David Auten & John Schneider — Queer Money
Cities across the country are announcing their LGBTQ pride this month, as queer people are embracing and celebrating their own. But, taking pride in who we are is more than just an annual parade. It’s a 365-day practice of taking care of ourselves physically, emotionally, mentally, and financially.
As for the latter, we as a community have two financial hurdles to tackle now: paying off debt and saving for retirement.
Prudential’s 2016 LGBT Financial Experience Survey found that over half of the queer community polled are consistently $10,000 or more in debt, slightly more than the general population. Worryingly, respondents in 2016 were faring worse with retirement goals than respondents in 2012 when the annual survey started. Compared to 2012, 2016 participants were “less likely to have started saving or investing for retirement, to have insurance products, and to have a will or estate plan.”
For our personal wellness—and the wellness of our queer community—it’s important for all LGBT people to take at least as much pride in our money as we do in being ourselves. This year, we’ve created a challenge for our community. By following this simple plan to get your finances in order now, you can be a lot better off financially by next Pride, so you can celebrate your pride in who you are and your financial security.
Talk about money
Since June 2015 when the U.S. Supreme Court ruled that gay marriage is a constitutional right, as the Debt Free Guys and hosts of the Queer Money podcast, we’ve seen a shift in the questions and comments we receive from our audiences. Before, we occasionally received questions from people in same-sex relationships about how to manage their money together, but since the ruling, we’ve seen a marked increase in those kinds of questions. Usually, the more financially comfortable partner wants advice about getting the less affluent partner to talk about money.
There’s no irony that the questions we get are from the partner doing better with their money. Studies show that, despite social taboos, those who talk about money tend to do better with money. Some people believe in talking about money so strongly they recommend avoiding people who won’t.
We aren’t that hardcore. Because couples often get together because of hormones and pheromones—not credit scores and debt-to-income ratios—we don’t recommend ending a relationship because of difficulty discussing finances.
However, we do often recommend starting a financial dialog with your partner, your friends, or your family. Talking it out might take practice, but getting on the same page financially is essential for healthy relationships.
Pay Down Debt
While you’re learning to be more open about money, take immediate action to get your financial house in order. If you don’t have an emergency savings account, save at least $500 before you do anything else. Once you do this, you’ll be better prepared to withstand unexpected emergencies or expenses caused by missed work, accidents, or just exceeding your smartphone data limit. Having emergency savings will also lower your stress level, benefiting your emotional and mental well-being.
Once you’ve tackled that, then get out of debt. Getting on a debt repayment plan can be one of the most beneficial financial moves you make this year, whether you’re carrying maxed out credit cards or some old straggler student loan debt. Remember: whatever interest rate you’re paying on your debt is too much.
You’ve got options for those repayment plans, too. With the snowball method, you pay off your smallest balances first and move up incrementally to focus on your larger debts. This method gives you quick emotional wins since you’re paying off smaller debts entirely before moving on to larger ones. There’s the avalanche method that says to pay off your highest interest rate debt first. And then there’s the debt lasso. This method focuses on lowering your credit card interest rates—either by negotiating with your current creditors or transferring to a lower balance card. Once the rates are lower, the theory goes, it’ll be easier to tackle the debt.
Contribute to a retirement account
Prudential’s surveys show an increasing number of queer people don’t have a solid retirement plan. Many companies offer retirement plans like 401(k)s along with a corresponding match of your contribution by your employer up to a certain dollar amount. If your company offers a retirement plan, it pays to sign up. Contribute at least up the minimum required to get 100 percent of your employer’s match—think of it as a free contribution to your freedom from this job fund.*
You could also just open a Roth IRA. Roth IRAs also let you contribute up to $5,500 a year ($6,500 if you’re over 50 years old) with no lifetime maximum as long as your annual income falls below a certain threshold. No matter what you choose, be sure to pay close attention to fees, which can quickly eat into your savings.
Create a financial plan
Financial planning is an ongoing process that helps you make holistic, smart decisions about your current and future financial situation. You can find numerous financial plans online. These plans can help you monitor your spending, make smarter financial choices, and develop goals to help you get ahead financially. Semi-cheeky suggestion: we offer the Debt Free Guys #MoneyConscious Financial Planning Guide for free at DebtFreeGuys.com.
Whichever plan you use, stick to it. Consistency is the key to paying off debt, saving for retirement, and building successful financial plans.
Because of the additional and unique challenges the LGBT community faces, we must take extra care of ourselves and our financial lives. Pride is a celebration of who we are and a reminder of how far we’ve come. It’s also a good time to gauge how we’re doing individually and how we can improve in the next 365 days to achieve a whole new level of pride.
* A previous version of this article mentioned the MyRA, a government retirement savings program phased out between July and December, 2017.