Just How Is Money Different for LGBTQ+ People?
The 80/20 rule of personal finance
Personal finance is a lot like the Pareto Principle, also known as the 80/20 Rule – 20% of your efforts produce 80% of your results. As such, 80% of money works the same for everyone; a dollar for you works the same as a dollar for me. It’s transactional. It’s the “finance” in personal finance.
The other 20% that affects our experiences with money is based on who we are, our background, history, race, creed, socio-economic class, sexual orientation, gender identity, heritage and much more. These qualities inform our money stories, many of which are passed down from previous generations. They make up the “personal” in personal finance. Thus, how each community thinks about and uses money is different from straight, white men to women to BIPOC folks and the LGBTQ+ community.
As with the Pareto Principle, the 20% has a disproportionate effect on the 100%, and it starts at a very young age.
Legacy financial exclusion
Beginning in our formative years for many LGBTQ+ people, we receive messaging from family, church, politicians, media and school that the thing we feel inside and makes us a little different is an issue. There’s something wrong with us. This is one reason why today’s rhetoric and state-level legislation will have a detrimental effect on today’s LGBTQ+ youth for a lifetime. If history is any guide, many will struggle with drug or alcohol addiction, suicide ideation, financial insecurity and other challenges.
Another consequence is legal financial exclusion, which happens at three stages in the lives of LGBTQ+ people – early, middle and late.
Early-life legacy financial exclusion
- Becoming homeless – Per the William’s Institute, 40% of homeless youth identify as LGBTQ+. Homelessness is expensive. It starts LGBTQ+ youth off without financial support from mom and dad and causes them to miss indirect financial education by watching them use their money. Some LGBTQ+ youth file for emancipation. Emancipation often starts kids off at an economic disadvantage with low skill, low pay jobs that set the baseline for their lifetime income.
- Not getting financial support for college – Student Loan Hero found in 2018 that LGBTQ+ graduates had an extra $16,000 in loans compared to their straight peers. This has been attributed, in part, to LGBTQ+ college students leaving non-affirming or abusive homes. In such cases, parents forgo helping their queer children in favor of helping their straight children.
It was recently reported by NBC News that many LGBTQ+ college students are leaving non-affirming states, particularly Florida, to get an education where they feel safer. With the increased cost of out-of-state tuition, many of these LGBTQ+ students will graduate college with even more student loan debt than previous generations, making it harder to get ahead after college. This will only exacerbate the gap highlighted in the 2023 Motley Fool/Debt Free Guys LGBTQ+ Money Study with 31% of respondents reporting having student loan debt relative to just 21% of the general population.
Middle-life legacy financial exclusion
- Not being helped with daily expenses– The Hill recently reported that 40% of Millennials (folks between 25-40) have their parents helping pay for at least one daily living expense, most often their rent or mortgage. Per savings.com, this averages $1,400 a month. This doesn’t happen for many queer folks who left home early or were forced to leave and supports why 63% of respondents report that keeping up with the cost of living is a top financial concern.
- Not getting help with paying for a wedding – Even today, many same-sex couples pay all the costs of their weddings. This has near- and long-term consequences. A 35-year-old, same-sex couple that spends $29,000 of their own money on a wedding rather than invest that $29,000 in a retirement account forgo upwards of $310,000 to $815,000 in potential retirement assets if they retire at 70 and got an average 7% to 10% return.
Later-life legacy financial exclusion
Finally, many LGBTQ+ adult children aren’t included in inheritances. Even small inheritances from family can help people pay off debt, pay off a home, send a kid to college, or provide support through their own retirement. This adds to SAGE’s 2021 findings that “one-third of ‘LGBTQ+ 50+’ [New Yorkers] live at or below 200% of the federal poverty level, compared to a quarter of non-LGBTQ+ [New Yorkers].”
For example, David’s parents will likely leave an inheritance up to $1,000,000 to his sister after they pass away. David will see none of this, and it’s solely because he’s gay. His parents have every right to do with their money as they wish. But David’s sister will get a considerable boost in financial security that he won’t get.
Financial solutions for LGBTQ+ folks
The importance of making personal finance education accessible to everyone, especially queer people, can’t be overstated. But for many in the LGBTQ+ community, thinking about their personal finances is a privilege they don’t have. Many are living in fear due to increased threats, real and perceived, of physical, verbal and political abuse.
It’s critical that personal financial education becomes more accessible to everyone, especially the LGBTQ+ community. The stronger we are as LGBTQ+ individuals and allies, including our financial strength, the stronger we are as a community. The stronger we are as a community, the more time, money and emotional energy we have to support the politicians, people and organizations that are protecting and pushing for LGBTQ+ rights.
That said, LGBTQ+ people have never had access to financial education and financial services like we do today. There are many LGBTQ+ personal finance content creators, from bloggers to podcasters to social media “finfluencers.”
The 2023 Motley Fool/Debt Free Guys LGBTQ+ Money Study also showed that 55% of LGBTQ+ respondents reported being discriminated against by someone in the financial services industry, up from 48% in 2022, and 49% attribute this discrimination to their lack of financial security. This is why we need to engage with LGBTQ+ financial advisors and planners, not just advisors and planners who are allies. Some great resources to do so include local Pink Pages, local LGBTQ+ chambers of commerce and the National LGBT Chamber of Commerce (NGLCC).
LGBTQ+ financial advisors and planners can be found at LetsMakeaPlan.org hosted by the CFP (Certified Financial Planner) Board. Finally, LGBTQ+ financial advisors and planners can be found at the Financial Planning Associations Pride Planners.
By bridging the persistent gap between the financial services industry and the LGBTQ+ community through LGBTQ+ financial advisors, planners and finfluencers, we can reduce the high amount of financial stress with which 72% of the LGBTQ+ community struggles.
We want to thank our guests, David & John Auten-Schneider, for sharing their experience and insight with us. We strongly believe that the next generation of financial advisors needs to better reflect the community it serves, and their blog emphasizes some of the critical reasons why. If any of this moves you, we implore you to seek a career in financial services so you can better serve your community or be an ally to it.
David & John Auten-Schneider are the Debt Free Guys and hosts of the Queer Money® podcast. They help queer people (and allies) live fabulously not fabulously broke. They were the first LGBTQ+ personal finance contributors to Forbes and their work has appeared in Yahoo!Finance, CNBC, Good Morning America and more. They’ve partnered with some of the biggest companies, from Capital One to Orbitz, worked with some of the leading LGBTQ+ non-profits, from The Trevor Project to Out & Equal and spoken for employee and business resource groups, from FICO to Verizon. With their newly released LGBTQ+ money study done in partnership with The Motley Fool, they’re creating a first of its kind service that bridges LGBTQ+ workers to the financial services industry. You can connect with John via his LinkedIn, David via his LinkedIn, or by visiting Debt Free Guys or Queer Money Podcast.