7 Financial Moves for the Holiday Season

Did you know that Americans plan to spend an average of $890 on holiday gifts this year according to the National Retail Federation? But here's what the statistics don't tell you: the period between Thanksgiving and New Year's offers some of the year's best chances to improve your financial position. Ranging from expiring tax benefits to strategic planning opportunities, there are many ways to prepare yourself for next year in this short window.

While everyone else focuses on holiday deals, financially savvy individuals use this time making moves that will benefit them long after the decorations come down. From maximizing employer benefits to setting up next year's financial success, the holiday season presents unique opportunities that won't come around again for another year.

This article covers:

• Holiday budgeting rules that actually work

• Year-end tax strategies that expire December 31st

• Setting up your finances for success next year

1. Set Your Holiday Budget Using the 1-2% Rule

Before you swipe that first credit card, consider this simple, classic framework: your total holiday spending should not exceed 1-2% of your annual income. For someone earning $100,000 annually, that means a holiday budget between $1,000 and $2,000 for everything—gifts, travel, entertaining guests and those inevitable last-minute expenses or gifts.

This rule works because it scales with your financial reality. It prevents the January credit card shock while still allowing generous celebration. Break down your budget into categories: 60% for gifts, 20% for travel (if applicable), 15% for entertaining and 5% for miscellaneous expenses. Adjust these percentages based on your priorities, but stick to the total.

The beauty of this approach? It takes emotion out of the equation. When your coworker suggests a $50 Secret Santa exchange, you'll know immediately whether it fits your plan. Plus, having clear boundaries actually makes gift-giving more creative and thoughtful.

2. Turn Holiday Shopping into Travel Points and Cash Back

If you're going to spend money anyway, make it work harder for you. Even if it's too late to apply for new cards this season, your existing rewards cards can generate significant returns—but only if you pay your balance in full. For next year, consider timing new card applications for early November to capture welcome bonuses through natural holiday spending.

Right now, focus on maximizing the cards in your wallet. Use card(s) offering 3-5% cash back in categories like department stores, online shopping or dining. Some cards offer rotating quarterly bonuses that align perfectly with holiday spending. Stack these rewards with shopping portals and retailer promotions to maximize returns. For example, shopping through your card's online portal could add an additional bonus in points, miles or cash back.

Here's the key: treat credit cards like debit cards. Track every purchase and pay your balance weekly if needed. The moment you carry a balance, those massive interest rates will devour any rewards you earned. Set up alerts for every transaction to stay aligned with your budget.

3. Make Tax-Efficient Charitable Donations Before Year-End

December charitable giving offers a triple benefit: supporting causes you care about, reducing your tax bill and potentially clearing out investment positions. If you itemize deductions, bunching multiple years of donations into one year can push you over the standard deduction threshold, maximizing tax benefits.

If you own stocks or mutual funds that have gained value since you bought them, donate those instead of cash. You'll avoid capital gains taxes while still claiming the full market value as a deduction. For those with significant giving plans, a donor-advised fund lets you claim the tax deduction this year while deciding on recipients later. This strategy works especially well if you expect lower income next year.

Don't forget about non-cash donations, too. That closet clean-out can help someone in need and also become a tax deduction, but be sure to document everything. Take photos, get receipts, and use IRS-approved valuation guides. Quality charitable giving requires the same planning as any other financial move.

4. Harvest Investment Losses to Offset This Year's Gains

Tax-loss harvesting sounds complex, but the concept is straightforward—sell investments that have lost value to offset gains elsewhere in your portfolio. This move can reduce your tax bill while maintaining your overall investment strategy. The key is doing it before December 31st so you can claim it for this year.

Review your taxable investment accounts for positions showing losses. You can use these losses to offset capital gains dollar-for-dollar, and even deduct up to $3,000 against ordinary income. Any excess losses carry forward to future years. Just remember the wash-sale rule: you can't buy the same or "substantially identical" investment within 30 days after selling your stock.

This strategy works best as part of regular end-of-year portfolio maintenance, not panic selling. Consider replacing sold positions with similar—but not identical—investments to maintain your desired asset allocation. Many automated investment services (or “robo-advisors”) now offer automated tax-loss harvesting, but understanding the strategy helps you evaluate whether they're doing it effectively. To read more about robo-advisors or what type of advisor you might need, read our guide “Finding Your Fit: What Type of Financial Advisor do You Need?”

5. Use Your FSA Funds Before They Disappear

Flexible Spending Accounts or “FSAs”, operate on a "use it or lose it" basis, making December crucial for FSA holders. According to the Employee Benefit Research Institute, the average employee forfeits $441 in FSA funds annually—don't let that be you. Check your balance now and create a spending plan for the remaining weeks.

Eligible expenses go beyond the obvious medical visits and prescriptions. Stock up on first-aid supplies, sunscreen and everyday medical products. Get new prescription glasses, schedule dental cleanings or finally try acupuncture. Many retailers now mark FSA-eligible items clearly, making year-end shopping much easier.

Some employers offer a grace period until March 15th or allow $660 to roll over according to IRS regulations, but don't count on it. Log into your benefits portal today, check the rules specific to your plan and set calendar reminders for must-spend dates. That money came out of your paycheck—make sure you get the benefit.

6. Schedule Your Annual Financial Review During Quiet Holiday Weeks

While others are recovering from holiday parties, use the quiet week between Christmas and New Year's for strategic planning. Many professionals have lighter schedules, making it easier to book extended consultations with financial advisors, accountants or estate planning attorneys. 

For those interested in learning more about what a financial advisor is and what they can do for you, read our guide “What is a Financial Advisor?”, or if you’re exploring financial advice for the first time, check out our guide “When is the Right Time for a Financial Advisor?”.

This timing offers unique advantages. You'll have nearly complete information about your current year's finances while having time to implement strategies for the coming year. Review your investment allocation, insurance coverage and estate planning documents. Additionally, update beneficiaries, adjust retirement contributions and ensure your financial plan still aligns with your long-term goals.

7. Fund Next Year's Tax-Advantaged Accounts on January 1st

Mark January 1st on your calendar now—not for resolutions, but for retirement contributions. Funding your IRA, HSA or other tax-advantaged accounts on the first business day of the year gives your money maximum time to grow tax-free. On a $7,000 IRA contribution, starting in January versus the following April could mean thousands in additional growth over time.

Set up automatic transfers now for January execution. Based on 2025 IRS contribution limits, max out your IRA contribution ($7,000, or $8,000 if over 50), fully fund your HSA ($4,300 for individuals, $8,550 for families), and increase your 401(k) contribution percentage. Even small increases compound significantly over time.

This move requires December planning and January execution. Review contribution limits, ensure you have cash available, and coordinate with your overall financial strategy. The earlier you invest, the longer compound interest works its magic. It's the easiest financial win of the new year.

Frequently Asked Questions About Financial Moves for the Holiday Season

What should I prioritize financially before the New Year? Before December 31st, prioritize financial moves with hard deadlines: spend remaining FSA funds, make tax-efficient charitable contributions, harvest investment losses if needed and check whether you need to rebalance your portfolio. These actions can reduce taxes, prevent unused benefits from expiring, and improve your overall year-end financial position.

How do I set a realistic holiday budget without overspending? The simple approach is the 1–2% Rule: set your total holiday budget at 1–2% of your annual income and divide it across gifts, travel, food and events. As previously mentioned, this keeps spending predictable and prevents last-minute debt while still giving you flexibility to adjust categories based on your priorities.

Is it better to make financial moves in December or wait until January? Some moves are best done before December 31st—such as charitable donations, FSA spending and tax-loss harvesting—because they affect this year's taxes or benefits. Others, like IRA or HSA contributions for the new year, are ideal on January 1st to maximize growth time and simplify tracking.

The Aligned Perspective: Financial Moves for the Holiday Season

The holiday season offers more than festive celebrations—it provides a unique window for financial optimization that won't come again for another year. These seven moves work together to create momentum—your budget keeps current spending in check, while strategic tax moves and early funding set up next year's success.

At Datalign, we help connect you with advisors who understand how to coordinate these year-end strategies with your overall financial picture. With over $50 billion in assets connected through our platform and 13,000+ advisors (86% appearing on Barron's Top RIA lists), we know that the right guidance transforms good intentions into executed strategies.

The difference between those who thrive financially and those who merely survive often comes down to taking advantage of time-sensitive opportunities. This holiday season, give yourself the gift of financial alignment—your future self will thank you.

Simple, strategic and designed to give you clarity as you grow.