December is a hectic time for most of us. In addition to your boss or teacher breathing down your neck to finish those do-or-die deadlines, you might also feel stressed about getting thoughtful gifts, coordinating schedules, and making it a memorable holiday.
In all of the holiday hustle, losing sight of your goals is pretty easy.
There’s nothing wrong with taking a little break, mixing up your routines, and creating new memories. In fact, I hope you do!
When it comes to your long-term goals, breaking your habits during the holidays can make it challenging to get back on track after the festivities end. Also, the holiday season means it’s almost the end of the year, including end of tax year. This is the moment to ensure your money and your budget are taken care of.
So, here’s a list of naughty and nice holiday habits you need to know to ensure your goals don’t go on a permanent vacation.
#1 Naughty: Overspending on Gifts and Sales
Did you know that the average American spends nearly $1,500 on the holidays? One of the most common holiday mistakes is overspending your budget, especially if it bleeds into more credit card debt.
People often splurge on gifts to show their appreciation for loved ones. Some might feel pressure to buy expensive gifts just to keep up with friends and family. And others find respite in shopping for themselves.
Just make sure you have a holiday budget if overspending is a concern. Apps like Mint can help you create and stay on budget and support sound financial habits.
However, if there are things you know you know you will need, holiday sales can be a great time to make pre-meditated purchases! You can buy anything from hotel bookings, flights, and high-cost appliances during Christmas sales and save hundreds.
#2 Nice: Review Your Investments
Reviewing your investments at least once a year is a critical habit if you have money invested.
Most investors manage growth, income potential, and risk by keeping their investments within a defined portfolio allocation. Portfolio allocation is the right mix of investments that depends on your circumstances and goals.
If you have a portfolio allocation, the year-end is a typical time to sell and buy assets (called “rebalancing”) to keep your investments within the target allocation.
2022 has been a challenging year for most investors, so you might find some of your investments in the red.
The silver lining is when you sell investments at a loss, the money you lose may be deductible from taxes. Selling investments at a loss and investing the money in another similar asset (but not the same) is a common practice called “tax-loss harvesting”.
Tax-loss harvesting can help grow your investments while minimizing taxes on your gains.
However, take caution in doing this because making mistakes can lead to tax disadvantages, such as wash sale rules being triggered. Also, selling assets you’ve held for a short period can lead to higher taxes.
Whether you manage your own portfolio or someone does it for you, make sure to get it glanced over before the tax year ends.
For additional guidance, I recommend consulting a fiduciary financial advisor to go over your investments and see if the points above are something you should consider.
#3 Naughty: Comparing Yourself to Others
The holiday season is when you get distant friends’ tweet-sized life updates on a Christmas card. Sometimes they can feel like a competition to see who had the most successful year.
Just like on social media, remember that most people share the rosy parts of their lives and that everyone goes through something.
So, start breaking down those bad habits of comparing yourself to others and beating yourself up when someone else seems to have it all. Instead, try to focus on some simple goals that can ultimately bring you more excitement, personal joy, and long-term stability.
Think about how far you’ve come in the last 10 years. What are some things on your bucket list to check off? Now is a great time to start setting goals for the New Year!
#4 Nice: Strengthen Social Relationships
Social relationships are essential for belonging and support. Strong social connections have been linked to a range of benefits for our mental and physical health, including a reduced risk of depression and anxiety, a stronger immune system, and even a longer lifespan.
The holiday season is a great chance to reconnect with family and friends. It’s also a great opportunity to reach out to those you’ve lost touch with over the years.
However, only reaching out to just give a brief update about yourself won’t go far in making a lasting and genuine connection. Take the time to ask how they’re really doing and what’s been going great (and not so great). Stay open, listen, and even show vulnerability to strengthen trust and support.
#5 Naughty: Breaking Your Exercise Routine
Returning to a routine after breaking it can be challenging because our brains are wired to resist change.
Breaking habits creates a sense of uncertainty and discomfort, which our brains don’t like. It also leads to a loss of momentum, motivation, and discipline.
As a result, you may feel reluctant to return to your routine, procrastinate or avoid it altogether.
The best way to avoid this is to not break the routine or do so minimally.
Instead of completely giving up on your 60-minute workout routine, can you temporarily shorten it? If nothing else, maybe make it into a few lunges or push-ups just to keep the momentum?
Alternatively, set a date to start exercising again and stick to it, even if it’s a small workout.
If you end up having a more extensive break, then make sure you gradually get back into your routine to avoid injury and prevent burnout. Set small, realistic goals, and be patient with yourself.
Nice #6: Get a Health Check
Going for an annual health screening is one of the healthiest habits that help prevent illness or disease, save money, improve quality of life, and extend lifespan.
For example, regular check-ups and screenings can help identify potential health problems early on when they are more manageable and less costly to treat.
Getting a health check before the year-end can give you great ideas for goals for the following year. Self-setting a measurable health goal and developing an action plan today can help you stay motivated throughout the next year.
In addition, if you have unused funds in your Flexible Spending Account (FSA), it may be beneficial to spend it before you lose it. Similarly, if you are over your health insurance deductible or out-of-pocket maximum, this might be an excellent chance to get care cheaper than next year.
#7 Naughty: Develop a Snacking Habit
During the holidays, you may be surrounded by snacks and treats you would not otherwise have around.
Getting into the holiday mood can develop bad habits of allowing yourself to snack more than usual. A few days is not a problem, but sometimes it can be hard to turn it off after the holidays.
Do you still gobble treats when the Christmas tree has already become mulch for someone’s backyard?
Try to break the bad habits by removing the trigger to snack. For example, don’t let yourself shop the snacks anymore or put them out of sight. Or try replacing the habits by noticing when the cravings come and picking a healthier option.
#8 Nice: Maximize Company Benefits
Your financial habits should include ensuring you get your total pay and benefits.
If you have a Flexible Spending Account (FSA), you might lose some or all the money you’ve contributed to it at the end of the year. If that’s the case, now might be the time to spend it on qualifying purchases to your rollover limit.
Your company might also offer annual reimbursements, such as gym memberships or home office stipends. Make sure to get the most out of the benefits available to you.
Many employers also offer matches on 401(k) retirement accounts or even HSA (Health Savings Accounts) up to a certain amount. If you have an account, it might be worth checking that you’ve contributed enough to get the full match. Otherwise, you will be leaving free money on the table.
Regarding 401(k), remember to check the contribution amount for the next year while you are at it. Many employers continue the same deduction amount in the New Year, so make adjustments if necessary.
#9 Naughty: Feeling Distracted
The year 2022 is ending with many world events, and getting sucked into reading negative news and social media is one of the most common naughty habits. It is easy to let the holidays creep by while you scroll through the news feed (or TikTok, for that matter).
When possible, try to focus your energy on positive and productive things. Research shows that staying fully present and engaged makes you more likely to feel happy and fulfilled.
Instead of mindlessly doomscrolling, being present helps cultivate gratitude and lets you let go of any stress or anxiety.
Similarly, your mind might still be caught up in work or school, not letting you thoroughly enjoy the moment. A trick that has worked well for me is to write down where my head is before the holidays so I can come back refreshed and pick up where I left off.
Write down what your priorities should be coming back from the holiday. What are pressing matters, what actions do you need to take, and who do you need to meet with? Writing it down helps get it off your mind, and you’ll feel more relaxed knowing there is a game plan ready for you when you get back.
Instead of feeling preoccupied, spend time with friends and family, start a new hobby, or visit a new place or nature. Stay engaged at the moment and get into a flow state in what you are doing.
#10 Nice: Income Tax Planning
The goal of income tax planning is to legally reduce the amount of taxes you owe, ultimately saving you money. This can involve taking advantage of tax deductions and credits, as well as structuring your income and investments in a tax-efficient manner.
As we are getting close to the end of the year, now is an excellent time to ensure you’re efficient with your finances. Here are some considerations you should review with a fiduciary financial advisor for your situation.
First, if you are a high-income earner or your income is tipping over to a higher tax bracket (such as from 12% to 22% or from 24% to 32%), it may be worthwhile to see if you should increase your tax-deferred contributions to 401(k), IRA, HSA or other similar accounts.
Second, if you are a retiree, remember to take your required minimum distributions (RMDs) from your retirement accounts if applicable. Otherwise, you may get slapped with a big tax bill.
Third, review if IRA conversion is for you (spoiler alert: it’s not for most people). An IRA conversion is moving assets from a traditional IRA to a Roth IRA, which will trigger tax payments now rather than in the future. For some people and situations, it can save you in taxes over the long term and give you more flexibility in retirement.
Happy Holidays!
Remember that life goals are a marathon and not a sprint. Stay in the moment during the holidays but don’t let the festivities break your momentum.
Breaking the bad habits and building good ones this holiday season will make it easier to stay on your target.
Still, don’t be too hard on yourself if you miss your goals. Remember that you are doing your best with what you have.
After all, the holiday spirit is about joy, generosity, and goodwill.