will take time.

gay couple in berlin

To buy a house

Buy a property is usually the biggest purchase most people will make in their lifetime. LGBTQ+ people are no different in this regard, and homeowners typically have much of their wealth stored in their homes. Your mortgage company can provide cost estimates for loan interest, taxes, insurance and fees, but remember to include maintenance costs in your homeownership budget.

Hire an advisor

With 86% of LGBTQ+ consumers saying they need help managing their wealth portfolio, find the right financial advisor is vital for LGBTQ+ people who want to find the best plan for their future goals. Using the services of a financial advisor experienced in socially responsible investing can provide LGBTQ+ people with access to investment portfolios that align with their values ​​of equality and non-discrimination.

Different parts of the LGBTQ+ community also face costly steps that can impact wealth creation. For example, for trans people who self-fund their medical care, tens of thousands of dollars can be invested in the transition plan, making it even more difficult to build long-term wealth.

There is no silver bullet to all of these challenges, but it is essential to recognize the unique circumstances that LGBTQ+ people face when working to create wealth. In practice, wealth managers can offer bespoke investment plans that take into account the need to withdraw funds at certain intervals for major expenses, such as surrogacy or gender-affirming medical surgery.

Retirement plans

Without traditional family support structures, many LGBTQ+ people face major challenges as they age. According search for SAGE51% of LGBTQ+ seniors worry about not having enough money to support themselves as they age, compared to just 36% of non-LGBTQ+ people.

Preparing for retirement doesn’t have to be a complex task, and the sooner you start putting money aside, your financial future becomes more secure. The higher the better, but saving around 10-15% of your income for retirement is a typical recommendation. If your employer matches the pension, make sure you contribute enough to get the maximum benefit from this match.

Even if access to a 401(k) isn’t possible, opening an Individual Retirement Account (IRA) can be a great alternative to saving money for retirement while enjoying tax benefits.

For many people in their 20s, 30s, 40s and older, thinking about how to afford a comfortable retirement is often a daunting task. But overcoming this malaise is especially important for the LGBTQ+ community, because if only 42% of non-LGBTQ+ Americans don’t have money set aside for retirement, it the number increases 55% for LGBTQ+ people.

Estate planning

A complete real estate project should include considerations for transfer of property, health care and legal protections. As many LGBTQ+ people may not be married or have children, it is especially important for community members to have a clear plan in place that outlines exactly where assets should go after death. Also, if you’re unmarried and don’t want your biological family members to make important decisions about your health or finances on your behalf, an estate plan might assign that responsibility to someone you know. trust.

A typical estate plan is made up of four distinct elements; a will, a revocable trust, an advance health care directive and a power of attorney. Each person will have their own unique situation, and different states have a range of separate estate and estate taxes. Speaking with a financial advisor can be a good way to navigate the best method of estate planning, especially for managing wealth and securing a simple estate.

Despite the unique financial challenges LGBTQ+ people face, understanding the basics can make a real difference to improving your financial security and go a long way to avoiding common pitfalls people often fall into.

This article is a sponsored editorial produced in conjunction with Comerica Bank. The journalism of Between The Lines is made possible through the support and partnership of advertisers like Comerica. Learn more about Comerica at www.comerica.com