5 financial challenges for the LGBTQ community and how to face them
A new survey finds that LGBTQ people experience more money anxiety than straight cisgender people. A quarter say that their sexual identity has had an impact on their finances. Though the findings of this survey shouldn’t come as a surprise, they go against the widely held assumption that the Supreme Court’s landmark 2015 ruling that made same-sex marriage legal in all 50 states also abolished the other institutional obstacles this community faces.
“The biggest challenge is people think now that marriage exists, everything is taken care of,” said Brian Thompson, a Chicago-based financial advisor whose practice focuses on LGBTQ couples. “We live in a society where blatant bias still exists.”
It is true that the Supreme Court decision had huge financial implications for the more than 11 million adults in the United States who identify as LGBTQ. To start, it meant that everyone could enjoy the more than 1,100 benefits and privileges accorded to married couples by federal law, from tax breaks to health coverage. However, many barriers to true financial equity remain.
Of course, the LGBTQ community is hardly a monolith. The challenges a transgender man faces may be quite different from those confronting a cis lesbian woman. That said, here are five broad financial areas in which members of the LGBTQ community encounter financial obstacles, and strategies for navigating them.
Challenge #1: Earning what you’re worth
The issue: There is a persistent myth of gay affluence. But it flies in the face of reality. Those who identify as LGBTQ are on the wrong side of a pay gap. A recent Prudential survey of 1,376 LGBTQ and 503 general population respondents found that gay men earn, on average, $56,936. That’s $26,533 less than heterosexual men, or about 68 cents on the dollar. Lesbian women earn an average of $45,606—$5,855 less than heterosexual women, or about 89 cents on the dollar. The problem is exacerbated by the high costs of living in communities that tend to be welcoming to LBGTQ residents, such as New York and San Francisco. It’s easy to see why LGBTQ people, particularly women, are more likely to experience economic hardship such as food insecurity or inability to pay rent or utilities. Many LGBTQ individuals also face bias in the workplace because a majority of states lack laws protecting against discrimination on the basis of sexual orientation. However, recent research suggests that work discrimination has decreased in the wake of the Supreme Court’s 2015 decision.
What to do: If you’ve been afraid to ask for a raise or other perk at work for fear of rocking the boat, you may have more options than you’re aware of. But many hold back, failing to see their own value: “I deal with couples with high-powered jobs who still have Imposter Syndrome,” Thompson said. Building a larger emergency fund may help you feel more secure before you make your request. If your employer won’t pay you what you’re worth, don’t be afraid to apply elsewhere—especially to one of the hundreds of companies that score high on the Human Rights Campaign Foundation’s annual Corporate Equality Index. If you believe you’ve experienced employment discrimination, contact one of these civil rights organizations for advice and assistance.
Challenge #2: Saving more
The issue: A recent Experian survey found that, compared to the general population, LGBTQ people struggle to save, and a higher percentage (34% vs. 28%) say they have bad financial habits they’d like to break. These bad habits (such as overspending) are particularly pronounced among LGBTQ millennials. Thompson speculates that LGBTQ people may struggle more with consumerism because they’ve spent a lifetime feeling devalued. “I think a lot of it goes back to needing to compensate for feeling lesser-than—showing the people that you have nice things or that you live a nice life,” he said.
What to do: Breaking the habit of overspending is hard, but it’s easier if you understand why you’re overspending. Thompson has clients take the Klontz Money Script Inventory, a 53-item questionnaire developed by father-son duo Ted and Bradley Klontz, both professors at Creighton University’s Heider College of Business, that digs into your money values and fears to identify problem financial behaviors. (If you’re curious, you can take it here.) Identify your spending triggers—stress, peer influence, certain types of stores, etc.—and steer clear of them whenever possible. The other half of getting a handle on profligate spending is practical: Track your spending and create a budget that aligns with your money goals. Leave your credit cards at home and take only cash with you when you shop. Mentally “spend” your paycheck on your budgeted items as soon as you receive it, so you’re not tempted to think that you have “extra” money in your account. Automate deposits into a savings account, and set a short-term goal for how much you want to save, so you’ll feel a sense of accomplishment when you reach it. Open a 401(k) at your job, if one is available, or set up a Roth IRA. (As a rule, I suggest trying to save 15% of your income.)
Challenge #3: Dealing with housing and credit discrimination
The issue: If a potential landlord or creditor pulls your credit report and sees that you formerly went by another name that suggests you transitioned from another gender, or notes on your application that you have a same-sex spouse, that person may deny your request for an apartment or a mortgage if he or she allows bias—either conscious or subconscious—to taint the decision. Remember, in a majority of states, LGBTQ people lack legal protections against this kind of discrimination. A recent study found that same-sex couples applying for mortgages were 73% more likely to be denied than heterosexual couples with similar financial backgrounds. What’s more, those who were approved were charged 0.2% more in interest and fees.
What to do: There are two prongs to this remedy. One is preemptive: Do research to find an LGBTQ-friendly bank before you apply for a mortgage, for example. The other is after the fact: If you’re turned away by one creditor, don’t assume you’ll be turned away by another. You can also legally challenge the creditor who denied your application. Though the federal Fair Housing Act of 1968 doesn’t explicitly protect people against discrimination because of sexual orientation, LGBTQ advocates have found success in the courts by challenging their treatment as discrimination on the basis of sex, which is protected. Ask the company you’re dealing with whether it’s willing to rectify the problem. If not, file your complaint as soon as possible. Some resources to start with include an attorney, the Lambda Legal help desk, HUD, the Consumer Financial Protection Bureau, or the American Civil Liberties Union. In the longer term, the solution is a legislative push to pass the Equality Act, which would amend existing federal laws such as the Civil Rights Act, the Fair Housing Act and the Equal Credit Opportunity Act to prohibit discrimination on the basis of sexual orientation and gender identity.
Challenge #4: Building a family
The issue: Because many LGBTQ people are coming out earlier in life, they’re less likely to have children from a previous marriage and more likely to adopt or use reproductive technologies such as artificial insemination or surrogacy. While these options offer same-sex couples more choice in their pursuit of a family, they can be quite expensive. Adopting from foster care is close to free, while adopting a newborn in the U.S. through a private nonprofit agency costs an average of $40,000. (The issue of whether same-sex couples and LGBTQ individuals can be barred from adopting through a particular agency on religious grounds is being fought state by state.) An artificial insemination cycle can run less than $1,000, while a round of in vitro fertilization (IVF) can easily top $10,000. (Neither guarantees success, of course.) Having a child through surrogacy can cost $120,000 to $175,000.
What to do: Obviously, the options open to LGBTQ individuals and couples will vary. Unlike other financial goals (for instance, owning a home), there may be a biological clock involved in the process, so the conversation may need to happen sooner rather than later. “It’s all about awareness and planning and having some intention behind what you’re trying to accomplish” when building your family, Thompson said. Discuss your desires with your partner: how much you can and want to spend, and whether, for instance, it’s vital that one of you has a biological relationship with your child. Make sure to educate yourself about the expenses and the risks. Then set aside a dedicated savings account for family-building expenses.
Challenge #5: Staying on top of paperwork
The issue: I harangue everyone about getting their will and other important documents prepared and organized. If a crisis does arise, you won’t have the added stress of being unprepared. Unfortunately, this is absolutely imperative for LGBTQ people. The harsh reality is that in some circumstances—especially where couples or families are concerned—you’ll still have to “prove” your relationship to get basic rights. Many LGBTQ people report being held to a higher standard when, for instance, traveling or seeking medical care for themselves or for their partners.
What to do: If you’re traveling, even domestically, make sure you carry copies of your marriage certificate and your children’s birth certificates. The last thing you want in a moment of crisis is to be unable to prove quickly to authorities your relationship with a loved one. In addition, it’s vital that you have in place a will, as well as durable financial power of attorney (which legally designates the person who can use your money to pay your bills, file your taxes, etc., if you become incapacitated), a living will (which spells out your wishes for end-of-life care, such as when to remove you from life support), and durable power of attorney for health care (which names a particular person to carry out those wishes if you can’t express them yourself). While these documents are important for everyone, in some cases LGBTQ couples will face heightened scrutiny from authorities as well as members of their partners’ families who don’t embrace the relationship. These documents help to ensure that your wishes—and your love—are respected, and that both your partner and your children will get all that’s coming to them.