Rising interest rates, accelerating inflation, and recession risks affect everyone. However, economic shocks often disproportionately impact the LGBTQ+ community.
Additionally, financial planning for the LGBTQ+ community can be more difficult as each state has different legal protections and benefits.
Though there are certain protections on the federal level, many states do not have equalized benefits in terms of access to credit, housing, and healthcare. Each location has many rules governing adoption, parental rights, and other planning options.
It can be tough to understand all the different rules that affect the LGBTQ+ community, which is why careful financial planning is crucial. Creating a financial plan ahead of time will provide the best chance of weathering recessions and growing wealth.
Benefits of Working With a Financial Advisor
With all the hurdles LGBTQ+ individuals face, seriously consider working with a financial advisor.
New York City-based financial advisor Michael Raimondi states, “One of the most daunting challenges the LGBTQIA+ community faces is finding a professional with whom they can talk openly about their finances and who understands their lives. Financial services is a notoriously heteronormative industry. The last thing a client wants to be concerned about is their financial professional judging them for who they are.”
Though a DIY approach could save you a couple of dollars in fees in the short term, partnering with a financial advisor could help you achieve your financial goals much faster and alleviate a lot of the stress you may be experiencing.
Financial Planning for the LGBTQ+ Community
Regardless of whether you choose to work with a financial advisor, here are some actionable tips you can use to start moving your finances in the right direction today.
One of the essential parts of achieving wellness in your finances is to set goals for yourself. It’s tough to achieve your goals if you don’t have any.
Try to break up your goals into a couple of different time frames. A long-term plan can work wonders to align you and keep you on the right path. However, having some short-term goals can keep you motivated, so you keep putting in the work daily.
An excellent financial goal should follow the SMART goal-setting approach:
What this might look like in action: “I will increase my savings rate to 20% of my total income by the end of next year.”
Create a Budget
Once you have outlined your financial goals, the next step is to create your monthly budget. Though you may not realize it, having a budget can help you organize your spending and maintain order throughout your finances.
You’ll want to start by listing your total income and expenses and figuring out exactly how much money is going to each area of your life. A good rule of thumb to follow is 50/30/20. This budget is when you spend 50% of your after-tax income on needs, 30% on wants, and 20% on savings.
Though you can try many different budgeting methods, the important thing is to start tracking your finances. After all, you can’t improve what you don’t keep tabs on.
Reducing debt should be a top priority for anyone serious about getting their finances in check.
If you still have student loans, credit card debt, or personal loans, prioritize paying those off as soon as possible.
Debt makes it very hard to achieve financial goals and can add many years to your financial plans. Whether you use the rain shower or snowball method, you should figure out how to pay off your debt as efficiently as possible.
Build an Emergency Fund
Something as simple as a car repair can throw a big wrench in your financial plans if you don’t account for it ahead of time. Building an emergency fund helps you prepare for all of the unexpected incidents that could happen in life.
A general rule of thumb is that your emergency fund should be between 3-6 months of your regular salary. So if you’re making $60,000 a year, your emergency fund should be $15,000 – $30,000.
Three to six months might sound like a long time – and a lot of savings – but this is a pretty good measure of the time it takes for someone to network and find a new job after losing their old one. Having this money saved helps prevent you from going into unnecessary debt and burdening yourself with high-interest rates.
Invest for the Future
Once you have repaid debts, a solid budget, and a substantial emergency fund, the next step is to invest in the future. It’s tough to gain financial independence without letting your money work for your future.
Setting aside a chunk of money every month to invest is a great way to ensure that you’re moving towards your financial goals no matter what happens. It may not seem significant in the short run, but compounding works magic when mixed with time.
How To Find the Best Financial Advisors for the LGBTQ+ Community
While you may find a great financial advisor to work with through the referral of an acquaintance or whose office you drive by on your daily commute, it’s essential to consider several factors to improve your odds of hiring the best financial advisor for your circumstances.
As a member of the LGBTQ+ community, you may decide the best financial advisor for you is one who specializes in understanding your unique financial planning challenges.
Because many business financial advisors can work with you online, you’re not limited to hiring a financial advisor in your neighborhood. Your best financial advisor may live hundreds of miles away.
In other words, whether you hire a financial advisor who lives near or far, it's most important to hire a financial advisor who truly understands your individual needs based on their education, experience, and commitment to serving the LGBTQ+ Community.
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Jeff is a current Harvard student and author of the blog Financial Pupil who is passionate about learning, living, and sharing all things personal finance-related. He has experience working in the financial industry and enjoys the pursuit of financial freedom. Outside of blogging, he loves to cook, read, and golf in his spare time.