Financial Planning for the Holidays

By Chris Duderstadt

November 2, 2021

Financial Planning for the Holidays

Key Points – Financial Planning for the Holidays

  • Reassessing What’s Important to You
  • What Kind of Giving Is in the Cards for You This Holiday Season?
  • Spending Time with People I Care About
  • Leaving a Legacy by Financial Planning for the Holidays
  • Family Trips, Gifting Plans, Charities, Second Homes, and More
  • The Best Gifts: Clarity, Confidence, and Control
  • 8 minutes to read

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Reassessing What’s Important to You

Whether it’s putting up decorations around the house or deciding what gifts to get for your loved ones, there’s a lot of planning to do during the holiday season. However, there’s much more to it with gearing up for one of the best times of the year.

Modern Wealth Management CEO and Founder Dean Barber recently sat down with CFP® professional Drew Jones to help people get a head start on financial planning for the holidays. Now is the time to join Dean and Drew in remembering what you’re truly thankful for.

“It’s far more important to think about what’s important in our lives than the physical gifts that we’re giving,” Barber said. “Our planning process has a lot to do not just with planning for the holidays, but planning for life in general to make the holidays that much more important.”

What Kind of Giving Is in the Cards for You This Holiday Season?

Many families have a tradition of playing their favorite card games together during the holidays. As Modern Wealth Management’s clients can attest, our CERTIFIED FINANCIAL PLANNER™ Professionals have a card game that helps people determine the five things that are most important to them. Let’s keep those five things in mind while financial planning for the holidays.

”Commitment-minded people might pick cards like ‘support charitable causes’ and ‘support other family members,’” Jones said. “We then take a deeper dive once they select those cards to understand who they are. Who are the people and causes they want to support and to what degree to they want to help them?”

Jones and Barber often find that people want to give more than they do during retirement. However, that optimal level of giving can happen more often than not if the proper financial plan is in place. Once that planning process is under way, people tend to realize that they don’t need to make some assumed sacrifices to accommodate for their desired amount of giving.

Modern Wealth Management’s CFP® Professionals can have those conversations with clients about what’s important to them and incorporate that into their financial plan so they can give to their kids, charities. You won’t know how much you can give without a plan, though.

A Top-Five Card: Spending Time with People I Care About

One of the most popular top-five cards that Barber and Jones see in that 15-card prioritization exercise is a card that reads “Spending Time with People I Care About.” That certainly rings true this time of year, so it’s imperative that the financial planning for the holidays is done so that can happen more often.

“Let’s think about a gift during the holidays—not of something that they’re going to do at that time—but let’s give a gift of a destination vacation,” Barber said. “Let’s plan a couple of years in advance so they can get the time off to do that. I’ve had so many people do that. When they come back from those family trips, they say it was the best Christmas gift they ever gave. Yet it wasn’t something they did during the holiday season. They created a memory and experience that’s going to live well beyond them.”

Leaving a Legacy by Financial Planning for the Holidays

Speaking of a creating a memory and experience that will live well beyond you, there are several ways in which you can leave a legacy with financial planning for the holidays. Of course, a monetary gift can make an immense impact on your children and grandchildren’s futures, but those memories together are what will last forever.

Fun Family Trips

As Barber mentioned, many clients have made those great memories via fun family trips. In 2021, 52% of Americans plan to travel and many will choose to do so by air (40%, although this figure rises to 57% for those with household incomes above $150,000).

In the case of one client, their family did some financial planning well in advance of the holidays to be together during the holidays.

While the client’s wife wanted to go skiing, their daughter was hoping for a vacation to someplace more tropical. Once the family decided on going somewhere warm, that’s where Barber came in to work the trip into their plan.

“We searched for some places they could go within the budget they had laid out. They booked it and the kids and grandkids were super excited because they weren’t going to spend the holidays in a cold location,” Barber said. “That might not be what everyone wants to do for Christmas or the holidays because everyone has their own thing, but if you put things like that in your plan and give yourself permission to do them, they can be more meaningful gifts than anything you can buy at any store.”

Long-Term Gift Planning

For some clients, fun family trips every few years is the perfect card to play. For other clients, it works best to put together a long-term gifting plan for their children and/or grandchildren and see what card they decide to play.

Barber has one client couple who is reaping the rewards who is getting the best of both worlds—spending time with people they care about and long-term gift planning to their loved ones. That couple has two daughters who respectively purchased condos with their families at Table Rock Lake and in Florida.

“Guess where those clients are going?” Barber said. “They’re going to the condos and taking part in that. When that was all done, the client told me that they were doing things that they would have never done without the plan and counsel. When you think about risk, the biggest risk that you have is not living your one best financial life because you’re fearful. If you don’t have the plan put together so you can get the permission slip to do those things, that’s when those things start to happen. Those are the biggest regrets.”

According to a recent Natixis U.S. investor survey, an inheritance is something that 68% on millennials expect. However, only 40% of parents will leave one. If leaving an inheritance is something that’s important to you, it’s critical to have a financial plan set up so that all parties involved are living their one best financial life.

Financial Clarity and Giving to Charity

Having clarity is can give you confidence to do financial planning for the holidays (or anytime of year). While other family members are oftentimes the recipients of those holiday gifts, there’s no doubt that there are many other people and causes worth supporting as well. There are creative ways with the change in the tax code that Modern Wealth Management CERTIFIED FINANCIAL PLANNER™ Professionals can help people with bunching on their gifting.

“They can let the charities know that they’re going to give bigger chunks every to two or three years. That way you can get a tax advantage and still give to the charity,” Barber said. “You can’t give like that unless you’ve built that gifting into your overall plan so that you know that those larger gifts aren’t going to impact your ability to do the things that are important to you.”

Some of Modern Wealth Management’s clients have specific charities that are near and dear to their hearts. One of Jones’s clients is a retired Marine who is very passionate about supporting Toys for Tots.

“The holidays are important for families who don’t have the resources to provide a good Christmas for their kids. With my client being older than 70.5, he’s done the Qualified Charitable Distributions out of his qualified accounts,” Jones said. “That is something he’s doing to help satisfy that Required Minimum Distribution that he’s going to need to take. The money is going to a 501(c)(3) charity. They’re getting it and they’re doing good things with the money. It’s a win-win situation for both involved.”

There’s No Place Like (a Second) Home for the Holidays

Whether you’re supporting a charity like Toys for Tots or are ringing the bell for Salvation Army, there are several ways to spread the holiday spirit to those who need it most. Modern Wealth Management’s team is happy to help with that by assisting you in financial planning for the holidays.

While giving to others is a great feeling during the holidays, there’s also nothing wrong with a gift to yourself. After all, your retirement should be the ultimate gift for all your years of hard work. With winter coming soon, a second home in a warm location might be perfect for you and your spouse.

“I had a conversation with some clients, and part of their dream was to have a winter home in Arizona. We started running numbers on real estate property there to determine what it was going to cost,” Jones said. “We built a separate goal in the plan. When they found a house, we ran the numbers that day and told them they had the green light. Whenever I’m doing those reviews, I’m talking about the cool things that come from those stories afterward. During every review, clients say thank you for giving them that clarity to do it and stories about how they’re enjoying those places during the wintertime.”

It Doesn’t Have to Be a Lifetime Commitment

Whether it’s a winter home or a summer lake house, there’s a lot of value to having a second home. However, amid all the happiness that second home can bring, there are other things—such as health—to consider.

“One of my clients was looking for a house to buy or to build in the Scottsdale area. He was only in his mid-50s, but he started developing this lung issue,” Barber said. “Initially, he thought he had COVID. He didn’t have COVID, but he found out he had a rare disease where if you’re in an environment or area where the air quality is bad that it’s going to affect you in a very negative way. Scottsdale happened to be one area where he shouldn’t be.”

So, Barber and the client had to change the plan. During that process, they knew exactly what the budget was that he could spend on a second home. Doing dynamic financial planning is imperative year-round, especially when you’re Making a Big Purchase in Retirement.

“I have a client who wants to spend summers in Wisconsin on the lake,” Barber said. “They want to buy a cabin up there. A lot of people think they’ll buy a second home and that it’s a lifetime commitment. In most cases, it’s not. It’s maybe for 10, 15, or 20 years if you’re lucky and you’re healthy. It’s a finite period, not an infinite period. That will determine if you can pay in cash for the property or take out a mortgage and use income from your investments to pay that mortgage. What’s the right the scenario from a tax perspective and how will that work?”

The Best Gifts: Clarity, Confidence, and Control

Unfortunately in 2020, virtual Christmas gatherings were all too common because of a surge in the pandemic. PwC’s research has shown that the excitement of a more traditional holiday season will lead to consumers with household incomes of $150,000 and more spending almost double the average this holiday.

It is completely up to each client to determine what gifts they want to give this year. Although financial planning for the holidays is unique for each person, Modern Wealth Management is happy to bring the same gifts of clarity, confidence, and control to all clients.

Our team at Modern Wealth Management utilizes its Guided Retirement System™ to create living, breathing financial plans that are designed to capture all the changes that take place in an individual’s life and overall objectives. It also accounts for the ever-changing economical and political environment with interest rates, inflation, etc. That way you have the clarity to do the things that you want to do.

“What better time than the holidays to be talking about that clarity and having the freedom to truly enjoy your life than planning for the holidays,” Barber said. “It becomes far more than shopping and buying gifts, which has become so commercialized. It’s about truly being in a situation, mentally and financially, where you can enjoy your remaining holiday seasons. People don’t really think about that. If you’re around 65 or 70, how many more of those holiday seasons do you have? How can you make every one of them as meaningful as you want them to be?”

As you prepare to do your financial planning for the holidays, make sure to schedule an appointment with one of our CERTIFIED FINANCIAL PLANNER™ Professionals. We can visit with you in person, by phone, or by virtual meeting.

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The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.