02 December 2015
It's that time of year when the retail companies of the world ban together to create shopping events. Black Friday - the oldest and most widely know of them - has been around for several decades. Small Business Saturday and Cyber Monday are relative newcomers to the scene. All three share a common purpose - they are all events designed to encourage you to get your Christmas/Holiday Season shopping up and running. In their opinions, it's time for you to go buy some stuff!
I'm a consumer (of course) and we celebrate Christmas with gift-giving in our home, but I am not a participant in these massive consumer events. Not my cup of tea. The crowds and the frantic atmosphere wear on my nerves very quickly. I am usually at home or work on those days. I am not opposed to shopping around for a bargain, I just don't want to feel like I am competing with others to do it.
It's impossible to ignore these major retail events completely, though. My Thanksgiving Day football games this year were sponsored by Target and Wal-Mart - and their amazing deals! Every commercial break that day was loaded with the suggestion that I was really going to be missing out if I didn't get out and buy some stuff within the next 24 hours.
It got me thinking - how valuable are these sales? How much are people really saving, and is it worth it? Is the advertising 100% hype or is there at least some truth to the matter?
In order to formulate a reasonable assessment I had to do about 15 minutes of research on the interwebs. Here is what I found: Experts recommend spending between 1% and 1.5% of your annual household income on Christmas. Every family and their traditions are different, of course, but let's use those percentages as an acceptable range.
A household with a total income of $80,000 should spend somewhere between $800 - $1,200 on Christmas. If you're able to save 50% of that amount by using the super shopping events right after Thanksgiving you would save between $400 to $600 dollars. That's not bad. That's significant money in a household with a total income of $80,000.
Given my line of work, though, something else was immediately apparent to me. $600 is also likely to be chump change compared to what that household could save if they engaged in tax planning. In my experience many households leave significantly more than $600 on the table in unused tax credits and deductions every year. Money they could have kept for themselves, but they gave to Uncle Sam instead.
Additionally, tax savings can have a lasting impact beyond the current year. Saving on Christmas gift purchases is a onetime deal. With tax planning the benefits can be realized both now and again in the future. A tax benefit taken this year can continue to be a tax benefit for years into the future. Some tax benefits you take this year could even benefit your children or grandchildren decades from now - even after you're gone. (And you don't have to camp outside the store overnight to get those tax breaks, either!)
Our TVs, radios, and internet-connected devices will constantly be reminding us for the next few weeks of super sales where we can save a few dollars on our holiday shopping. You won't see or hear very much about how to arrange for a lifetime of savings through proper tax planning, though. It's a shame, really, because it can truly be a gift you give your family that keeps on giving.
If you want to find out more about tax planning please contact me.
