It’s that time of year. The winter holidays are approaching, and calendars are filling up with parties, concerts, dinners, gift exchanges and festive events. Along with all these gaieties come the post-holiday bills and end-of-year financial obligations. But with smart planning, the experts at Securus Circle of Advisors say you can minimize or sidestep these landmines.
“Most people go into the holidays willy-nilly without planning. And then they get all these credit card statements and say, ‘We can’t pay these,’” says Chris Shreves, president and CEO of Securus. “There’s no better time to start planning than now so you can start off the year fresh.”
In fact, according to Magnify Money, last year’s holiday spending left the average American more than $1,000 in additional debt. And holiday expenses are not the only things to consider at this time of year: Property taxes are due at the same time, putting an extra burden on household finances.
Planning Ahea
In order to avoid that credit card surprise, Chris recommends that every household create a budget to determine what’s available for holiday spending.
“We would want to budget that amount beforehand so they don’t get into a financial problem,” says Chelsey Sweeten, COO and executive director of marketing. “Look at the past months of spending and discretionary income, remember that taxes are also owed and then budget.”
Limiting end-of-year spending to one’s monthly discretionary income may avoid financial trouble.
Consequences of Overspending
The problems associated with not budgeting are multi-faceted and far-reaching.
Unfortunately, overworking the credit cards can create a mountain of bills that may be difficult to pay.
“Not being able to pay bills and/or being late with payments affect your credit,” Chris says. “If you have a high usage of your credit, then it lowers your credit score, which results in immediate financial penalties. If you want to refinance your home or get a car, you will end up paying a higher interest rate for the loan because of this low credit score. Plus, you could be hit with additional credit card penalties and increases in interest rates.”
In addition to credit issues, spending more than budgeted may negatively impact retirement plans.
“If you want to retire within the next 10 to 15 years, and if you don’t start budgeting now, you could end up cutting into retirement,” Chris says.
Tax Implications
Another consideration that may impact holiday spending is the changes in tax law. For example, W-2 employees who buy meals, tickets and gifts for clients for which their employers do not reimburse them used to be able to deduct these expenses; that deduction is now gone. In addition, some people rely on their prospective tax refund to pay for their holiday spending; this year, that may not be a realistic strategy. On the other hand, 529 plans now allow for K-12 funding, so gifting children and grandchildren money for education may bring a state tax deduction.
The important lesson when it comes to holiday and end-of-year spending is to create a plan and consult with professionals.
Securus, for example, has professionals in a variety of fields to help clients plan: estate planning attorneys, fiduciaries, tax consultants, money managers and insurance agents. This boutique-type operation, located in Cottleville, provides clients with turnkey solutions and can be seen on KMOV-TV on Mondays during Great Day St. Louis. Visit Securus at CircleOfAdvisors.com.
NOTE: Do not use this article as insurance, legal, tax or financial advice. Always consult with a licensed professional.
