The Holidays and Your Finances: How to Prepare –

The holidays are here and with that comes the inevitable holiday sales. You may already have your shopping list ready but before you dive in, it’s important to check in on your financial situation. Especially this year with a pandemic still raging, you may gift a bit differently than in years past. Here are some tips to consider before you start holiday shopping.

1. Create a spending strategy

The first — and arguably most important — thing to do before buying gifts is develop a strategy. This may look different for each individual or family. Some may want to sit down with their financial advisor and identify where they stand at year-end, and for others, this may look like setting a maximum limit for holiday spending and could include reviewing your credit cards to see where you can get the most perks. Even if you have a sizeable budget, who doesn’t like to save money?

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Additionally, it’s important to track all of your purchases. Whether you have a personal bookkeeper, or you start a spreadsheet on your own, tracking purchases is vital to staying on top of your spending, as well as keeping organized when it comes to who you are gifting what. You can even start a spreadsheet with tabs for each year to remind yourself what you’ve purchased in years past.

2. Identify any large gifting

This year especially, some families may turn to gifting money or large assets due to potential change in tax law in 2021 under the Biden administration. Under the current law, the estate and gift tax exemption amounts are $11.58 million per individual and $23.6 million per couple. Biden plans to decrease that amount by roughly half as soon as the beginning of 2021. Generally speaking, if your estate is well in excess of the current exemption amounts, you may want to talk to your advisor about gifting before year-end. Gifting will remove assets from your estate for estate tax purposes. It is also possible that any changes to the estate tax exemption could be applied retroactively in 2021.

3. Get creative

This holiday season is unlike any other many of us have experienced. With the impacts of COVID-19 changing the way we gather with large groups over the holidays, it may be helpful to think of creative ways to still uphold family traditions. That most certainly looks different for each family but some things to think about include:

  • Shipping gifts to family members who live far away, or who you may not see in-person this holiday season
  • If family and friends who live close don’t feel comfortable gathering in person, warp and decorate gifts as you normally would and act as Santa to deliver to your loved one’s doorsteps.
  • If your family is not interested in physical gifting this year, explore ways to put those funds towards your community. Perhaps have each family member choose a charity that is near and dear to them to donate the funds you would have spent on gifts.
  • Support local businesses. With the lack of a national stimulus package, many small businesses are suffering. Consider budgeting to purchase items from local businesses as opposed to big-box stores.

Even amidst a pandemic, the holidays can still be an enjoyable time and ensuring your financial situation is in a good place to handle an increase in spending will make it even more enjoyable. Have questions? Give us a call here at Egan Wealth Advisors.

Hightower Advisors, LLC is an SEC registered investment adviser. Securities offered through
Hightower Securities, LLC. Member FINRA/SIPC.