We are Less Than 100 Days Until the Holidays… Are You Ready?
It’s never too early to start thinking about the holiday season, especially if current economic conditions have led you to be a little more cautious about spending this year.
Rising costs, market volatility, and high interest rates might lend worry to a Scrooge-like holiday season, but don’t worry. There’s still plenty of time to get ahead and put yourself in the best possible position before the season arrives. With some planning and a few smart money moves, you can stretch your dollars while still embracing the spirit of giving.
Tip #1: Create/Review Your Budget
The budget you created at the beginning of the year may no longer be reflective of your current lifestyle. Expenses change, bills increase, subscriptions get added, and family needs evolve over time. Spending habits often drive upwards over time without us noticing. Reviewing your budget now can help identify opportunities to free up cash for holiday gifts, travel, entertaining, or year-end savings goals.
Start by reviewing:
- Income sources
- Monthly expenses
- Savings goals
- Debt payments
- Upcoming large purchases
Focus on major spending categories such as housing, utilities, groceries, insurance, entertainment, subscriptions, dining out, and transportation expenses. Even modest adjustments can create meaningful savings.
Tip #2: Find Hidden Savings Opportunities
Before cutting back on things you enjoy, look for ways to maximize the spending you’re already doing.
Consider:
- Using rewards points or cash-back balances toward holiday purchases
- Redeeming airline miles or hotel points for holiday travel
- Reviewing employer perk and discount programs
- Shopping through retailer rewards portals
- Consolidating recurring bills onto a rewards card if you can pay the balance in full
- Taking advantage of retailer price-matching programs
Small savings opportunities can add up quickly during the holiday season.
Tip #3: Take Advantage of Open Enrollment
For many employees, open enrollment occurs during the fall months and offers the opportunity to update health, dental, vision, disability and other workplace benefits without a qualifying life event. For most workplace benefits, this period is between October and December, while Medicare open enrollment runs from October 15 through December 7.
Review your health plan by comparing out-of-pocket costs such as deductibles, copays, and coinsurance, and confirming that your preferred doctors and prescriptions are in-network. Consider whether a health savings account (HSA) or flexible spending account (FSA) fits your needs. If you have an FSA, check your remaining balance before December 31 to avoid losing unused funds.
For those with equity compensation, stock options, or deferred compensation plans, fall may also bring important election deadlines that deserve attention.
Tip #4: Review Credit Card Balances Before Holiday Spending Begins
Rewards and cash-back programs can be valuable tools, but only when balances are paid in full. Interest charges can quickly erase the benefit of any points, miles, or cash-back awards earned during the holiday season. Before increasing your spending, review any existing balances and create a plan to keep debt from becoming part of your holiday tradition.
Tip #5: Review Your Investment and Tax Strategy
Now is an ideal time to review your investment portfolio and make tax efficient moves before the tax year ends on December 31. If you sold shares for a profit earlier in the year, consider how those gains could affect the taxes you owe. Tax-loss harvesting helps offset capital gains by selling investments at a loss before year-end. Portfolio rebalancing can help maintain your target allocation as market movements change the underlying dollar value of your investments over time.
The goal is to ensure that your portfolio continues to reflect your goals, time horizon, and risk tolerance. Keep in mind that tax-loss harvesting and rebalancing are subject to IRS wash-sale rules, which prohibit the sale and purchase of substantially similar investments in a 30-day period.
You may also want to review asset location, or which investments are held in taxable, tax-deferred, and Roth accounts. Income-producing investments such as bonds and REITs may be better suited to retirement accounts, while investments that receive long-term capital gains treatment may fit better in taxable accounts.
Tip #6: Consider a Roth Conversion
For investors looking beyond year-end, a Roth conversion may be worth evaluating.
A Roth conversion allows you to move assets from a traditional IRA to a Roth IRA, paying taxes now in exchange for future tax-free growth and qualified withdrawals. With current tax rates scheduled to sunset after 2026 under existing tax law, now may be an appropriate time to assess whether a partial Roth conversion fits within your broader tax strategy.
As with any tax-planning strategy, consult your tax professional before making changes.
Tip #7: Make Tax-Efficient Charitable Gifts Now
The holiday season is often a time for charitable giving, and planning ahead can benefit both the causes you support and your overall financial plan.
Potential strategies include:
- Qualified Charitable Distributions (QCDs) from your IRA (for those age 70½+)
- Donor-Advised Funds (DAFs) for larger, strategic giving
- Appreciated stock donations, which avoid capital gains taxes
Tip: Giving early helps nonprofits and charities plan better and gives you time to structure the most effective gift for your tax strategy.
Tip #8: Create a Holiday Spending Plan
Make a list of the people you expect to buy gifts for and set a reasonable spending limit for each person. Don’t forget other expenses such as food, transportation, decorations, and holiday activities.
For many households, colder weather also brings higher energy usage, increased heating costs, and winter home and vehicle maintenance expenses. Estimating these costs now and setting money aside can help absorb the seasonal price increase.
Tip #9: Meet with Your Advisor!
If you’d like help reviewing your financial plan before the holidays arrive, reach out to your advisor to discuss strategies tailored to your goals and circumstances. Reach out to our team today.
Roth IRA conversions have tax consequences and are not appropriate for all investors; consult a qualified tax professional regarding your individual circumstances. Withdrawals from a Roth account are tax-free as long as investors leave the money in the account for at least 5 years and are 59 1/2 or older when they take distributions, or meet another qualifying event such as death or disability.
Presented by Carl Holubowich, CFP® with support from Jasmine Tiamfook and Isabella Che
