Your holiday wellness plan should include ways to lower stress and taxes

Depending on who you ask, the holidays are either a season full of celebration and connecting with family and friends, or they’re a seasonal burden that adds to the never-ending stresses of life. A recent survey found that 88% of people believe the holidays are the most stressful time of the year and 56% say that financial strain brought on by the holidays is their largest source of anxiety.1

We’ve identified a few ways to manage stress, keep your budget in line, and experience the joy of giving in a tax-advantageous way. avoid tax stress during holiday

Sticking to a Budget

Everyone understands the past year has been tough, and while the economy is recovering, we’re not out of the woods yet. American balance sheets are in better shape, but it’s easy for the end-of-year festivities to blow a holiday-shaped hole in any budget. American Express reports that 86% of millennials spent more than they had planned to during the holidays last year.2 With ‘buy now, pay later’ services on the rise, it may be even more challenging to keep spending to a limit.

One way to keep holiday spending manageable is by setting a budget. It’s never been easier to compare prices online to figure out where the best deals are, so before hitting the mall or scrolling through Amazon, have an idea of what you’re able to spend. Take some time to list out your gift buying. Planning your purchases ahead of time will help you avoid impulse buying and overspending.

Another strategy is to use a separate card or account for holiday spending so you can easily see how much you’ve spent. It may even help to download a budgeting app, such as Mint or You Need a Budget, for the holidays so you can set limits on spending and get notified when you’re close to hitting them.

But remember, memories and experiences are worth more than the number at the bottom of a receipt. Don’t overextend yourself and add more stress to your plate when gifting this holiday season.

Practicing Gratitude & Prioritizing Mental Health

Practicing gratitude is a good habit no matter what season it is, but it feels more significant during the holidays. Oftentimes, the focus around this time of year is on gifts, but the holidays are more than spending money and exchanging presents. They can be a time of reflection and a chance to spend time with family. Many studies have shown a direct correlation between practicing gratitude and increased levels of happiness and reduced stress.

Overall, we tend to take little things for granted. It’s easy to get caught up in the day-to-day stresses of life, but don’t forget to take some time to be thankful and grateful for the positive aspects of life, the blessings you have, and the time you may get to spend with loved ones.

The past year has taken a toll and mental health conversations are at the forefront. In addition, many Americans struggle with seasonal depression as the holidays can trigger a variety of different feelings. One way to help reduce negative feelings is by being proactive and recognizing triggers and symptoms. This can allow you to plan ahead to avoid certain situations or at the very least, be aware that actions need to be taken to help cope.

During the holidays we may feel obligated to do certain things or act certain ways around family or friends and it’s not always healthy. Setting boundaries is important in any relationship. Without them, you may end up in uncomfortable or undesirable situations, leading to more stress and frustration. By setting boundaries, even with those you love, you’re laying out guidelines for yourself to determine what works for you and what doesn’t. This can be challenging to do but overall, but it can lead to healthier relationships.

The Season of Giving

Giving back is a great way to ground yourself and find purpose during the holiday season. It’s a time of giving and right now, the world needs more of it. Giving can come in many forms and also doesn’t have to be monetary. Spending time in your community and volunteering at a food kitchen or charity both have an impact and volunteers often report having higher personal satisfaction and gratitude than those who don’t. Additionally, you may also be able to deduct volunteer expenses if you purchased any supplies or had significant travel costs.

Don’t forget about the local businesses when you’re shopping. Small businesses keep money in the local economy, may not have the same supply chain issues as the big stores, and may participate in a lot of giving back to the community. They’re often the local sponsors for sports teams and arts clubs, and they often support food banks and sponsor charitable drives.

Tax-Advantaged Giving

Of course, there are direct donations to charities and other organizations as well. This may be easier to do and it can also come with tax benefits. Depending on the type of organization you donate to and how the donation is made, you may be able to deduct the full donation amount.

Setting up a trust is a classic option when it comes to charitable giving, but depending on your circumstances, a donor-advised fund may be simpler and achieve your goals. According to the National Philanthropic Trust, DAF contributions exceeded $38 billion in 2019, an 80% increase since 2015. DAFs allow you to donate highly appreciated stock and assets, receive an immediate tax deduction, but rather than select a charity immediately, the funds can be invested in the DAF, left to grow over time, and distributed at a later date.

Donating appreciated stock is advantageous because it can allow you to donate more than if you sold investments and donated cash. When charities receive appreciated stock, they’re not required to pay capital gains upon liquidation. As long as requirements are met, you receive a tax deduction for the full market value of the assets.

Those over age 70 1/2 can use a qualified charitable distribution strategy that allows donations of up to $100,000 directly to a charity from an IRA instead of taking RMDs. This can help reduce taxes because you avoid taking income, which could mean staying in a lower tax bracket, and potentially lowering the amount of RMDs in future years.

The Takeaway

The holidays bring out a variety of different emotions, and we often focus on others during this time, but don’t forget to take care of yourself. If you typically feel overwhelmed during the holidays, taking appropriate steps can help you spend more of the season enjoying the festivities. With a little planning, the holidays can be a time to unwind and spend much-needed time with loved ones.

Also refer to Justus Morgan’s November 2021 Racine Journal Times article for additional year-end tax savings ideas. Curious about what important documents you should hang on to? Refer to Justus’s article, Tax-Related documents you should retain.

 

  1. Anderer, John. Jingle Bell Crock: 88% Of Americans Feel The Holiday Season Is Most Stressful Time Of Year. Study Finds. December 21, 2019.
  2. White, Alexandria. 86% of Millennials Overspent on Holiday Gifts Last Year—Here’s How to Avoid the Same Mistakes. CNBC. August 17, 2021.

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The information contained herein is intended to be used for educational purposes only and is not exhaustive.  Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return.  If applicable, historical discussions and/or opinions are not predictive of future events.  The content is presented in good faith and has been drawn from sources believed to be reliable.  The content is not intended to be legal, tax or financial advice.  Please consult a legal, tax or financial professional for information specific to your individual situation.

 

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