Money Management

The deepest discounts may be yet to come. 

There’s a reason retail events like Black Friday and Cyber Monday tend to be popular with consumers. That’s when you’ll commonly find a host of discounts on everything from apparel to electronics to toys.

But now that both of these events are in the rearview mirror, you might assume the best holiday deals are far behind you. But that’s not necessarily the case. In fact, if you hit the stores or shop online in the coming weeks, you may find that the bargains are even more attractive.

A really great time to shop

Many people like to do their holiday shopping earlier on in the season so they’re not stressed about last-minute buys and shipping delays. But if you’ve yet to finish checking all of your holiday gifts off of your list, don’t sweat it. In fact, waiting to buy gifts might work to your benefit.

The reason? Some of the best deals you’ll find on holiday purchases will pop up the week before Christmas, explains Marshal Cohen, chief retail industry adviser for market research firm NPD. And if you want the absolute best deals, he insists that the time to go after them is right after Christmas.

That logic makes sense. Many people rush to do their holiday shopping in time for Christmas, and once the big day is over, the need to purchase gifts tends to wane. And so it’s easy to see why retailers might, at that point, start marking down leftover inventory.

It pays to wait

If you have holiday gifts you still need to buy ahead of this weekend, then the time to get moving is probably now — especially if you’ll be shopping online and having purchases delivered to your home, or to the door of your gift recipients. But if there are items on your personal wishlist you’re hoping to check off, or if you have gift cards to spend, then you may want to wait until right after Christmas to do your personal shopping. You might manage to score a variety of items without racking up a huge credit card tab.

That said, if you’re going to do some post-Christmas shopping, you may want to stick to online. Retail stores tend to be jam-packed in the days and weeks following Christmas as shoppers rush to return items that didn’t work out while they’re still eligible for a refund or store credit.

Shopping online right after Christmas could prove to be less chaotic than shopping in person. And if you’re buying items for yourself, you won’t have to stress about potential shipping delays.

Keep your receipts

Because retailers tend to offer deep discounts right after Christmas, it’s important to hang on to receipts for items you know you want to return in late December or early January. If you don’t have a receipt, you may only be offered the current price of the items you’re looking to unload, not their original purchase price. And given the way retailers tend to slash prices after Christmas, you could lose out big time in that scenario.

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You only have until Dec. 31 to complete these tasks. 

The holiday season is finally upon us and that means the much-less-exciting tax season is just around the corner. If you want to owe the government as little as possible, now is the time to make some key tax-saving moves. Here are three tax breaks you may want to pursue before we ring in 2023.

1. Charitable contribution tax deduction

December is the most popular month to give to charities. Not only does this help these organizations provide vital services for those in need, but it could also earn you a tax break. The charitable contribution deduction reduces your taxable income for the year by the value of your donations, so you pay the government less.

But there are a few rules you must follow if you hope to claim this deduction. First, you need to donate to a qualifying tax-exempt organization. The IRS has a search tool that can help you verify whether your donation is tax deductible.

Typically, you can’t deduct more than 50% of your adjusted gross income (AGI). Contributions to private foundations, veterans organizations, fraternal societies, and cemetery organizations are capped at 30% of your AGI.

You may donate either money or goods, but in either case, you need proof of your donation. This could be as simple as a receipt or a credit card or bank statement. If you plan to donate several hundred dollars, you will need a written acknowledgement from the charity.

Finally, you must itemize your tax deductions. This may not save you money compared to using the standard deduction. It’s often best to calculate your taxes both ways and go with the option that will save you the most.

2. Saver’s Tax Credit

The Saver’s Tax Credit rewards low- to middle-income families who save for their retirement. This is a tax credit, which means it’s a dollar-for-dollar reduction of your tax bill. If you owed the government $5,000 and qualify for a $1,000 tax credit, you’ll only owe $4,000. This can have a significant effect on the size of your tax refund.

This credit is only available to adults 18 and older who aren’t students and aren’t claimed as dependents on anyone else’s tax returns. The size of your credit depends on the size of your retirement contribution, your income, and your tax filing status. Here’s a table to help you figure out how much you qualify for:

This means that if you’re a single adult with an AGI of $20,000 and you put $1,000 in a retirement account this year, you’ll earn a tax credit of 50% of that amount, or $500.

The maximum contribution amount that qualifies for the credit is $2,000 for single adults and $4,000 for married couples. This means the maximum credit is $1,000 for single adults and $2,000 for married couples.

3. Tax loss harvesting

Tax loss harvesting is where you sell some investments at a loss in order to offset some of the capital gains you’ve earned on your other investments. This reduces the amount of capital gains taxes you owe. In addition, if you’ve lost a lot more than you gained, you can use your losses to write off up to $3,000 of your ordinary taxable income. And you can carry over any losses over $3,000 into the next year.

This is only an option for you if you’ve sold investments during the year, and investments in tax-deferred retirement accounts don’t count. So you’ll need to keep some money in a taxable brokerage account if you plan to do this.

You also need to watch out for the wash sale rule. This says that if you sell an investment at a loss for tax loss harvesting, you can’t buy that same investment or another virtually identical investment within 30 days before or after the sale. If you break this rule, the IRS will disallow the tax deduction you claimed for tax loss harvesting.

There are a lot more tax breaks out there, and it’s a good idea to look into any you think you may qualify for. Be sure you understand the rules, including income limitations and how much you can write off, so you don’t run into problems with the IRS.

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There are steps you can take to improve your outlook. 

It’s fair to say that 2022 has been a tough year for a lot of people — namely, because we’ve been grappling with rampant inflation since the start of it. Over the past 12 months, many consumers have been forced to raid their savings and rack up costly credit card debt not to take vacations or update their homes, but to do basic things like keep the lights on and put food on the table. And so it’s not all that shocking to learn that more than one-third of Americans say they’re in worse shape financially now than they were last year, as per a recent Fidelity study.

If you feel that your financial situation has worsened over the past 12 months, you’re clearly not alone. But you should also know that you aren’t trapped. Here are a few steps you can take to improve your financial outlook — and close out 2023 in a much stronger place.

1. Build an emergency fund

Having money in a savings account buys you protection when your bills start climbing, or when unexpected ones land in your lap. If you want your financial outlook to improve, work on building an emergency fund in 2023, even if it means socking away a small amount of money each month. Having that protection could give you peace of mind, and that alone could help you feel like you’re in better shape financially.

2. Establish a debt payoff plan

If you were forced to take on debt in 2022, then that alone is a good reason to feel down about your finances. But that doesn’t mean you’re stuck with that debt for years on end. If you come up with a solid debt payoff strategy, you might be able to shed it sooner than expected.

Let’s say you owe several thousand dollars on your credit cards. One strategy you might employ is consolidating that debt via a balance transfer. If you’re able to move your balances over to a new credit card with a 0% introductory APR, you’ll get a break from racking up more interest for a period of time.

3. Take on a second job

The problem of inflation is likely to persist in 2023, at least at the start of the year. And because of that, you may find that it’s a struggle to squeeze extra money out of your paychecks to build an emergency fund or pay off debt. That’s why it’s a good idea to consider a second job.

Will doing so mean losing out on downtime? Yes. And to be clear, that’s a big deal, because having free time is absolutely essential to your mental health.

But you don’t have to commit to a side job forever, nor do you have to take one that’s difficult to manage. You can find a gig that’s flexible, like doing data entry online or driving for a ride-hailing service, and boost your income when you can spare the hours. That extra money could really help you get to a better place financially.

It’s easy to see why so many people are ending 2022 on a sour note, financially speaking. But if you take these steps, you might feel very differently 12 months down the line.

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Higher borrowing costs for consumers could have negative results. 

Inflation has been hammering consumers since the latter part of 2021. And over the past year and a half, many people have been forced to charge up a storm on their credit cards and raid their savings accounts just to keep up with rising costs.

The Federal Reserve is really eager to see the problem of inflation go away. And to that end, it’s been aggressively hiking up interest rates this year in an effort to cause a pullback in consumer spending.

To be clear, the Fed doesn’t set consumer borrowing rates, like auto loan and mortgage rates. Rather, it oversees the federal funds rate, which is what banks charge each other for short-term borrowing.

But when the Fed raises its benchmark rate, consumer borrowing rates tend to follow suit. And so these days, consumers are looking at higher interest rates on everything from personal loans to credit card balances.

Now the goal in making borrowing more expensive is to drive a modest decline in spending so that the supply of goods and services can catch up to demand. Once that happens, it should help bring inflation down to a more moderate level.

But the Fed is taking a big risk. If consumer spending declines drastically, it could be enough to spur a full-blown recession.

Meanwhile, in November, the Consumer Price Index, which measures changes in the cost of consumer goods, showed a slowdown in inflation compared to earlier on in the year. In spite of that, the Fed announced a 0.50% interest rate hike on Dec. 14. And while that won’t lead to an instant recession, it could bring us closer.

Things could take a turn for the worse

So far, higher borrowing costs don’t seem to be slowing consumers down to too much of an extreme. But some experts think a big reason we haven’t seen a notable decline in spending is that Americans still have leftover stimulus funds to spend from 2020 and 2021. Once that money runs out, spending could drop to a large degree.

If that happens, it could be enough to cause a recession to hit in 2023. And at that point, the topic of stimulus aid might re-enter the mix.

Lawmakers have previously relied on stimulus aid to bust the economy of a slump. And so if things get really bad for the economy in 2023, Americans could see another round of stimulus checks land in their bank accounts.

Lawmakers might be stingy

Although a 2023 recession could lead to a round of stimulus funding, the last batch of stimulus aid given out was met with a lot of criticism. In fact, many experts believe that it was lawmakers’ generous stimulus policies in 2020 and 2021 that led to such rampant inflation in the first place.

If a recession strikes in 2023, stimulus checks could be back on the table. But they may be a lot more limited in size and scope than in previous years. And so all told, stimulus aid is not something the typical consumer should rely on in the near term — even if economic conditions decline.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More