There is no one-size-fits-all methodology to financial planning. Every family is unique, and their financial plan should be uniquely tailored to their goals Unfortunately, some financial advice fails to consider the needs of non-traditional families. In particular, financial planning can be troublesome for gay families. Most financial planning practices are based on traditional nuclear family structures– a husband and a wife, with two kids. Consequently, many Japanese financial planners fail to meet the needs of gay people. In particular, gay expatriates living in Japan are often left misunderstood, and underserved.
Is Gay Marriage Legal In Japan?
In most respects, Japan is progressive. In fact, some rank Japan as the most progressive nation in the world. After all, Japan is the world’s third biggest economy.
However, Japan lags other progressive nations in some areas. One such area is Gay marriage. In the most progressive countries, gay marriage was once controversial. However, marriage has recently become a basic right for gay people in many of the worlds leading countries. Unfortunately, despite Japan ability to lead the world in many respects, it is trailing it LGBTQ+ rights.
Gay marriage being illegal in Japan isn’t just a social issue– it’s a financial and overall life quality issue. Academics have proven that the union of marriage has a wide range of benefits. Some of the most statistically measurable benefits are financial, and it is clear to see that marriage makes people better off.
Marriage Improves Quality of Life
Studies show marriage hugely benefits life quality. Married people outlive their single people. Children whose parents are married are more successful. People who are married earn more. These are just some of the many benefits of marriage.
Gay people in Japan may ask themselves why this is important to them. After all, Japan does not let gay people marry. Despite gay people in Japan facing barriers to a traditional life, they can work around these barriers to achieve the same benefits marriage offers.
Albeit, obtaining these benefits requires creativity, and knowledge of the intricacies of Japanese tax laws. The average professional may find this challenging. Fortunately, financial planners knowledgeable of the financial needs of LGBTQ+ families can streamline this process.
Finances have always been a driving force in the fight for equal rights. With the help of financial planners, or even independently, gay families can even weaponize their investments to improve the livelihood of the LGBTQ+ community as a whole.
Marriage Makes Getting Loans Easier: Can Gay People Improve their Credit Worthiness?
Married people typically combine their incomes. When banks consider giving loans, income is a primary factor. More income behind a loan means a smaller possibility of the debtor defaulting. Thus having two incomes tied to a single loan is ideal.
Access to bank loans is crucial to upward mobility. Most families take out mortgages to buy a home, and mortgages are expensive. Small differences in mortgage rates have a huge impact on the cost of home ownership.
This may seem like bad news for gay families in Japan. However, there is a silver lining. Some banks allow same-sex couples to combine incomes when applying for loans.
In 2017, some Japanese banks started allowing gay people to apply for loans with their partner. Most joint-debtors in Japan are married heterosexual couples. Consequently, it can be harder for gay families to find loans with the most favorable terms. However, financial advisers experienced with the LGBTQ+ community can help find the most gay-friendly banks.
Marriage Creates Tax Deductions: Can Gay Families Reduce Tax Liability?
The Japanese government sees marriage as fundamental to fostering a health society. History has shown that family union promotes a well-functioning society. As a consequence, most countries use monetary incentives to encourage marriage. In Japan’s case, only the marriage of heterosexual couples.
Married people get a variety of tax benefits. Typically, these benefits come in the form of tax deductions. Consider Japan’s spousal deduction. The spousal deduction gives employed couples who file jointly a significant tax break. With the spousal deduction, primary earners can deduct 380,000 JPY if their spouse earns less than 1.5 million JPY.
It is important to note that this particular deduction only applies to households in which both adults are employed. Households in which only one adult is employed won’t be able to take advantage of this deduction. However, that isn’t to say there aren’t other deductions to make up for missing this one.
Financial Planning For Gay People In Japan: Decipher the Tax Code and Reduce Tax Liability
Rising marginal tax rates are fundamental to most progressive income tax systems. As people earn more, the amount of tax they pay on their last dollar earned goes up. As somebody’s marginal tax rate increases, deductions become more important. Those who take advantage of the right deductions can lessen their tax liability by thousands of dollars each year.
This may seem like bad news for gay families in Japan. However, in this case, as in the case of combining incomes for bank loans, there is a silver lining. With the right steps, gay families can reduce their tax liability just as much as heterosexual families.
The tax code is complicated. This can be frustrating when filing. However, these complications open the door for gay families to achieve the same tax breaks that married families do. There are countless ways to reduce tax liability, from depreciating property, to understanding what tax credits are available for gay families to use.
An important note about optimizing tax liability is that there is no one-size-fits all approach. Since every family is unique, there are always a variety of factors at play that can influence which creative ways to reduce tax liability are available. Choosing the wrong deductions at the wrong time can cause people to lose a good deal more of their income to the tax authorities.
One of the key benefits of a financial adviser is that they can analyze your individual situation and decide which deductions are right for you. Reducing tax liability is no simple process.
Gay Financial Planning: Align Your Investments with Your Values
Now more than ever before, wealth managers are helping families align their investments with their values. For years investors believed that to invest for social good was to sacrifice returns. However, wealth managers have proven that it is possible to get good returns even when prioritizing personal values. In fact, incorporating personal values into an investment portfolio can even help boost returns.
Environmental, Social and Corporate Governance (ESG)
Society now scrutinizes the environmental impact of publicly traded companies more than ever. Government regulators use data to categorize companies based on their efforts in combatting climate change.
This increased consideration for the environment is what ultimately started the idea of Environmental, Social and Corporate Governance (ESG). ESG is an broad term to describe corporations that look not only to profit, but also to make the world a better place.
This focus on holding companies accountable makes it easier for environmentally conscious investors to understand where their money is going. For example, the S&P admits companies that adhere to climate goals into a special index. This grouping makes is simple for investors to pick companies that are committed to fighting climate change.
One common misconception about values based investing is that you must invest in a company that specially intends to tackle a certain social issue. For example, many think you have to invest in clean energy to address climate change. This is not the case; you can invest in a wide range of companies, but still tackle climate change by choosing companies that offset their emissions.
Climate change is just one example. Investors can put their dollars towards other causes aligned with their personal values. The advancement of social justice, women’s rights, and LGBTQ+ rights are all common ESG themes.
As one could expect, companies require a significant amount of vetting before one can be confident the company is operating in accordance with the investors values. In the case of social justice, women’s rights, and LGBTQ+ rights, ESG data usually isn’t as readily available. This can make it harder for investors to vet investments, depending on which values they wish to incorporate into their portfolios.
Values Driven Investments Without the Hassle
Gay families in Japan can easily incorporate ESG into their portfolios. ESG exchange traded funds make it easy to invest for social good. However, these funds may make it hard to target specific values. Most ESG exchange traded fund managers simply track ESG indexes such as the S&P ESG Index.
iShares ESG Aware MSCI EAFE ETF (ESGD) is an international equity index fund that focuses exclusively on ESG stocks. The fund consists of international companies that have favorable ESG ratings. Exchange traded funds make diversification easy, and offer a hands off approach to investment. ESGD can potentially be a good option for those looking to incorporate ESG into the equity portion of their portfolio.
iShares ESG Aware 1-5 Year USD Corporate Bond ETF (SUSB) can help investors incorporate ESG into the fixed income portion of their portfolios. SUSB is a corporate bond ETF composed of bonds that are highly regarded for their ESG ratings. Essentially, to purchase SUSB is to loan funds to corporations that strive to make a positive impact.
Both these ETFs are an easy way for gay families to incorporate their personal values into their investments. However, these are just two very small examples of how investors can make a difference with their money.
Find a Financial Planning Company Who Understands Gay Families
Gay families in Japan face unique challenges. Fortunately, they have tools at their disposal to address these challenges. Financial advisers who are experienced in working with gay people can simplify the complicated landscape that LGBTQ+ families in Japan face. From helping navigate the tax code, making it easier to find the best loans, and to making money a source for good, financial advisers are worth consulting.