A Queer (Mis)understanding of Personal Finance
Note: This is the first of a two-part series. Next month, Edge Editor-in-Chief Steve Weinstein will examine some of the lessons imparted by the authors of the new book "Same Sex Legal Kit for Dummies, by Carrie Stone and John Culhane."
You know someone like this. You probably know several people like this. In fact, it's entirely likely that you are someone like this: the gay man or lesbian who drinks only in bars and insists on top-shelf booze, would never let artificial fibers touch skin, vacations in exotic destinations or on party cruises, never cooks at home (and wouldn't know how anyway), just has to see the latest hit musical or buy the complete DVD set of a favorite TV show. Yet, every month, this person scrambles to pay bills, and come April goes into absolute panic about how to pay taxes.
Many LGBT Americans follow the old Greek maxim, "Eat, drink and be merry, for tomorrow we die." There are plenty of reasons for this. Until the mid-90s, gay men felt they faced a death sentence if they contracted HIV. Though many of us have become parents, many more of us have no dependents to put through college. Without families of our own, we may be cavalier about what happens to our assets when we die. Our urban gayborhoods may be fun places to live, but they can also be expensive, competitive and judgmental. We pride ourselves on our taste for the finer things in life -and disdain for those who lack our good taste. We may be estranged from our families or not particularly enamored of them.
Through discussions with financial planners and other research, I have come up with the 10 ways we mismanage money.
We don’t save for a rainy day.
Remember the grasshopper in the Aesop fable, who fiddled all summer while the industrious ant put away bits of food? Like sunny days, rainy days will happen. Anyone not prepared will find that rain wreaks havoc on credit cards, credit ratings, and family members and anyone else who can be hit up for an emergency "loan."
We don’t buy life insurance.
Parents have to think about what will happen to their children. But just because we may be parentless doesn’t mean that there aren’t people in our lives who don’t depend on us in some way. It could be an ailing parent or other relative, or a friend. All of us have our pet charity or other nonprofit organization that could receive needed funds as the beneficiaries of life insurance. And HIV is no longer an excuse: Thanks to improved meds, some companies offer policies to people infected with HIV.
We don’t do estate planning.
In the absence of normal protections, it’s vital that gay couples give special attention to detailed estate planning. Don’t think that a notarized will necessarily keeps hostile relatives from coming after what you have bequeathed to your partner or spouse. Thanks to the Defense of Marriage Act and in tons of other ways, we are heavily penalized compared with straight couples, which means more attention must be paid.
We don’t do pre-nups.
Too many of us have pie-in-the-sky romantic notions that this one is forever. Gee, I hope so. But some of the first gay nuptials have already ended in divorce. Half of all marriages end in divorce, and there’s no reason to believe that - even though we as a community are fighting so hard for the right to get hitched - we’re any different. One sticking point is a disparity of income: Sometimes it’s hard for gay couples to acknowledge that one partner makes significantly more than the other. If you buy property or any other big-ticket item together, it’s especially important to detail exactly who gets it in case of a breakup, and how much the other must pay to keep it.
We don’t buy enough health or disability insurance.
The obvious response is, who does these days? But that doesn’t mean you can risk not being covered in case of a serious illness or accident. That many of us can now get coverage through our spouse certainly has changed the landscape (while keeping in mind that that coverage is taxed). Many gay people tend to be self-employed, which means difficulty finding coverage at a reasonable rate - or any rate - and finding the money to pay for it.
We don’t designate a proxy.
A durable power of attorney or proxy is vital for everyone these days, when medical science can keep people alive in extreme circumstances. It’s crucial for unmarried people to designate someone who make sure hospitals and other facilities respect wishes.
We try to keep up with the latest trends.
Money is only a status symbol to nouveau riche reality television stars and Russian oligarchs. One of the most wonderful aspects of gay life is that it is a great leveler of social circles. Much more than those in mainstream society, we are apt to know semi-homeless tweakers and corporate CEOs. But there are downsides. We’re faced with people whose incomes dwarf our own. Snobbery (or perceived snobbery) can intimidate us - forcing us to buy or do something we can’t afford because of our insecurity, our fear of having people look down on us. That also holds true for investments. A second house on Fire Island is one of life’s great pleasures - but only for those who can handle the high cost of upkeep. The wealthy can deal with volatility because they can absorb the potential losses.
We don’t plan for retirement.
The ability to depend on the government in our later years is becoming unlikely, as Medicare and Social Security face their own difficulties. Even if those programs manage to survive for the next several years, you’ll need a source of income to supplement them. Unfortunately, most people don’t spend their lives at one company anymore - and most companies no longer offer pensions. A lot of us are freelancers, with not even the instability of a 401(k).
We don’t invest smart.
Because may of us aren’t worried about paying for our kids’ wedding or helping them put a down payment on that first house, we may be attracted to speculative investments - never a good idea, as recent events have again proved. Conversely, sometimes we invest too conservatively, which means inflation will have eroded much of our savings by the time we need to draw on it.
Life is a cabaret (or at least a disco).
Don’t have fun all the time! Make like the ant, you grasshopper. That’s the biggest issue. Your greatest asset is your ability to earn a living. Don’t fritter it away. Good credit doesn’t only mean more credit cards (another bad idea). It’s also the only way you’re going to get a mortgage - if, that is, you can come up with the down payment. The next time you gather up your friends for yet another meal in a trendy restaurant and cocktails at the local watering holes, maybe you should consider whipping up some spaghetti and a salad at home, and buying a bottle of vodka and Sour Apple Pucker for a pitcher of homemade appletinis. This doesn’t mean you can never go out to eat - or travel to a Circuit party, or vacation in Mykonos, or buy a $1,500 Dolce & Gabbana blazer, or lease a Mercedes or take a house for the season in Provincetown. But not at the expense of your financial security.