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How to Make a Budget That Fits Your Lifestyle

Queer folks are more likely than cishet peers to have a lower salary (even after college), more likely to face discrimination when applying for loans and can have higher medical costs that aren’t covered by health insurance.

That makes making and sticking to a budget especially important — and challenging — for LGBTQ folks.

The obstacles facing queer people

You might think these claims are an exaggeration, but statistics back them up. For example, a study by Student Loan Hero found that 40% of LGBTQ borrowers were denied financial assistance for college because of their sexual identity. The 2019 Workplace Equality Factsheet by Out & Equal showed almost 10% of queer people had left jobs after experiencing discrimination, and a whopping 50% experience discrimination in the workplace on a regular basis.

On top of that, trans folks face extra medical costs if they choose to medically transition, and can have trouble finding supportive medical professionals. In some states, including Ohio, bills have been passed that could allow medical professionals to deny care and services to people “on the basis of moral, ethical, or religious exemption,” according to the Human Rights Campaign

It doesn’t take a genius to figure out that a religious health care provider could legally deny care to a queer person because they object to their “lifestyle,” causing LGBTQ people to have to search harder for medical care or even go out of state.

When you put all this together, it’s no surprise that queer people can have a hard time making ends meet. A budget can’t fix the underlying systemic issues that keep queer people down, but it can help you ensure you have enough money to pay for the necessities each month, while still having some left over to spend on entertainment, clothes or whatever brings you joy.

How to create a budget as a beginner

A budget takes your total after-tax income and determines where you should spend it. It’s a good tool for anyone, whether you are scraping by on minimum wage or making six figures. 

Calculate your after-tax income

Before you can start a budget, you need to know your after-tax income. If you work for a company and get a regular paycheck, that’ll be the amount you bring home each month.

If you’re a contractor or a freelancer, you’ll need to deduct your expected taxes and business expenses from your income. The IRS provides some resources on what taxes look like if you’re self-employed.

If you earn a regular paycheck, add back in any pre-tax paycheck deductions like health insurance or 401(k). This will give you a more realistic picture of how much you’re spending on necessities and savings.

Use the 50/30/20 method

One of the easiest ways to determine a budget is to use the 50/30/20 method. The concept is simple:

  • 50% of your income goes toward necessities.
  • 30% of your income goes toward wants.
  • 20% of your income goes toward savings.

Of course, some expenses can be difficult to categorize — for example, a gym membership might be viewed as a necessity by some and as a want by others. Think critically about all your regular expenses to determine which category they fall into for you.

Necessities can include things like mortgage or rent, groceries, insurance, basic utilities like electric and water, child care, and minimum loan and credit card payments.

Wants can include things like entertainment, travel, expensive clothing and streaming services. There are some things that could fall in both the necessities and wants categories — for example, you need a winter coat if you live in a cold climate, but if you own several winter coats, a new one might be a want.

Savings include your emergency fund and retirement savings, but you should also include debt repayment in this category. It’s important to pay down debt (especially high-interest debt) if you want a successful financial future.

Choose a budgeting system

Now that you understand how to separate your expenses using the 50/30/20 method, it’s time to put your budget together. The first step is choosing a budgeting method that works for you.

Pick a method that’s easy for you to manage. If you choose a method that’s too complicated or takes a lot of time to maintain, you’re less likely to stick with it.

There are a few budgeting methods out there, including the envelope system and zero-based budgeting. Here’s a little on each of these methods to help determine which is right for you.

The envelope system 

The envelope system is exactly what it sounds like. Using this method traditionally, you’ll create envelopes for each category and put the cash budgeted for that category in the envelope. Over the month, you’ll take money from the envelope to pay for items within this category, and once the money runs out, you’ll have to stop spending in that category until the next month.

For example, you might have an envelope for your entertainment budget. Every time you go out for dinner, go to a movie or go to a club, you’ll use money from that envelope. Once the money has gone, you’ll have to skip meals out or parties for the rest of the month.

It’s not common anymore to pay for things with cash, but that doesn’t mean you can’t use the envelope system. 

Rather than putting physical cash in an envelope, you can use a spreadsheet to track your expenses. Create a tab or a column for each category and assign an amount you should spend in that category. When you spend money, add the expense to the appropriate category. This helps you track your spending and tells you when you’ve reached your limit for each category.

Or you can use a budgeting app that links to your bank account and automatically tracks and categorizes your spending. Automating your expenses this way is easy, but there’s always the chance that the app will miscategorize some expenses. Check in every week to correct anything that’s labeled incorrectly.

Zero-based budgeting 

Zero-based budgeting allocates every single penny of your income to a category so your ending balance each month is $0. You’ll input your monthly income into a spreadsheet or app and then list out every single expense each month. That includes all of your necessities, wants and savings. 

This budgeting method requires some prep work. Before you can start, you’ll need to track your spending for a few months to see where your money is going. Once you know that, you can determine whether you’re spending too much on wants that could go to savings or whether your needs are costing more than 50% of your income, so you can make cuts where you can.

Once you get going with zero-based budgeting, it can be a great way to know where every penny you earn is going. But it does require a lot of time and effort to keep up. You’ll need to be diligent about tracking expenses through the month and watch what you spend like a hawk. 

A zero-based budget can also be hard to maintain if you encounter unexpected expenses, such as a car repair, but having an emergency fund can help with that.

If you don’t have a predictable income (for example, if you’re a freelancer or service worker), the zero-based budget isn’t a good option. This budget method works best when you know exactly what your after-tax income will be each month.

Budgeting FAQs

Still have questions? Here are the answers to some of the most-asked questions about budgeting.

How do you make a budget and stick to it?

The key to making a budget and sticking to it is consistency. Choose your method and make sure you check it frequently and track all your expenses. Be honest with yourself and always ask whether you need or want to make a purchase and how that fits into your budget. If it’s the latter, that’s OK; but if you’ve exceeded your allowance for “wants” that month, it’s best to hold off on making the purchase until the following month.

Make sure the method you choose isn’t too complicated, which will make it easier for you to stick to. For that reason, a budgeting app or a bank account with spend tracking is a good choice for many people, because it can automate your tracking and alert you if you go over in a certain category.

What is the 30-day rule?

Impulse spending can be a real barrier to successful budgeting. You can curb your impulse buys and stick to your budget more easily by implementing the 30-day.

The 30-day rule says you should wait 30 days before buying something you want. If, after 30 days, you still want the item, you can purchase it. But often, 30 days will go by and you’ll realize you’re not thinking about the item anymore and can do without it. That’s money saved!

Why do budgets fail?

Your budget may fail for many reasons. For example, you might choose a budgeting method that’s too complicated and takes too much time to keep up, and you’ll abandon it. That’s why it’s a good idea to consider which method will be easiest for you to stick with.

Your budget might also fail if you’re not honest or clear about where you’re spending money. Failing to track certain purchases can make it seem like you’re sticking to your budget while you’re racking up credit card debt or dipping into your emergency savings for non-emergency items.

Creating and sticking to a budget can help make sure you’re on track to reach your financial goals. If you have specific questions about your personal financial situation, reach out to a financial advisor to make a plan that makes sense for you.

Catherine Hiles (she/her) is a writer, editor, mother, friend and ally. She lives in Ohio with her husband, two kids, and sweet but wild pit bull mix.

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401K Investing : LGBTQ Retirement Savings Strategies

Would you leave free money on the table? 

Not a chance, if you’re like most people. But you might be doing exactly that with your 401(k). To follow up on our 401Kiki event, which benefited the Edie Windsor Coding Scholarship, we’ve put together this guide to all things 401(k). 

Find out how much you can save in a 401(k), what kind of investments to keep in a 401(k), 401(k) alternatives for once you’ve hit your contribution limit (#retirementgoals) and, most importantly — why you should open a 401(k) account in the first place!

Why open a 401(k)?

You’ve probably heard that Social Security trust funds are running out of money. But you might not know how soon that could affect your life.

Unless something changes, Social Security will need to reduce the amount of benefits it pays as early as 2034, CNN reports. By the time you’re ready to retire, there might not be much left –– which is why it’s important to take charge of your own retirement savings. 

If you work for an employer, that starts with the 401(k). 

At Daylight, we consider retirement savings an LGBTQ issue. Hear us out: Wealth management firm UBS reports that LGBTQ people: 

  • Are less likely to have a will or estate plan (19% versus 26% of cishet peers).
  • Put less of their paycheck toward retirement (20% versus 25% for cishet peers).
  • Are less likely to have any money saved in a 401(k) (35% versus 40% for cishet peers). 

There are lots of systemic reasons why queer folks are behind on retirement savings. But we didn’t come this far toward equality to not thrive during our golden years! 

We can’t say it enough. To live your best life in retirement, you need to make saving a priority while you’re working. That’s where a 401(k) comes in. 

So what is a 401(k), exactly? It’s an employer-sponsored retirement account that’s funded through contributions from your paycheck and, if you have this benefit, through employer contributions. 

Your workplace might contribute a flat percentage of your pay across the board. Or it might offer a match percentage, where the company matches your retirement savings up to a set percentage point. 

If you’re just getting started with a 401(k), setting aside 10% of your gross pay is a good goal. If you earn $60,000 a year, that would be $6,000. Assuming you’re paid twice a month, that breaks down as $500 a month. If your employer matches your contributions up to 5%, that’s an extra $3,000 in your account for the year.

How much can you save in a 401(k)?

The IRS sets an annual limit on 401(k) contributions because they have tax implications. For 2021, you can save up to $19,500 in a 401(k). If you’re over age 50 you can save an added $6,500.  

It’s worth noting the tax implications of a 401(k). Your contributions are pre-tax. They don’t just sweeten your future, they lower your tax obligations now. You’ll have to pay taxes in retirement when you withdraw the money, but there’s a good chance it’ll be at a lower rate.

Choosing investments for your 401(k)

As part of your employee benefits package, you’ll receive a list of investments to choose from. These tend to be mutual funds, which are basically large baskets full of stocks and bonds. 

Two types of mutual funds commonly offered in employer-sponsored retirement plans, including a 401(k), are index funds and target-date funds (a.k.a. target-date retirement funds). 

  • Index funds are mutual funds that track a stock index like the S&P 500. Investing in index funds gives you exposure to all the stocks that make up the S&P 500.
  • Target-date retirement funds are set in increments that reflect a retirement year: 2050 for someone who will be 67 in 2050, for example. They start aggressive, taking on more risk to grow the balance quickly, assuming the market goes up. They become more conservative as the retirement year approaches to protect your savings against market downturns.

The right investment for you depends on your preference and risk tolerance. A target date retirement fund is ideal if you tend to be hands-off with investments. The money will most likely grow for you until you need it.

If you’re a cautious investor, a low-risk fund will preserve your savings –– but it may not grow very much. A high risk fund could bring big rewards, but you’ll have to stomach the volatility of big market swings.

You’ll find quizzes that assess your risk tolerance and suggest an appropriate asset mix for you — like this free investor questionnaire from discount brokerage Vanguard. This can help you narrow down the list of funds.

401(k) alternatives 

The most common 401(k) alternatives include: 

  • 403(b): 403(b) plans are essentially 401(k)s for nonprofits, public schools and a handful of other employers. Just like 401(k)s, these use pre-tax contributions and can include employer matches. The contribution limits are the same as for the 401(k).
  • Traditional Individual Retirement Account (IRA): As you might be able to guess from the word “individual” in the name, this is a retirement account you fund and manage without going through an employer. In 2021, individuals can contribute $6,000 ($7,000 for 50+) to an IRA. Traditional IRA contributions are tax-deductible with a caveat: If you’re a high saver, you might not be able to deduct all your contributions to your IRA and 401(k). 
  • Roth IRA: Like the traditional IRA, this is self-funded. A Roth is taxed when you put the money in and not when you take it out. If you stash money away now, it’ll grow tax free until you need it. Roth IRAs are a way to boost your retirement savings and reduce tax liability later on, since you won’t owe tax on withdrawals. You can contribute up to $6,000 ($7,000 for 50+) to a Roth IRA as long as you earn less than the income threshold, which is $125,000 for single filers or $198,000 for married filing jointly. After that, the amount you can contribute decreases as your income increases.
  • Roth 401(k): A Roth 401(k) combines the Roth tax treatment with the 401(k) retirement account. These less common employer-sponsored retirement accounts are taxed at contribution then grow tax-free. Contribution limits are the same as for a 401(k): $19,500 plus $6,500 in catch-up contributions for those 50+.

When to open an alternative retirement account

In our 401Kiki video, we covered some of the reasons you might choose another type of retirement account. To expand upon that here, let’s reiterate two things:

  • Any amount of retirement savings is good! Seriously. 
  • If you have high-interest debt, like a credit card with 20%+ interest, pay that off before saving for retirement. There’s one exception: If you’re fortunate to have an employer match, you might want to direct enough money toward the 401(k) to get the match while paying off debt. Remember what we said about free money? 

If you max out your 401(k) in a year and want to save more, you’ll need another type of account. That’s when you’d think about opening an IRA or Roth IRA. You might also open an IRA if you’d like wider options for investing, whether that’s individual stocks or investments that align with your values.

Experts generally advise that you contribute to a Roth IRA when your earnings and tax bracket are low. If you don’t make a lot of money, you don’t really need to shield your income from taxes. 

When you’re in your prime earning years, you might move into a higher tax bracket. Directing more money toward a 401(k) or a traditional IRA actively reduces your tax obligations.

A financial planner can help you understand the nitty gritties of these accounts and advanced topics, like  investment strategies. 

Are you maximizing your savings? 

For now, if you have access to a 401(k) at work, check your contribution limits. Are you saving as much as you’d like? Can you bump up your savings rate to take full advantage of an employer match?

Every dollar you save now helps secure your future. Thanks to the magic of compound interest, even a little amount in your 20s will really add up by the time you reach retirement age.

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4 Big Ways to Stretch Your Dollar in an Expensive (but Inclusive) City

If you grew up in a small town, you may not have been able to live as your authentic self for fear of retribution, or even violence. Some rural communities and small towns might be much less welcoming to queer people than most larger cities. 

This could push you to settle in a big city as an adult so you can live in a more inclusive and welcoming environment where you can grow into the person you’re meant to be.

But big city living comes with a big price tag. Everything, from rent and food to entertainment, costs more in major cities, which can be a huge roadblock — especially true LGBTQ folks, who may also face discrimination in healthcare, education, housing and employment.

Living in a queer-friendly city doesn’t have to bankrupt you, though. Here are some tips to help you succeed in your new home and live within your budget.

1. Look for ways to save

There are many ways to save money and live frugally, even in a pricy city. Here are just a few examples. 

Buy used items 

New clothes can be expensive — and with mass-produced items, you always run the risk of showing up to a party wearing the same outfit as someone else. 

Rather than buying your clothes new, check out your local thrift and consignment stores. You can save a ton of money on your wardrobe and find unique items.

Also look for used furniture, books, exercise equipment and electronics. Scour your area for garage or yard sales or check out peer-selling sites like Letgo, OfferUp and Facebook Marketplace to find deals in your area. 

Pro tip: If you meet a stranger to pick up an item, take a friend with you and choose a public meeting place. You can never tell whether that stranger on the internet is legit or looking to rip you off (or worse).

Spend less on food

Buying food doesn’t have to be expensive; you just might need to plan ahead. Try these tips:

  • Meal-prep when you can so you’re not tempted to grab takeout after a long day. 
  • Consider couponing and rebate apps like Ibotta, Fetch and Dosh to find deals on grocery items you buy frequently. 
  • Buy the generic or store brand of most foods rather than the name brand. It can save you money over time — and it’s usually the same stuff!
  • If you enjoy eating out with friends, make a list of affordable restaurants and suggest those when you’re making plans. Meal swaps and potlucks are also a an alternative, affordable option and a great way to connect with your chosen family in a new city!
  • If you enjoy cooking, look for copycat recipes of your favorite restaurants and make them at home. Invite your friends over to sample your cooking and see how it compares to the real thing.

Look for free entertainment

Even in big cities, there is plenty of free entertainment to be found. Many museums and art galleries operate on donations rather than entry fees, so if you’re looking for something to do but don’t have any extra cash, you can spend an afternoon wandering around and looking at artifacts. 

Most big cities also have plenty of green spaces that are free to use. Consider packing up a picnic lunch and spending the day in the park with friends, people-watching or just chatting.

Look for free social events and meetups through your neighborhood LGBTQ center, especially when you’re new to the city. This is the perfect place to meet people and spend time in the environment you came to the city to discover.

Once you’ve connected, host game nights or movie nights at your apartment for your people. Have everyone bring a snack or drink to share, and you provide the entertainment. It’s not quite the same as going to the movie theater or the club, but you can have plenty of fun at home with the right people.

2. Find affordable housing

Housing is the biggest monthly expense for most people, and the proportion of your expenses it takes up is even greater in big cities. 

Most cities have a wide variety of neighborhoods, each with unique benefits, even if they’re not right downtown. Find neighborhoods with an average rental price that aligns with your budget, and ask the local LGBTQ center for advice on the most queer- and trans-friendly options. 

Start your research before you move to the city. Visit first if you can, and ask locals which neighborhoods they like. You can talk to baristas, cab drivers, friends you have in the city and LGBTQ groups and forums to get an idea of where to base your search. 

Explore the neighborhoods they suggest to make sure they offer the diversity and inclusivity you need. Then hunt for apartments and roommate-matching sites (or find brokers in New York) to see what’s available in your price range. 

Be prepared to compromise on some of your wants in order to find a place that fits your budget.

3. Consider smaller, yet still inclusive, cities

Big cities like New York and San Francisco are wonderful places to live if you’re queer, but the cost of living makes it impossible for many people to live comfortably there. 

Rather than living in an expensive city and worrying about money every month, consider a smaller city with a more affordable cost of living.

Cities like Minneapolis and Denver are welcoming to LGBTQ folks and have a lower cost of living than cities on the east or west coasts. In Minneapolis, check out the Lyn Lake neighborhood, which is known for its queer-owned businesses. Denver’s Capitol Hill and River North Arts District are popular places for queer people.

College towns also tend to be more progressive and LGBTQ-friendly than other cities, even in small towns or rural locations. Even in more conservative states, you can find solace in these towns. 

Check the Campus Pride Index to see which universities are considered the most LGBTQ-friendly in each state, and look at apartments and amenities in that area to see if it’s a good fit for you.

It’s also a good idea to narrow your search to states that rank high in the LGBTQ policy tally — for 2020, only 14 states ranked “high” on the map, while over half rank at “fair,” “low” or “negative.” Big cities in the lower-ranked states still tend to be welcoming for queer people, but state laws are not necessarily supportive of our community.

4. Reach out for help

Sometimes you try everything but still have trouble making ends meet. Luckily, there are several resources that can help you get back on your feet.

  • Food banks: If you’re short on food and don’t have the money to buy more, look into food banks and food pantries in your area. This might not be a resource you need to use regularly, but it can help fill your stomach if you’ve had a bad financial month and need assistance. You can search for local food banks through Feeding America.
  • Rental assistance: If you’re really struggling to find a place to live within your budget, look for rental assistance programs in the area. People who earn less than 50% of the median income in your area may qualify for assistance from the U.S. Department of Housing and Urban Development.
  • Health care support: Organizations like Point of Pride can help if you’re having a hard time accessing gender-affirming care. Point of Pride helps fund essential care for trans folks so you can access the care and support you need.

Moving to an inclusive city can be an expensive choice, but by doing what you can to save money and live frugally, you can live your authentic life in a welcoming new city without worrying about being judged or discriminated against by the small-minded people from your hometown.

Catherine Hiles (she/her) is a writer, editor, mother, friend and ally. She lives in Ohio with her husband, two kids, and sweet but wild pit bull mix.

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