Be Prepared for These Five Holiday Expenses

11/15/2018 - By Chris Stennett, CFP®

The Holiday Season is a time of year that many of us look forward to. Unfortunately, it’s also the time of year when budgets get stretched the furthest. I understand how stressful this time of year can be on people’s finances. This year may be especially challenging since there have been some significant changes to our tax laws that might impact your giving plans. Planning ahead for these 5 holiday expenses will help ensure you can stay on track for your long-term goals while still giving you the peace of mind to enjoy the season. 

1. Traveling

Whether you’re traveling to see family or traveling to get away from them, this expense can have a big impact on your finances. Flying might get you there quicker, but you’ll likely pay a premium for the convenience. Booking a flight has a known upfront cost, but there are secondary costs like baggage check fees, rental car fees, and rigid cancellation/reschedule fees. If the trip is a manageable distance, consider driving. Planning ahead on this expense could save hundreds (if not thousands) of dollars.

2. Entertaining Friends and Family 

Because Florida has one of the best winter climates, you’re likely going to have people asking to come visit you. The good news is there are plenty of budget friendly ways to show them a good time. Are they coming from a cold climate? Show them our wonderful beaches or take a trip to one of our state parks. Do they have children? Check out a local zoo or even a children’s museum. If you have more room in your budget, you could even visit one of our famous theme parks. Last year, my wife and I didn’t have a big budget as we welcomed our first child in June. When family came to town, we took the visiting kids to some local community parks and pools, to keep them entertained. The kids didn’t care how much we spent, they were just happy to have somewhere fun to play. 

3. Giving Gifts to Loved Ones

To this day, my parents still get me Christmas presents, and I’m in my mid-30s. Ever since I was born, my mom has set aside money, every month, into a separate savings account. She calls it her “Santa Fund.” For her, it’s easier to save a little bit every month rather than trying to do it all in one month. Planning ahead for this expense helps ease the financial stress of the holidays. She’s able to experience the joy that comes with giving gifts, without sacrificing her household expenses. It's a lesson I've adopted with my family as well. 

For those interested in giving large gifts this year, keep in mind the IRS limits the amount of money a person can gift without having to pay gift taxes. For 2018, that amount is $15,000 per recipient. If you’re married, you and your spouse can both give $15,000 to 1 person ($30,000 total) without owing gift taxes. There isn’t a limit to the number of people you can gift money to, but there is a limit to how much you can gift over your lifetime. I will dive deeper into those rules in a later article, so for now let’s assume you’re going to stay under the annual exclusion and gift only to a few individuals. 

4. Donating to Charity

The Tax Cuts and Jobs Act of 2017 has impacted charitable giving in a big way. It’s important to understand that the giving you may have done in the past might not benefit your taxes under the new laws. Many people who gave to charity were able to itemize those donations, along with other items, on their taxes. Under the TCJA, it’s estimated that 90% of people will be taking the standard deduction in lieu of itemizing. In order to itemize, individuals need their total deductions to exceed $12,000 (married couples exceeding $24,000).

If you are going to give to charity, plan ahead with your CPA and financial advisor. There are several strategies that can be used to get your itemized deductions above the threshold, so you can get the tax benefit from the gift. Keep in mind, even if you aren’t going to be able to itemize the donation, you’re still doing a very noble thing by giving.

5. New Year’s Resolutions

A new year, a new you! The end of the year brings about a lot of reflection. Hopefully, you’ll get an opportunity to spend some time thinking about how to make next year even better. While you’re thinking ahead, start planning out what potential new costs could be involved. If you’re thinking that you’d like to see improvements in your health or weight, consider budgeting for a gym and personal trainer. There are also some great online sites that can help you plan healthy family meals at budget friendly prices. Maybe your resolution is going to be increasing your net worth or tackling a specific financial goal. There are plenty of qualified financial advisors available to help you reach your goal. Whatever your goals are for next year, plan to have someone help hold you accountable to increase the probability of reaching your goal. 

As a financial advisor, my job is to provide my clients with education and information to make informed decisions. I also help them create a plan to accomplish the goals they have and hold them accountable to ensure they reach those goals. I hope that this article has given you some helpful information to navigate the upcoming holiday season and prepare for next year. If there are any topics you’d like to discuss deeper, our financial advisors are here to help. 

About the Author | Chris Stennett, CFP®
Chris is a financial advisor and Certified Financial Planner™ practitioner for Saltmarsh Financial Advisors, LLC, an affiliate of Saltmarsh, Cleaveland & Gund. He serves individuals and organizations as a comprehensive financial planner and coordinator of investment activities. His areas of expertise include investment management, income planning, tax and estate planning, incapacity protection, and liability management.

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