The holidays can be a financially stressful time in the best of years – and 2020 hasn’t exactly been the best of years for many. Employment is down and financial uncertainty is up, but this doesn’t mean you can’t be merry. You just need to use some smart financial strategies this holiday season.
Create Your Gift-Giving Game Plan
The cost of holiday presents can add up fast. Investopedia says the average American was expected to spend $942 on holiday gifts in 2019, up from $885 in 2018.
Unfortunately, this year, many people might not be able to afford to spend nearly a thousand dollars on gifts. This means people will need to look for ways spread cheer without spreading their budget too thin:
- Consider making homemade gifts. Who doesn’t love home-baked cookies?
- Set up a Secret Santa gift exchange with your family, at least for the adults. This way you only have to buy one present instead of a bunch of them.
- Shop for good deals. Look for sales, use coupons and do some serious comparison shopping this year.
- Make a list. The more organized you are, the less likely you are to make potentially expensive mistakes.
- Allow extra time for shipping. Shipping may be delayed this holiday season because of the pandemic. Avoid paying extra for fast delivery – or having your gifts arrive late – by acting early.
Rethink Travel and Parties
In light of the pandemic, the CDC says that celebrating the holidays virtually or with the people who live with you is the best way to reduce the risk of spreading coronavirus. Large gatherings and holiday travel could increase the spread of the virus.
Many people will be cancelling their regular plans for parties and travel. While this will likely be very disappointing, there are some bright sides. Traveling and hosting can be very expensive, and the money saved can be used elsewhere. Consider the best way to reallocate this money.
Create a Win-Win Situation with Charitable Donations
Those who are doing well should consider making charitable donations before the end of the year. This can be a great way to help others while also helping yourself to a tax break.
The CARES Act has made it even easier to claim your tax deduction in 2020. Under the new rule, taxpayers can take a charitable deduction of up to $300 for cash donations made in 2020 without having the itemize their deductions. Additionally, the limits on charitable donations have been temporarily suspended, and food inventory contributions have been temporarily increased.
Make sure the organization you’re giving to meets the requirements for tax deductions. See the IRS website for more details.
Remember End-of-Year Deadlines
You’re bound to be busy during the holidays, but it’s important to make sure you’re not missing any of the end-of-year deadlines.
For example, 401(k) contributions typically need to be made by the end of the year. Additionally, if you have an FSA, you may need to use funds by the end of the year or risk losing them, although you may have a grace period before funds actually expire.
Some rules have been changed in response to the pandemic. For example, you may be able to skip your 2020 required minimum distributions for IRAs and retirement plans because of the CARES Act. See the IRS announcement for details.
For assistance with your financial planning strategies, contact PTT Financial.