LGBTQ+ guide to personal finance 2022

According to Gallup, 7.1 percent of U.S. adults identify as LGBTQ+. That number is significantly larger for U.S. adults born between 1997 and 2003, at 20.8 percent. [i]

As we celebrate Pride Month, it’s important to recognize the LGBTQ+ community’s successes while also raising awareness for the changes that are still needed. LGBTQ+ Americans have made great strides toward equality since the 1969 Stonewall Riots that birthed the modern LGBTQ+ rights movement and annual Pride celebrations. But inequities still exist — especially in personal finance.

Studies show that LGBTQ+ adults are behind other Americans in retirement savings and ahead of other Americans — but ahead in the wrong way — regarding debt. In this guide, we’ll address the financial disparities that exist and highlight resources that can help.

Financial inequities for the LGBTQ+ community

Personal finance isn’t just about your income. It touches nearly every aspect of how we live. LGBTQ+ Americans are, on average, less insured, more in debt and have less in savings. Here are a few figures from a 2022 survey co-sponsored by Debt Free Guys, an LGBTQ+ financial blog, and The Motley Fool.[ii]

• 43 percent of LGBTQ+ adults have life insurance, compared with 54 percent of all adults.
• 17 percent of LGBTQ+ adults have disability or critical illness insurance, compared with 49 percent of all adults.
• 16 percent of LGBTQ+ adults have a will or estate plan, compared with 33 percent of all adults.
• 37 percent of LGBTQ+ adults have student loan debt, compared with 21 percent of all adults.
• 37 percent of LGBTQ+ adults have personal loan debt, compared with 6 percent of all adults.
• 52 percent of LGBTQ+ adults have less than $10,000 in savings, compared with 43 percent of all adults.
• 48 percent of LGBTQ+ Americans have experienced discrimination by someone in the financial services, banking or investing industries.

In each of those categories, LGBTQ+ adults get the short end of the stick. It’s no wonder, then, that the survey found two-thirds of LGBTQ+ Americans suffer high financial stress every day. About the same percentage cited earning enough money to get by as their top financial concern.

Income and savings

The income gap is real for LGBTQ+ people, and intersectionality deepens the divide in some cases. The good news is that the most common income range for LGBTQ+ Americans is $100,000 or more — which is also true for the general population. However, it’s still a smaller percentage (26 percent) than the general population (31 percent).

And despite the success of those making over $100,000, 22 percent of LGBTQ+ adults live in poverty (compared to 16 percent of heterosexual adults).

A large factor contributing to these figures is the fact that LGBTQ+ workers earn about 90 cents for every $1 earned by a typical American worker, according to the HRC Foundation.[iii] The numbers are worse for some ethnicities and races:

• An LGBTQ+ Asian/Pacific Islander worker earns $1 for every $1 that the typical worker earns.
• An LGBTQ+ white worker earns 97 cents for every $1 that the typical worker earns.
• An LGBTQ+ Latinx worker earns 90 cents for every $1 that the typical worker earns.
• An LGBTQ+ Black worker earns 80 cents for every $1 that the typical worker earns.
• An LGBTQ+ Native American worker earns 70 cents for every $1 that the typical worker earns.

Male workers in the LGBTQ+ community earn about 4 percent less than the typical worker, according to the HRC Foundation analysis. For female workers in the LGBTQ+ community, there’s a 13 percent shortfall.

Likely a result of smaller incomes, LGBTQ+ individuals tend to have less in savings. According to the same analysis by the HRC Foundation, a smaller percentage of LGBTQ+ Americans have $10,000 or more in savings than their non-LGBTQ+ counterparts.

“Previous research has found that LGBTQ+ adults in the United States, on average, fare worse economically than their straight and cisgender counterparts,” the HRC Foundation declared in releasing its findings about pay.

Debt

The financial worries of LGBTQ+ Americans are aggravated by the sheer amount of credit card debt that they’re saddled with. The Motley Fool and Debt Free Guys survey found that 56 percent of LGBTQ+ adults have credit card debt, compared with 45 percent of all adults.

Also, the median credit card debt for LGBTQ+ Americans stands at $3,000 — 11 percent higher than the average American. On the flip side, the median amounts of student loan and personal loan debt are substantially lower for LGBTQ+ Americans versus all Americans.

Credit scores

A smaller percentage of LGBTQ+ Americans have credit in the “very good” to “excellent” ranges.

Homeownership

A 2019 study at Iowa State University analyzed national mortgage data from 1990 to 2015 and discovered the approval rate for same-sex couples was 3 percent to 8 percent lower than the rate for opposite-sex couples.[iv] The researchers also found that same-sex applicants were 73 percent more likely than opposite-sex couples to have their mortgage applications rejected. On top of that, mortgage lenders hit same-sex borrowers with higher fees and interest rates.

Knowing this, it’s unsurprising that The Motley Fool and Debt Free Guys found that only 26 percent of LGBTQ+ Americans have a mortgage, compared with 40 percent of the all Americans.

Retirement

A huge component of a healthy financial plan is retirement savings. Unfortunately, a study from Transamerica Institute found that LGBTQ+ Americans tend to be less prepared for retirement than heterosexual Americans. [v]

• 61 percent of LGBTQ+ workers say debt interferes with their ability to save for retirement (compared to 48 percent of non-LGBTQ+ workers)
• 63 percent of LGBTQ+ workers are confident of being able to retire comfortably (compared to 74 percent of non-LGBTQ+ workers)
• 69 percent of LGBTQ+ workers have access to an employer-sponsored 401(k) or similar retirement plan (compared to 76 percent of non-LGBTQ+ workers)

Economic impact of the pandemic

The pandemic affected Americans differently, and in many cases, things got worse for groups that were already struggling. The Transamerica Institute study also uncovered several financial challenges that deepened for LGBTQ+ workers since the start of the pandemic.

• 24 percent of LGBTQ+ workers accumulated new credit card debt due to pandemic-related financial woes, compared to 15 percent of non-LGBTQ+ workers.
• 62 percent of LGBTQ+ workers say the pandemic has hurt their financial situation, compared to 49 percent of non-LGBTQ+ workers.

New financial frontiers

The first step toward equality is understanding where disparities exist. Next comes action. With this wealth of data available, financial services firms and nonprofit initiatives are taking action to help through specialized products, targeted services and philanthropic efforts. A few examples include:

• Superbia Services’ goal is to wipe out discrimination in the financial services sector, and it is poised to open the country’s first credit union focused on LGBTQ+ customers and allies.
• Founded in 2020, Daylight Bank bills itself as the first digital banking platform for the LGBTQ+ community. Its offerings include checking accounts and fee-free access to ATMs. Daylight allows customers to choose their desired names for accounts and debit cards.
• In 2021, Mastercard expanded its True Name program. True Name enables customers to put their desired name on payment cards. BMO Harris, Citi and Republic Bank are among the brands that have joined the True Name program.
• At the outset of Pride Month in 2022, Family Wealth Management Group introduced its new Rainbow Network for LGBTQ+ financial advisors.

LGBTQ+ financial legislation history

For decades, LGBTQ+ Americans have ridden the societal ups and downs of legislation that affects their finances. Here are some of the highlights and lowlights:

• 1969: The Stonewall Riots at New York City’s Stonewall Inn ushered in the modern movement for LGBTQ+ rights.
• 1974: The federal Equal Credit Opportunity Act passes, prohibiting discrimination tied to credit transactions (such as loan and credit card approvals) based on race, color, religion, national origin, sex, marital status, age or income. However, the law excluded discrimination by sexual orientation and gender identity.
• 1988: Federal lawmakers updated the Fair Housing Act to ban discrimination against buyers or renters based on race, color, national origin, religion, sex and disability. Again, the law didn’t cite discrimination associated with sexual orientation and gender identity.
• 2015: The U.S. Supreme Court legalized same-sex marriage nationwide The ruling allowed same-sex couples the same tax and other financial benefits that married opposite-sex couples get.
• 2020: The U.S. Supreme Court ruled that federal law prohibits discrimination against workers based on sexual orientation or gender identity.
• 2021: The U.S. Department of Housing and Urban Development (HUD) added sexual orientation and gender identity to the categories of people covered by enforcement of the Fair Housing Act.
• 2021: The federal Consumer Financial Protection Bureau extended protections under the Equal Credit Opportunity Act to LGBTQ+ Americans, prohibiting discrimination based on sexual orientation and gender identity.

LGBTQ+ financial resources

Finance is personal. Here are a few financial resources, from large institutions that publicly support the LGBTQ+ community to those specifically designed to help LGBTQ+ Americans.

The Debt Free Guys blog, run by personal finance experts (and husbands) David Auten and John Schneider, offers a queer take on slashing debt. Their blog, podcast and online tools are aimed at helping “live fabulously, not fabulously broke.”

Financial educator K. Kenneth Davis, known as “The Trans Capitalist,” is determined to boost the financial literacy of LGBTQ+ Americans. Among Davis’ offerings are a step-by-step money guide, financial literacy workshops, one-on-one financial coaching, online investment courses and financial counseling for couples.

SAGE, a nonprofit organization serving older LGBTQ+ Americans, provides a variety of legal and financial resources. Among them is SAGEcents, a digital platform designed to help older LGBTQ+ people improve their financial literacy and stability. The platform’s financial backer is the Wells Fargo Foundation.

The Human Rights Campaign, an LGBTQ+ civil rights group, and the HRC Foundation promote a number of legislative and policy changes aimed at bettering the financial lives (and all-around lives) of LGBTQ+ Americans.

The Oh My Dollar! blog, created by Lillian Karabaic, is “an inclusive, no-judgment place to talk about money for people of all incomes.”

Sources

[i] Gallup:  LGBT Identification in U.S. Ticks Up to 7.1%. February 2022. https://news.gallup.com/poll/389792/lgbt-identification-ticks-up.aspx

[ii] The Motley Fool and Debt Free Guys: LGBTQ+ Finances: A survey of 2005 Americans. April 2021. https://www.fool.com/research/lgbtq-money-study/

[iii] Human Rights Campaign: The Wage Gap Among LGBTQ+ Workers in the United States. May-June 2021. https://www.hrc.org/resources/the-wage-gap-among-lgbtq-workers-in-the-united-states

[iv] Iowa State University: Lower approval rates, higher finance fees evidence of discrimination for same-sex borrowers. April 2019. https://www.news.iastate.edu/news/2019/04/16/samesexmortgage

[v] Transamerica Center for Retirement Studies: Recognizing and addressing risks and realities negatively impacting retirement security. November 2021. https://transamericainstitute.org/docs/default-source/research/2021-retirement-outlook-compendium-report.pdf