5 Financial Planning Steps for LGBTQ+ Couples

Vickie Messman is a lead planning excellence consultant at Northwestern Mutual. 

Building a life together is the most exciting part of entering a committed relationship, but it can also be the most challenging financially. Combining finances, focusing on joint goals and even just figuring out the paperwork can feel daunting—and that can be especially true for LGBTQ+ couples.

While LGBTQ+ couples have many of the same needs as all couples, when it comes to financial planning, there are some real differences you will need to consider. 

Working with your partner to take charge of your finances is an important step to a fulfilling life. Here are five financial planning steps for LGBTQ+ couples to consider.

Financial planning steps for LGBTQ+ couples

1. Understand your cash flow

As with any couple, it’s important to make sure you are on the same page as your partner when it comes to how you prioritize your spending. And that can be more challenging for many LGBTQ+ people who tend to report a lower household annual income than adults nationwide. According to the most recent LGBTQI+ Economic and Financial Survey, only 13 percent report an income of more than $100,000, compared to 34 percent of all adults.

Whenever you have a conversation about money, make sure to keep it positive. The survey cited above found that roughly twice as many LGBTQI+ respondents as non-LGBTQI+ respondents reported negative emotions—such as feeling anxious, overwhelmed and depressed—about their finances, so strive to avoid blame and be empathic as you discuss your goals.

It’s important to be intentional when creating a budget based on your income and expenses. Carefully tracking it allows you to determine how you’re really spending your money, compared with how you think you’re spending it.

Regular budget discussions allow you to make thoughtful decisions about how you choose to spend your money, so you both can be sure you’re investing resources in what’s most important to you.

2. Protect your income, family and assets.

If you haven’t taken a look at your insurance coverage in a while, now is the time. You probably have insurance to protect your house, but what about insurance if a disability were to prevent you from working? While LGBTQ Americans typically have adequate health insurance, one study found that they are a bit less likely to have life insurance and significantly less likely to have disability or critical illness insurance—just 16 percent hold a policy compared to nearly half of the overall population. And disability insurance is critical to keeping your financial plan on track, even if you're out of work for a while. 

You may have group life or disability through your employer, but those are typically capped at an amount that might not be enough to provide the lifestyle you want your family to have in the event of your death or disability. An advisor can help you build a plan for your family and recommend a strategy to protect your ability to achieve all you want in life - even if something unexpected happens.

3. Establish an estate plan

A will and power of attorney are vitally important for LGBTQ+ couples, particularly if you and your partner are not legally married. Because laws can change, it’s all the more important to establish an estate plan that make your wishes known legally.

Compared with 33 percent of the general population, only 20 percent of the LGBTQ+ community have a will or estate plan. Yet having a durable power of attorney might be especially important in LGBTQ+ relationships because it can help ensure that the person you want has the power to make decisions on your behalf.

It can be a good idea to store digital copies of your marriage license and other vital documents in a secure file storage service that you can access no matter where you are. That way, should your partner end up in the hospital or other emergency situation, you will be able to produce any documents you may need to prove that you’re married.

 

4. Create a strategy to handle debt 

While the majority of Americans carry some personal debt, the LGBTQI+ Economic and Financial Survey found that members of the LGBTQ+ community tend to have more student loans and credit card debt than the general population, which can make it more challenging to build a solid financial foundation.

Creating a plan to pay down your debt can help you feel in control. One strategy is to prioritize your bills according to their interest rate so you are paying down your highest interest debts first, while continuing to make at least the minimum payments on all accounts. If you have student loan debt, consider possible steps to pay it down strategically—or get it forgiven completely.

The goal is to be smarter about your debt to free up money that can then be put toward savings so you can get ahead financially.

5. Develop a savings and investment plan

Many LGBTQ+ couples have a difficult time saving because they often face higher expenses on a variety of fronts. For instance, they may need to buy a home in a more expensive area where they feel safe, and those who want to start a family may face high adoption expenses. Even female couples where one is the biological parent may find they face legal expenses if their partner is not automatically considered the other legal parent.

Saving for each of these milestones should be a priority—but not at the expense of retirement. Because many LGBTQ+ couples get married later in life—and usually have children later, too—it may be more difficult to amass an adequate retirement nest egg as they get closer to the retirement horizon.

That’s why the sooner you start saving, the better, so your money can work for you, thanks to compounding interest. Focus on starting small and expanding to create the habit. Once you’re in a savings routine, you can focus on slowly increasing the amount you save over time.

Find an advisor who understands you

Many LGBTQ+ Americans have experienced discrimination from someone in the financial services industry, which is why working with a financial advisor who is experienced with the needs of LGBTQ+ couples is key. The good news is that you don’t have to be limited by geography. Many Northwestern Mutual financial advisors have licenses to work across state lines and can meet you where you are to provide personalized guidance for mapping our your financial plan.