Top 5 Tips From an LGBT Financial Advisor
|Written by Tom Yeung, CFA | CDFA|
Investment Advisor & Fund Manager, Jurnex Financial Advisors
Good financial planning doesn’t have to do with whether you’re straight or LGBT. Everyone could use a great financial plan, just as everyone could use a good budget.
But doesn’t it seem that LGBT people face different circumstances from everyone else?
If you feel this way, you’re not alone.
As a group, LGBT people make more money on average. But we also face issues that straight people don’t. This includes everything from outright workplace discrimination, to more subliminal issues.
Much financial advice is geared towards the straight world. So here are my top five tips for you, coming from a fellow LGBT member.
The top 5 tips from an LGBT financial advisor
1. Automate your spending habits
It turns out that LGBT people DO spend more money than straight people. Studies by Experian and Nielsen both found that LGBT people spend 72% more on bookstores, 55% more at liquor stores and 32% more at pet stores.
But there’s a simple solution to budgeting: automate your spending
Budgets are often too hard to follow
Budgets have a habit of getting broken. We tell ourselves that we *should* be able to follow these plans. But only a theoretical person could possibly be able to follow a budget down to the dollar.
In reality, spending is messy. Emergencies come up. Temptation (often in the form of online sales) springs at every corner. We’re only human.
Automation solves the spending problem
Instead of tracking spending, why not automate things instead?
I often tell clients about the 50/15/5 rule: when you receive your paycheck, have it immediately split into 3 accounts (virtually every US bank offers auto-deposits):
- 50% into a bank account for “essentials” (groceries, housing, utilities & transportation)
- 15% into a savings account
- 5% into an emergency fund account
The remaining 30% can stay in the original bank account and be used for “fun” spending. But once the fun money runs out, you simply have to wait until your next paycheck to come in.
Imagine that! Being able to spend guilt-free, knowing that you have enough set aside for retirement and essentials.
2. Know your medical costs
The second of the top 5 tips from an LGBT financial advisor: medical costs.
In general, LGBT people have higher medical costs than straight people, according to the NIH. Additional expenses include:
- Men. Higher risk of exposure to chronic diseases such as HIV, Hepatitis B and certain cancers
- Women. Longer life expectancy adds ~15-25% to total retirement medical costs.
- Transgender. Medical costs for sexual reassignment procedures, and long-term hormonal treatment expenses
In addition, LGBT people are (source):
- 1.5-2.5 times more likely to smoke cigarettes
- 28% more likely to have heavy drinking issues
- 43% less likely than opposite-sex couples to have access to employer-sponsored spousal health benefits
Not every LGBT person faces heightened medical risks. There are plenty of people in the community who take great care of themselves. You might be one of them too!
But keep in mind the average LGBT person will spend more on medical care over the course of their lifetimes. That means most general financial advice tells LGBT people to save TOO LITTLE for medical care.
So make sure you know what health risks you face. If you’re like most Americans, health care will be one of your largest expenses in retirement, after housing and transportation costs. The average retired couple may need $285,000 saved to cover health care expenses in retirement. As an LGBT person, you might need an extra 20-25% saved away.
3. Have a plan BEFORE you adopt
The third of the top 5 tips from an LGBT financial advisor: understand the costs of adoption
If you’re considering adopting a kid, I thank and congratulate you wholeheartedly. There are almost 400,000 children in foster care, and every child we adopt helps relieve that statistic.
Make sure you have a written financial plan in place.
General financial advisors will tell you that the average child costs $233,610 over the course of 17 years. Private tuition can add an extra $80,000 on top of that.
As an LGBT financial advisor, I tell people that adopted children may have hidden costs. According to a study by the Adoptive Families Magazine, the average total cost of independent adoption comes to $34,093. Going through an adoption agency adds an additional $5,873 to that amount. So while you don’t have to pay hospital birthing fees, you still have to be careful about the initial cash requirement for adoption.
Don’t let finances dissuade you from adopting
In fact, a clear financial plan will HELP make adoption a reality. That’s because a financial plan can show an adoption agency that you can afford to have a child.
Having a child usually means setting aside at least $15,000 per year in additional expenses. This usually comes from reducing spending in other categories, such as entertainment or travel. But if you find the right kid, it’s worth it.
4. Keep your partner (or next-of-kin) involved
The fourth of the top 5 tips from an LGBT financial advisor: keep your partner and family in mind.
Even though same-sex marriage is now legal in all 50 states, many LGBT couples have decided to remain domestic partners.
That means you need to make sure proper documentation is in place in case something happens to either of you. Otherwise, the law will assume a blood-relative as a next-of-kin. This can cause major issues for long term couples who have decided to stay unmarried.
Do married couples have to worry?
Even if you’re married, having medical and end-of-life wishes written out can help your spouse carry out your wishes without having to guess.
- Medical power of attorney. What happens if you get in an accident and can’t make your own medical decisions?
- Will and testament. What should your spouse or family do if you pass away? Who will your assets transfer to? Are there any charities you want to help fund?
- Life insurance. Is your spouse or family covered if something were to happen to you?
- Joint bank accounts. Do you have joint accounts with your spouse, or will your spouse have to go through probate if you were to pass away?
What is probate?
Probate is a legal process that takes place after someone dies. If you have bank accounts or property is in your name only, the courts may freeze access to those assets while they determine who you’ve left the asset to. This prevents any family member from illegally withdrawing money from your account for themselves.
But what happens if your partner is living in that house or uses a bank card in your name? While some states like California allow up to $100,000 to be transferred without probate, other states aren’t as generous. All of a sudden your spouse’s life could be up-ended during the time your estate gets settled.
How to pass assets directly to a domestic partner
You can avoid probate in a couple of ways:
- Joint ownership. Add your domestic partner as a joint owner. This is the simplest way to avoid probate.
- Revocable living trust. Putting valuable assets in a trust can help avoid the probate process. That’s because the trust (not you as an individual) ultimately owns the property.
- Pay-on-death account. Most banks have simple forms where you can list a beneficiary. When you die, the money goes directly to that beneficiary.
5. Donate to LGBT causes (if you can!)
The final of the top 5 tips from an LGBT financial advisor: know how to donate.
Give to pro-LGBT causes if you can. It’s never too early or late to start making a difference.
Anti-LGBT sentiment is sadly still alive and well in the world. From Chick-Fil-A’s donations to conversion therapy causes, to leaked homophobic memos from Puerto Rico’s former governor.
Can you afford to donate?
Many LGBT families are hesitant to donate because they aren’t sure whether they’re saving enough money. That’s understandable: if you aren’t sure you can provide for yourself, how can you start donating significant amounts of money?
But that’s one great reason to have a written financial plan in place. Because once you do, you’ll start to realize exactly how much you can afford. Instead of spending money without a plan, families can mindfully save, spend, and donate the rest to causes that are meaningful
As an LGBT financial advisor, I constantly see well-meaning advice that’s geared towards straight individuals and families. Much of it is useful to the LGBT community. But the advice is rarely complete.
That’s because LGBT people have different needs and lifestyles from other people. That’s what makes us different from heteronormative people in the first place!
Where to find more resources
If you’re looking to revamp your financial plan, there’s no better time than now. All it takes is a phone call.
That’s because I’ve invested client money for over a decade in the same old-fashioned way: seek out great companies in good industries, that can be purchased at a discount to their fair value. Sounds too simple to be true? Give me a call today and I’ll show you that it’s still possible after all these years.
About Jurnex Financial Advisors
At Jurnex Financial Advisors, we have the securities backing of Charles Schwab. Yet we retain our operational independence from any third party. This means you can have the confidence your money is safe with one of America’s best brokerages and still receive knowledge and advice from an independent firm focused on YOU.
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