New Year, New (Financial) Life: Taking Charge of your Financial Path to Retirement

For many in the LGBT+ community, planning for retirement presents unique challenges and financial struggles. Discrimination, unequal access to benefits, and periods of economic instability can have long-lasting impacts on retirement savings and overall financial security. As a result, LGBTIQ+ individuals may face additional struggles in securing a comfortable and stable retirement.

However, with the right strategies it is possible to take control of one’s financial future. This article explores the key financial struggles faced by many in the LGBT+ community when planning for retirement and provides insights to overcome these obstacles.

As explored in previous articles, LGBT+ individuals often encounter unique financial obstacles throughout their lives compared to their non-LGBT+ peers. A 2021 Survey of Household Economics and Decision Making (SHED) highlights this disparity, revealing that LGBT+ individuals typically possess less savings.

3 Financial Group, a financial advisory firm serving Hawaii’s women and LGBTQ community, further emphasizes the distinct retirement challenges faced by the LGBT+ community. These challenges are rooted in historical discrimination and ongoing disparities in healthcare, legal, and social support systems. Issues such as marriage equality, discrimination protections, and estate planning are crucial to secure a comfortable retirement.

The LGBT+ community may also face increased healthcare needs, including access to hormone therapy, HIV/AIDS treatment, and mental health support. Long-term care and potential discrimination in care facilities can aggravate feelings of isolation. Moreover, workplace discrimination can lead to further wage gaps and negatively impact retirement savings.

Financial matters don’t have to feel overwhelming. An optimal solution is to break down the process step by step to achieve financial stability. Money plays a crucial role in daily life, enables comfort, and provides the extras that individuals desire, such as vacations, gadgets, etc. But how can these goals be reached when many people struggle to make ends meet and build savings? The first step is to gain a clear understanding of your financial goals and what you want to accomplish—whether it’s early retirement, purchasing real estate, starting a business, etc. This analysis process may take a few days or weeks to refine.

This exercise does not have to be done at the start of the year; it can be undertaken during the Chinese New Year, the Jewish New Year, or any other time of the year that suits you. What matters is that it happens, as it provides crucial direction and motivation for your daily life. Once the goals are clearer or even while you are still analyzing, it’s time to start planning a monthly budget.

The goal is to take control of the expenses and understand where the money is being spent. By tracking the monthly expenditures, you gain insight into how to create a budget that aligns with your goals. There are several free, user-friendly apps available for smartphones that make it easy to track daily expenses. If tracking daily expenses feels too burdensome, it can be done on a weekly basis. The goal is simply to stay mindful of the expenses. A bank statement can also be a helpful tool for tracking one’s costs.

A monthly budget should include both fixed and variable expenses. Fixed expenses are predictable and consistent, such as rent, mortgage payments, insurance premiums, and utility bills. Variable expenses fluctuate, including groceries, dining out, entertainment, and travel.
It’s critical to analyze spending habits to identify areas where you can save. For instance, consider how much do you spend on groceries compared to dining out? One can be surprised by how much money can be saved by preparing their own meals. Not only does this save money, but cooking at home can also prioritize healthier food choices, which can improve long-term health and potentially reduce healthcare costs later in life.

The 50-30-20 rule, popularized by Elizabeth Warren over 20 years ago, remains a practical guideline today. This rule suggests allocating 50% of the monthly income to “needs” (housing, utilities, groceries), 30% to wants (entertainment, dining out), and 20% to savings.

Many people are surprised to find that by automatically allocating 20% of their income to a separate savings account, they can adapt their spending habits and live comfortably without dipping into those savings. As Warren Buffett, the “Oracle of Omaha”, advises, “Do not save what is left after spending; instead, spend what is left after saving.” It’s essential to “pay yourself first,” meaning that as soon as the paycheck hits the bank account, 20% should be automatically transferred to savings.

The 50% allocated to “needs” should ideally include no more than 30% for housing costs (rent or mortgage and utilities), with the remaining portion covering groceries, insurance, medical expenses, and other essential costs. The 30% for “wants” includes discretionary spending like dining out, drinks, entertainment, and hobbies.

For those facing financial challenges, saving 20% of their income may feel initially overwhelming. A simple alternative is to start by saving just 1% per month, gradually increasing the percentage each month. The ideal saving rate can be adjusted based on individual circumstances and refined over time.

Once the monthly expenses are analyzed and the budget is set, it’s crucial to build a financial cushion for unexpected situations. A way to obtain it is by having enough in savings to cover three to six months’ worth of expenses. This emergency fund is crucial in case of unforeseen events, such as a job loss or illness.

The 50-30-20 rule is flexible and can be adjusted based on individual needs after carefully reviewing the monthly expenses. By increasing the savings percentage and incorporating investments, the path to financial independence and to securing a stable retirement can be accelerated.

Achieving financial goals requires time, patience, and resilience. Taking the initial steps of tracking expenses and budgeting can truly transform lives. Ultimately, by gaining control over personal finances, individuals can empower themselves and set a new, positive direction that can be life-changing.

Please note, the information provided is for informational purposes only and should not be considered personal financial advice. For personalized guidance, please consult a qualified financial advisor.