Wealth Beyond Wages: Achieving financial independence as an LGBTQ+ person
Financial independence is not just a distant aspiration; it's a realistic goal for LGBTQ+ individuals. Embracing FI can be a powerful tool for our community, paving the way for a brighter, more secure future. In this piece, we'll delve into the concept of financial independence (FI) from the unique perspective of LGBTQ+ individuals, exploring its role in sustaining our community and highlighting practical steps that can yield significant returns over time.
What is Financial Independence (FI)?
While definitions of Financial Independence (FI) may vary, it powerfully signifies the ability to meet one’s current financial obligations—such as rent, food, and student or car payments. This concept is intricately tied to the FIRE (Financial Independence, Retire Early) movement, which has inspired countless individuals in recent years. According to a 2023 poll by financial services company Empower, the average American aspires to achieve FI with a minimum yearly income of $94,000. While a substantial majority (67%) recognize the importance of financial independence, it’s vital to address the reality that over half (57%) still rely on family or friends for financial support.
Another survey conducted by the Human Rights Campaign Foundation among LGBTQ+ adults in 2023 found that LGBTQ+ adults were more likely to feel like they were not doing well financially (48% vs. 27%), with Black and Hispanic LGBTQ+ adults having higher rates than their White LGBTQ+ counterparts. This highlights a critical gap in the desire for FI and how individual circumstances might make those desires hard to achieve, especially for LGBTQ+ people.
What Unique Barriers to Financial Independence Do LGBTQ+ Individuals Encounter?
LGBTQ+ folks often deal with specific struggles on their path to financial stability and building wealth, mainly because of biased policies and practices that can really make a difference. A recent survey of 2,000 LGBTQ+ adult Americans by The Motley Fool and the Debt Free Guys found that over half (55%) have faced discrimination in financial services because of their sexual orientation or gender identity. This unfair treatment can make it challenging to access essential financial tools, such as retirement accounts, brokerage services, home loans, and insurance, which are crucial for building wealth. As a result, approximately 72% of people in the community experience increased financial stress. However, by raising awareness and advocating for more inclusive policies, we can all work together towards a fairer economic future.
In the past, the lack of job protections for LGBTQ+ folks, not having marriage equality until recently, and unfair financial practices like what Black people have faced in the U.S. have all played a role in making it harder for our community to get ahead financially. Altogether, these outdated and ongoing unfair policies have made it extremely challenging to build wealth and achieve financial independence.
The Crucial Role of FI in Empowering the LGBTQ+ Community
All this information begs the question: why is FI important for the LGBTQ+ community? There are numerous reasons why achieving FI is crucial for our community. On average, LGBTQ+ people earn less than the typical worker, with LGBTQ+ women, transgender men and women, and LGBTQ+ people of color earning much less. This income disparity underscores the importance of being intentional about planning a path toward achieving financial independence, particularly since we already have less income to work with in the first place. Additionally, we are less likely to have access to long-term care as we age due to our lower likelihood of having children and our increased likelihood of living alone.
Achieving FI can provide a sense of security and reassurance that one can afford to live a comfortable life, both currently and in retirement, especially when there is no guarantee of support from one’s biological family. On a larger scale, FI can also enable individuals to live and thrive in safer neighborhoods, choose to leave a toxic work environment, travel, and possibly even resettle in a more LGBTQ+-affirming country, as well as support organizations and initiatives aimed at improving the lives of others.
What Actionable Steps Can You Take to Work Towards FI?
What are the initial steps to start or continue your journey toward FI? Here are some:
1) Gain a clear understanding of your expenses and spending habits
Develop a comprehensive understanding of your financial expenditures and personal spending habits. Take the time to analyze and categorize your expenses, identifying patterns and trends in your purchasing behavior. This insight will empower you to make informed decisions about your finances, helping you to budget more effectively and ultimately achieve your financial goals.
2) Start investing to grow your wealth.
Saving alone will not get you to FI. You must save your money AND make it work for you by investing it in assets that have the potential to grow over time. Diversification is a key component of this strategy, as spreading your investments across different sectors and asset classes can mitigate risks and increase overall potential returns. This can be achieved through investment in low-cost index funds, which provide exposure to a broad array of market sectors with a reasonable return over time.
3) Automate your finances for peace of mind.
Setting up your accounts to allow for regular automatic deposits and investing removes the additional burden of having to do it yourself, freeing up time for you to dedicate to the things that bring you joy. An example is an automatic monthly deposit of $500 from your checking account to your investment account, which is then invested in an S&P 500 index fund. This “set it and forget it” strategy enables you to work actively towards FI with ease.
Conclusion: FI is achievable and essential for the LGBTQ+ community
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