Money Management

A Guide to Understanding a 401(k) Plan

a couple in bed dreaming of retirement -a guide to 401k plan

No one needs to remind you that you should save for retirement. After all, no matter your age and how far away your retirement is, you want to enjoy your golden years without having to worry about money.

In the past, many employees could depend on a traditional pension from their employer. But that was then. With traditional pensions becoming a rarity, we are pressured to do the heavy lifting of saving for retirement on our own. Although the word ‘401k’ is synonymous with retirement planning, how many of us know and understand all the rules of a 401k plan?

Here is a guide to understanding a 401(k) plan:

What is a 401k and why enroll in a 401k plan?

The 401k plans are retirement plans offered by employers. And a 401k account is tied to your employer because the employer sponsors the plan. A 401k is just the name of your retirement savings account where you save money for retirement.

A 401k account is a tax-deferred retirement account. It allows you as an employee to set aside a percentage of your pre-tax earned income to a retirement account.

When you set aside your pre-tax money you avoid paying taxes on that income today and allow those contributions to grow tax-free until retirement. But when you retire and start withdrawing money from your 401k account you will have to pay taxes on your withdrawals.

Why enroll in a 401k plan?

The best benefit of the plan is to reduce paying taxes today and allow your contributions to grow tax-free for a long time.

However, you cannot avoid paying taxes entirely. You will pay income tax on any money you withdraw from your 401k when you retire.

How to open a 401k account?

Opening a 401k account is pretty simple. You can open an account when you do your paperwork as a new employee. However, you are not required to start the 401k when you are first hired. It can happen at any time. You just need to fill out the paperwork and decide how much of your paycheck will be going into that account. Your contributions will be automatically deducted from your paycheck.

How much can you contribute to a 401k plan?

Retirement savings accounts are regulated by the IRS. That means the IRS sets the rules as who can use a 401k plan, and how much they can contribute. The amount you decide to contribute to your 401k is up to you. However, the IRS regulates the contribution limits every year.

The 2021 maximum 401k contribution:

The 401k contribution limit is $19,500. But if you are age 50 or older, the catch-up contribution limit is an additional $6,500. So, you can save a total of $26,000.

Whenever possible, increase your retirement contributions up to the maximum allowed in your retirement plan. If you are a few years away from retirement, being short on retirement savings can be problematic.

The benefits of a 401k plan.

There are many tax advantages of saving money to a 401k plan.

First, the contributions you make to your 401k are tax-deductible. That means you do not pay taxes on the money you put into your account.

Your 401k contributions will be deducted from your gross income which will reduce your taxable income for that year. For example, if you made $75,000 and contributed $15,000 to your 401k, you would be only paying taxes on $60,000.

Next, your employer may match your contributions. The employer match means that your employer agrees to match a portion of your money going into the 401k account. Usually, the employer match is between 3 to 6 percent.

For example, your employer offers to match 50 percent on up to the first 6 percent you choose to contribute. So, if you make $75,000 a year and choose to contribute 6 percent of your annual salary ($75,000 x 0.06 = $4,5000), your employer will contribute an additional 50 percent of that amount. That free $2,250 ($4,500 : 2) will steadily grow over time.

If you do not put money into a 401k, there is no match. If your employer offers to match your contributions, I suggest at least save as much as the match. That is free money. In the end, you will be earning extra money for doing absolutely nothing.

Lastly, the money inside your 401k account grows tax deferred. If you open an investment account, you will have to pay taxes on your capital gains and dividends every year. But in a 401k plan, your money grows tax-free as long as it stays in the plan. And thanks to the power of compounding, your retirement savings will be growing faster over the years.

How to invest your 401k money?

Most 401k plans offer a limited number of investment choices. Your 401k is tied to your employment. When you sign up for a 401k plan, you have to choose from the investments offered by your employer’s plan.

Most 401k plans typically allow you to choose from a small number of pre-selected mutual funds that vary from conservative to aggressive. Some mutual funds are index funds, which track major market indexes. And other funds are target-date funds, which select a mix of investments appropriate for your age, but the fees can be very high.

Investing in index funds or target-date funds present less risk for you as an investor, than investing in individual stocks. But you need to understand which funds are best suited for your retirement goals, your age, and your risk tolerance.

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What to do with 401k when you change jobs?

When you change jobs, you have a couple of options:

Leave 401k with your old employer

Your first option is to do nothing and leave it with your old employer. If you like the investment options and costs offered by the plan administrator, your money will continue to grow in that 401k account.

But the biggest drawback to this option is that you can no longer contribute. To keep investing, you will have to open a 401k with your new employer. That means you will be juggling multiple statements and accounts every month.

Rollover old 401k to new 401k

Your second option will be to carry out a 401k rollover. A 401k rollover means you transfer your funds from the old 401k to your new employer’s 401k plan.

The rollover makes sense if you do not want to leave money with your former employer’s 401k, or simply want all your money in one account. That way, you will have more control over your contributions, and both of your accounts will be consolidated. Your new 401k plan administrator should help with transferring the funds.

Rollover 401k to IRA

Another popular option is to roll over the old 401k into an individual retirement account (IRA). I personally prefer this option because 401k plans usually do not offer the best investment options, and the administrative and management fees can be high.

A 401k plan can only be offered through an employer, but an IRA account can be open by anyone. You have a choice to select a brokerage firm, open an account and then ask them to roll over your 401k funds into a new IRA account.

One of the best benefits is that you do not need your employer’s approval when deciding how and where to invest your money. And typically, IRAs have lower fees than 401k plans so, you can save big on it over the years. Most of my IRA money invested into the low-cost index funds from Vanguard and Fidelity.

Cash out 401k

Finally, you still have an option to cash out your 401k money. It sounds like an easy option to cash out your old 401k and start over with a new employer. But if you try to cash out before a certain age, you will face an early withdrawal penalty. While there are exceptions like death, disability, or medical issues, you might lose a lot of money if you choose to take out your 401k funds early.

401k withdrawal rules

a dollar bill with coffee beans in a bowl-benefits of 401ks

I believe it is wise to keep money in the 401k or IRA rollover plans as long as possible and delay taking money from these accounts that will add to your taxable income. But if you decide to cash out your 401k funds before a certain age, you need to be aware of rules on distribution.

Penalty for an early withdrawal:

If you withdraw 401k money before age 59 ½ and do not meet an exception that allows you to withdraw early, you will be paying both a 10 percent tax penalty as well as regular income tax on the funds you got withdrawn. That makes early withdrawals very expensive.

Impact of an early withdrawal:

For example, if you decide to take out $5,000 as an early withdrawal, you will have to pay the following, including penalties and taxes:

Early withdrawal penalty (10 percent) = $500
Federal and state tax withholding (20 percent tax rate) = $1,000
The balance you receive: $5,000 – ($500+$1,000) = $3,500

You have to be 59 ½ years old to withdraw 401k (or IRA rollover) money without any penalties. However, certain conditions allow you to withdraw 401k money without any penalties at age 55. Sometimes it is called the Rule of 55.

The IRS makes an exception for middle-aged people. It spares you the 10 percent tax penalty if you have been laid off, fired, or leave a job between the ages of 55 and 59 ½. But you still have to pay a regular federal and state income tax on your withdrawals.

From IRS – the Rule of 55 explained

401k plan Required Minimum Distributions

The IRS calls them Required Minimum Distributions (RMDs). You cannot keep money in your 401k portfolio forever. When you turn 72 (it used to be 70 ½), the IRS requires you to start taking money out of your 401k.

Your 401k plan administrator will be sending you yearly payments from your account. The RMD payments will be different for each 401k owner. Each year you are required to withdraw an amount based on your life expectancy and how much money was accumulated in your account. And if you fail to make a withdrawal you will have to pay a tax penalty and still make a withdrawal. Additionally, you will pay a regular income tax on your withdrawals.

If you have more than one 401k, you will need to take a separate RMD from each account. That is why it will be easier to combine all 401k accounts into one when you retire or ready to withdraw your retirement savings.

It is good to remember that many brokerage firms offer a service of calculating your RMD and sent the paycheck to you automatically.

The Bottom Line

The 401k plan has grown to become the most popular retirement plan in America sponsored by employers. Many people depend on the money they have invested in 401k plans to provide for them in their retirement years. A 401k plan offers a great opportunity to save for your golden years. Without your 401k savings, you will be only relying on a Social Security paycheck which can easily turn into a meager existence.

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Financial New Years Resolutions for Baby Boomers

by Maggie Leave a Comment

a piece of paper _new year resolutions for baby boomers

Happy 2021! In the spirit of the New Year, I have put together a list of financial New Year’s resolutions for baby boomers.

These financial goals are especially important for people who are planning to retire within the next 10 years. I personally think that the beginning of the year is a great time to start something new and work towards a goal.

Here is the list of financial New Year’s resolutions for baby boomers:

1. Determine how much of the nest egg you will need.

When you are near retirement, it is important to know how much of the nest egg you will need to live comfortably for the rest of your life. How do you figure it out? You have options.

The typical advice is you should aim to replace 70 to 80 percent of your annual pre-retirement income. For example, if you earn $70,000 per year before retirement, you should expect to live off $49,000 to $56,000 per year.

Also, you can use an online retirement calculator. Take a few minutes to enter initial information and then see the numbers, and where you stand today.

Vanguard – Retirement Nest Egg Calculator

Or you can use your current expenses and determine how it will change when you retire.

The best advice is to create an estimated retirement budget based on your current and future expenses. You might have a general idea of what you spend now. But you will be better prepared financially for retirement if you have a clear picture of your expenses now and how that might change in the future.

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2. Get a clear picture of your retirement income.

When you are working, you probably have a single employer and a single source of income – your salary. In retirement, everyone has different sources of income.

As a retiree, you receive income from multiple sources: Social Security, pension, part-time job, or rentals (if you have any).

Another source of income will come from your nest egg – investments and retirement savings:

Tax-deferred accounts – 401(k), IRA
Tax-free – Roth IRA, Roth 401(k)
Taxable investment accounts
Taxable bank checking and savings accounts

Getting a clear picture of your retirement income will help to make sure you have enough money to cover all your living expenses.

To make your assets last through the next 20 or 30 years, use the rule of thumb to withdraw 4 percent of your portfolio annually.

For example, if you have $500,000 in retirement funds, you can spend roughly $20,000 ($500,000 x 0.04) per year when you retire. Add this number to your Social Security, pension, and other savings, and calculate if it is enough to support the retirement of your dreams.

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3. Set a target retirement date.

woman and man walking on the beach - financial new year goals for baby boomers

Another important financial goal for baby boomers who are near retirement is to set a target retirement date. We all need to plan for the day when we are ready to retire or can no longer work.

Based on your target retirement date, retirement income, and what you want to spend in retirement, you can determine if you have enough money saved for your golden years. If it is not enough for a comfortable retirement, move the date, and save more into your retirement funds.

Related Article:

7 Financial Mistakes to Avoid in Retirement

4. Update your budget.

What is your budget? How much you want to save and how much to spend in 2021?

Sticking to your budget can help to know where your money is going. If you want to save more money for your upcoming retirement, begin eliminating some expenses that may not be important to you anymore.

When you retire, you do not need a lot of things that you did when you were working. The costs of commute, take-out lunches, and business clothes will go down. But you will start spending more money on travel, hobbies, and activities.

Balancing income with your spending plan will help you to save more money for retirement.

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5. Maximize your retirement savings.

Whenever possible, increase your retirement contributions up to the maximum allowed in retirement plans such as 401(k), IRA, and Roth IRA.

When you are a few years away from retirement, being short on retirement savings can be problematic. The best option is to start reducing expenses in your budget, so you can put more money into your retirement savings.

The 2021 contribution limits are:

$19,500 for 401(k) retirement plans. And if you are age 50 or older, the catch-up contribution is an additional $6,500. So, you can save a total of $26,000.
$6,000 combined contribution for traditional IRA and Roth IRA. And the catch-up contribution for people age 50 or older is $1,000. So, you can save up to $7,000 with your pre-tax money (IRA) and after-tax money (Roth IRA).

Related Article:

Why Do You Need to Max Out Your 401(k)?

6. Get out of debt before retirement.

Paying off debt, no matter how much you owe, is a key to a stress-free retirement. Getting into retirement with any kind of debt will put a burden on your lifestyle.

The best advice for baby boomers is to pay off all your debts before you retire including a mortgage.

When you are working, you have years of earned income to pay a mortgage, credit cards, student, or any other kind of loan. But once you retire, you will be living on a fixed income.

And when you start living on a fixed income, it is hard to pay off debt if you need to pull big chunks of money from your savings. Although, big withdrawals from retirement funds could push you into a higher tax bracket.

Being debt-free gives you more freedom and money left in your pocket to enjoy your golden years than struggling to pay the mortgage or other debts.

To pay off all debt including a mortgage might not be realistic for everyone. However, the less debt you have, the better you are prepared financially for retirement.

Related Article:

How to Pay Off Debt Before You Retire

7. Rebalance your portfolio.

list of 2021 goals - financial goals for baby boomers

The 2020 year has been a volatile year for financial markets. It can be tempting to stay away from stocks to reduce the risk of losing money in your retirement funds.

But stocks provide growth, and investing for growth is important at this stage of your life. If you retire at 65 and spend 20 years in retirement, you need to have enough growth to make your money last that long.

Take the opportunity to review your asset allocation and make sure your portfolio is diversified and invested for growth. You should have a mix of stocks, bonds, mutual funds, and other assets that fits your retirement goals.

You need to remember that a well-balanced portfolio will help you to weather market downturns. Also, it will potentially generate a retirement income to cover your living expenses.

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8. Think about the future medical cost.

Health care is expensive. Unfortunately, many baby boomers forget to include it in their financial plan. Medicare will cover most of your routine health-care costs if you retire at age 65 or older. Unfortunately, it does not pay for all medical bills, and it does not pay for long-term care at all.

Underestimating health care expenses or how to pay for long-term care can be a big financial mistake. Think about your future medical cost and find ways to protect your retirement savings.

Consider buying long-term care insurance which can help to pay for home health aides in your late years. If you buy long-term care insurance now, your premiums will be lower than if you wait several years.

It is recommended by many financial gurus to open a health savings account (HSA).

The money you can contribute to HSA is tax-deductible or pre-tax. And any increase in the value of your account is free from federal taxes. But it has to be used for qualified medical expenses otherwise you will be paying income tax and penalties on your contributions.

The 2021 HSA contribution limits are:

$3,600 for individual coverage
$7,200 for family coverage

You can put money into HSA every year until you enroll in Medicare benefits. After that, you are no longer allowed to contribute. However, money that you do not spend will be accumulating in this tax-free account until you need it in retirement.

Related Article:

5 Ways HSAs can Fortify Your Retirement

9. Plan where you will live.

Where you will live in retirement could have a big impact on your living expenses. Consider this option – sell your big house in an expensive location and move to a smaller house or condo in a low-tax state. In this case, your living expenses will be reduced, and you might have some extra income to pay for things you love to do in retirement.

You may also consider staying in your town but moving to a smaller home or condo. That will be more financially manageable while living on a fixed income.

But if you are planning to move to a big city you should be financially prepared to spend more money because retiring in a booming metropolis can be pricey.

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Final Thoughts

I know many people do not bother with New Year’s resolutions. But I find them to be very motivating. New Year’s financial resolutions are a great way to take steps to move towards your new goals.

What is your New Year’s resolution? Do you have any financial goals?

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The 2020 Year-End Review and New Year Goals

by Maggie Leave a Comment

Another year flew by, and I am glad it is almost behind us. 2020 was a difficult year for most of us and the whole world.

As the new year approaches, I like to look back at all things that happened in the last year. I get to see what I did, and what I did not do. I like to take count of the goals I accomplished. And If I failed to follow through on all my goals, I know I have another chance to make them happen in the new year.

I am not a big fan of New Year’s Resolutions, but since starting the blog, I like to reflect on my previous year and see what I would like to accomplish next.

So, I am happy to present my 2020 year-end in review.

My 2020 Year in Review:

Financial goals review:

1. Credit cards and banking

I want us to be debt-free as we are getting closer to retirement. In the past few years, Roman and I have accumulated $5,400 in medical debt. We transferred this money to 2 credit cards with 0 percent interest and finished paying off our debt in September. With this strategy, we would not dip into our savings.

We funnel all our regular purchases onto a couple of different rewards credit cards to earn points on our everyday spending.

Our go-to card is a PayPal credit card with 2 percent cash back on everything. Our secondary card is the American Express Blue credit card which we use at supermarkets with 3 percent cash back.

However, we also opened the Citi Dividend Platinum to take advantage of the 3-month promotion that gave 5 percent cash back at supermarkets.

Finally, we use the Bank of America credit card to pay for gas with 3 percent cash back. All these credit cards require no membership fee.

We have a combined no-fee checking account at Winchester Savings Bank which we use for bill payments, our mortgage, and money transfers.

We have 3 savings accounts. One savings account is a combined account at Winchester Savings Bank. The interest rate is very low, so we do not stash our savings there.

Capital One 360 is our primary savings account, which has no monthly fees and offers decent returns. We use the American Express High Yield Savings account for our emergency and travel funds.

2. Retirement accounts

I have several retirement accounts – 401(k), Roth 401(k), IRA, and Roth IRA. Each month I contribute roughly 12 percent of my salary to 401(k) and Roth 401(k), and my employer matches 3 percent. My strategy is to increase the contributions by 1 percent each year.

Unfortunately, that did not happen in 2020 because it was a difficult year and I was concerned about keeping my job, as we all saw so many people around us losing their employment. Luckily, my company managed through this year and worked hard to keep everyone employed. They even distributed bonuses to reward people for their efforts throughout the difficult year.

When COVID-19 entered our lives and the stock market fell drastically, I had a few sleepless nights as all our retirement and investment portfolios plummeted. We lost roughly 10 percent of our investments.

Luckily, it was a short-lived market downturn, and in April we already saw positive signs of market recovery. We are actually now in a better spot than before. Even though we lost a lot of money at the beginning of 2020, we gained it back through the year. Overall, our retirement and investment portfolios 2020 return was 9 percent.

I was planning to add $3,500 to my Roth IRA account in April, but again it did not happen because of the ‘gloom and doom’ news around us.

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3. Emergency fund and other savings

We were able to increase our savings despite all the chaos and uncertainty we experienced in the first half of 2020. It was easy to cut unnecessary expenses and find more ways to save money with both of us working from home since the middle of March.

Working from home helped us to save a lot of money on gas, parking, lunches, business clothes, dining out, etc. I am happy to report that we managed to meet our goal and increased our emergency fund up to $30,000. From now on, we want to use this money only for emergencies.

In 2019, we opened a separate savings account and called it “travel”. Roman and I like to travel and often pay for our travels with emergency fund money. I wanted that practice to stop and find other ways to pay for our travels.

In 2020, we made some adjustments to our budget and were able to save $3,000 in our “travel” fund.

4. Home mortgage

We bought our house in 2002 and did various big and small renovation projects that increased the value of our house. Right now, we are trying to stay away from any additional upgrades or renovations and just focus on paying off the mortgage.

In 2020, we brought our mortgage balance down from $241,000 to $230,000.

Blogging goals review:

2020 was a year when I challenged myself and pushed harder to improve my blogging skills.

I did not know about all the additional work that would be required when I launched the Save, Invest & Retire Blog in 2019. The blogosphere changed so dramatically over the years. According to the stats, there are 500 million blogs in the world today. That is a lot of competition to deal with for a new blogger.

In 2020, I became more knowledgeable about the blogging world and set up new goals for blog content, email marketing, traffic building, and a social media strategy to grow Save, Invest & Retire.

Not everything worked out the way I wanted it but setting up the goals and working towards them helped me to stay motivated.

Travel goals review:

2020 started well enough with plans to travel to Greece in May and Lithuania in September. But then… well everyone’s life changed.

We had to cancel both of our trips. We were lucky to get refunds on both of our trips, including Lufthansa airline tickets, hotels, and a full refund on the canceled Greek Islands cruise.

Related Post: My 2019 in Review

Final Thoughts on My Year-End Goals

Reviewing my 2020 goals was a painful exercise. I did achieve a good portion of my goals but not all of them. I think it is important to remind ourselves that missing a few goals is perfectly human and there is always the opportunity to try harder in the following year.

I will continue to try my best and improve on my successes from 2020 in 2021.

My New Year 2021 Goals:

top of mountains - new year financial goals

While 2020 was full of unexpected challenges, I am grateful I can still focus on my 2021 goals. First time I published my goals on this blog was in 2019.

I believe that sharing my goals on the blog is a great way to hold myself accountable. It helps me stay the course when life unavoidably gets in the way.

Financial goals:

1. Contribute to retirement accounts

In 2021, we will continue investing in our retirement savings.

I will continue contributing to my traditional 401(k) and after-tax Roth 401(k) so I will have another $15,000 stashed in my retirement accounts. Right now, I am saving 23 percent of my salary for retirement.

The ultimate goal is to max it out to $26,000. Unfortunately, this may be a difficult goal to reach in the upcoming year, but I will keep it as a goal to keep myself motivated.

The 2021 combined contribution limit for traditional IRA and after-tax Roth IRA is $7,000 for individuals age 50 and older. We plan to contribute $3,500 each to our Roth IRA accounts.

2. Increase savings

We have increased our savings significantly in 2020. We paid off our daughter’s student loan (2018), a car loan (2017), last construction loan (2015), and medical debt (2020).

Currently, we have no desire to buy a new vehicle, renovate our home, or make any large purchases that would require us to take on any new debt. No new debt means we will be able to save more money in 2021.

3. Pay off debt

Unfortunately, we had to take on a new loan to replace our broken boiler. The cost of replacing an old boiler, new water heater, and required new chimney lining was $13,800. We were able to secure a 0 percent interest rate 7 years loan with the Mass Save program.

The goal is to pay off the loan in 4.5 years.

4. Continue to pay off our home mortgage

We are slowly paying off our 3.5 percent interest mortgage. Last year we were able to reduce the balance to $230,000. As we are getting closer to retirement, I want to have our home free and clear of any debt.

In 2021 we are planning to refinance our mortgage to a lower interest rate, so we can speed up the process of reducing our debt.

Blogging goals:

Content

Continue with retirement planning content for new posts.
Add a new page with content on health and wellness.
Collaborate with other bloggers for guest posts.
Keep creating and publishing new posts every 2 weeks. I need to get at least 3 new posts ahead on Save, Invest & Retire, so I will have enough time to edit and add graphics before publishing them.
Start a content calendar.

E-mail marketing

Create a landing page to promote the resource library.
Update an old opt-in and make it work with the Mailchimp platform better to collect new subscribers.

Digital product

Create a new resource library with at least 5 printables for retirement planning and retirement budget.
Start working on an e-book.

Social Media

Stay active on Pinterest and Facebook.
Use Pinterest to drive traffic to my blog.
Learn how to automate social media.

Travel goals:

Like everyone, we had a few trips planned for 2020 but had to postpone our international travels hoping it will be safer to travel in 2021.

Currently, we do not have any concrete travel plans. We hope for normal life to resume with the approval of the COVID-19 vaccines. While clinical trials show the vaccines are effective at preventing illness, it is not clear if they prevent the spread of the virus.

Final Thoughts

2021 will be another year when Roman and I will be trying to achieve all the goals we set up for ourselves. We will focus on accelerating our financial goals so it will bring us closer to the day we can retire.

What goals or changes you will be making in 2021? Share your thoughts in comments.

Holiday Bucket List to Get into the Christmas Spirit

by Maggie Leave a Comment

Kids standing the Christmas tree - holiday bucket list

December is here, and to get into the festive Christmas Spirit I always have my holiday bucket list ready:

Decorate a Christmas Tree

Decorating a Christmas tree is one of my favorite traditions and number one on the holiday bucket list. We do not cut the tree, but we go to the local farm, select, and buy the tree there. Ah, the sweet smell of the fresh Christmas tree!

Then, we turn on some holiday music and begin to decorate. I have lots of ornaments that were collected over the years. So, now I have a good mix of different kinds of ornaments – elegant and expensive, plastic and cheap, old glass bulbs, and ornaments from our international travels.

Finally, our tree is decorated. It is special to me that many ornaments tell a story and bring out many good memories of our family holidays.

Make your own Christmas decorations

Christmas decorations on the table-holiday bucket list

To make your own Christmas ornament is a great idea for a holiday bucket list. We all like to be creative. And Christmas is the best time to put your own touch on your Christmas tree by crafting decorations together as a family.

31 Easy DIY Christmas Decorations

Another great idea is to make a festive garland to wrap around the tree or spread it on the fireplace mantel. Over the years, I made a few Christmas garlands to decorate our home using holiday supplies from Michael’s art store. There are many great ideas on how to make a garland from Country Living magazine:

48 Christmas Garland Decorating Ideas for the Holidays

Holiday baking

Baking holiday cookies is a favorite Christmas tradition for many families. It is a fun holiday activity and an amazing idea to do something together as a family. It feels that Christmas is not complete without baking and eating all kind of goodies.

Every family has a list of their own favorite cookies and bake them every year. In our family, we like to bake scones instead of cookies. Last year my daughter and I baked cheddar and chive scones, and we loved it.

This Christmas, we are planning to bake them again using the same recipe:

Cheddar and Chive Savory Scone Recipe

Also, I like to make a dozen cinnamon buns and keep them in the freezer. During Christmas week I would bake them for breakfast. There is nothing better than the aroma of cinnamon buns fresh out of the oven.

Send Christmas Cards

Christmas cottage - sending holiday cards - holiday bucket list

Nothing spreads cheer and joy faster than Christmas cards. We all love this time of the year, and opening a holiday card is part of the fun. Sending Christmas cards to family and friends is always on my holiday bucket list.

Recently, I have learned that the first ‘Merry Christmas’ greeting was used in a letter sent in 1534. Since then, people have been sending Christmas greetings to each other for hundreds of years.

I do not make my own holiday cards and usually shop for them at the store. But I like to write something personal instead of just signing my name under the statement inside the card.

If you want to add an extra personal touch to your cards, learn how to make your own Christmas cards:

Homemade Christmas Cards Ideas

Watch Christmas movies

Holiday movies are personal, and it depends on how you grew up. Every family has a list of their favorite movies they watch every year. Watching Christmas movies is always on my bucket list.

Occasionally, I will watch Hallmark movies even they are silly and predictable. But they are set during winter with lots of festive décors, so it gets you into the Christmas spirit.

Our family has a list of our favorite holiday movies we like to watch together every year:

White Christmas
Home Alone
National Lampoon’s Christmas Vacation
The Holiday
The Family Stone
Love Actually
Surviving Christmas
While You Were Sleeping

Listen to Christmas music

frosted window with Merry Christmas sign - get into the Christmas Spirit

Music makes me happy. Listening and singing along with my favorite holiday songs put me into the Christmas spirit. I have created a Christmas playlist with my favorite Christmas songs:

White Christmas
O Holy Night
Jingle Bells
Let It Snow
I’ll Be Home for Christmas

Also, I like to stream holiday music. Spotify has one of the best selections of Christmas music. You can find hundreds of streaming Christmas songs that you can listen to as long as you want.

If you do not know how to use Spotify for free, here is a quick guide:

Download and install the free Spotify application using versions for computer and/ or iPhone.
Create an account
Sign in and start listening

Christmas gift exchange with the family

Getting together with the family for the Christmas holidays is exciting but buying presents for them is tough.

We do not have a big family. Roman and I exchange ideas on what to buy for each other or one big gift for both of us.

Our daughter Ksenia usually send us a funny email letter with the list of gifts she wants to get from Santa. We do not have little kids but opening presents on Christmas morning is one of my favorite parts of the holidays.

29 Christmas Gift Exchange Ideas

Spend an evening wrapping presents

Wrapping Christmas presents is one of my favorite holiday activities. Usually, I start wrapping presents just a couple of days before Christmas. I take out wrapping supplies, turn on the music, and start covering all presents in pretty paper.

I like to use two or three types of wrapping paper and then add festive ribbons and holiday bags. Then, my husband Roman comes to help and we spend a few hours arranging the presents under the tree.

Sometimes we like to spread them out instead of piling high. If we have large size presents, we try to put them in the back and smaller presents such as socks or scarfs in front. In the end, a gift-wrapping night becomes a fun holiday activity and family tradition.

Drive around and look at the Christmas lights

We like to drive around with Christmas music playing and look at some of the light displays around our neighborhood. We have our favorite place where every house is decorated from top to bottom, and the whole street looks magical.

One year we drove to Boston to look at the Holiday Tree and Christmas lights around Boston Common. At night when the tree is lit, the Common looks like a winter wonderland of lights and decorations.

Go to see a musical or ballet

Christmas cartoon with a tree and a girl

My favorite part is to go and watch a musical or ballet with the family during the holidays.

Tchaikovsky’s ballet Nutcracker ballet became a Christmas classic and annual tradition. Many families were planning to see it. Unfortunately, the Christmas holidays will look a lot different this season due to the coronavirus pandemic.

The theaters in Boston will stay empty. But families can get into the holiday spirit by streaming life shows from many Boston-area performance groups.

Have a game night

Family game night is always on my holiday bucket list because it is a lot of fun. Sometimes we invite our neighbors for party games, but mostly it is only our family game night.

Monopoly is one of my favorite games, and we get extremely competitive. We like to play cards as well. This year we are planning to have a Christmas-themed game night, and a Christmas Bingo game is on the menu.

Host a Christmas party

During the holidays I like to invite friends over and host a big and festive party. However, Christmas will look different this year due to the Covid-19 pandemic.

Instead of inviting friends to our home, we will have a virtual Christmas potluck dinner on Zoom. If you do not feel safe to invite friends to your home, discover great virtual Christmas party ideas:

Virtual Christmas Party Ideas

More winter fun activities to add to your holiday bucket list:

Go ice skating
Visit your local Christmas market
Go cross-country skiing
Make some hot cocoa and have lots of fun toppings
Host a Secret Santa party with your friends
Make a DIY ugly Christmas sweaters
Host an ugly Christmas sweater party
Donate to a Christmas toy drive
Go on a winter hike with snowshoes
Sing Christmas carols with your family
Take a Christmas portrait with your family
Cook dinner together and light festive candles

We all love to celebrate the holidays. And a holiday bucket list is a great way to look forward to fun winter activities and spending time with your family.

How do you like to celebrate winter holidays? Do you create a bucket list every year? I would love to hear about your ideas and family traditions. Please share your experience in the comments below.

Holiday Spending and How to Control It

by Maggie 4 Comments

Christmas houses-how to control holiday spending

The holiday season is here. There are so many fun things to spend money on like gifts, decorations, parties, travel, etc.

The stores are decorated with Christmas trees and twinkling lights. TV commercials tell us about the “great deals”. Families and friends are making plans for holiday parties and activities.

With all the pre-holiday noise around us, it gets hard to remember how to control our holiday spending.

Follow these simple steps to avoid overspending, stick to your holiday budget, and keep more money in your bank account:

Create a holiday budget and stick to it.

No one wants to hear the word “budget” when it comes to preparing for the holiday season. But if you do not want to drain your bank account, this is exactly what you need to do.

Before you make a list of all the things you want to buy for the holidays, you need to create a realistic budget. A holiday budget will be helpful to know your limits, so you would not be dreading a moment when the piles of credit card bills will come due in January.

Decide how much you can afford to spend on things like:

Gifts
Holiday cards
Decorations
Holiday meals
Entertainment
Activities
Travel
Donations

And do not forget to budget for additional costs of holidays such as gift wraps, wrapping supplies, stamps, packing materials, and shipping. It all adds to the price of your gifts.

Make a shopping list.

holiday gifts - ho to control holiday spending

Do not go to the store without a shopping list because it is so easy to get caught up in the moment and overspend.

Before going to the store, make a list of your family members, friends, and neighbors and assign a gift budget to each name. Also, you can add to your shopping list a few gift ideas for each person.

I like to use a small notebook for my shopping list with names, gift ideas, and the total amount of money I can spend. With all details listed in my notebook, I enjoy my shopping without worries of getting into new debt during the holidays.

It is a smart idea to start shopping early because you will have more time to shop around and very often get the best price. Moreover, you will have time to compare prices at different websites and retail stores. That gives you more options on what to buy and helps to save money.

Last-minute holiday shopping is stressful and often comes with the risk of paying much higher prices.

Limit your gift list.

Do you have a list of all people you give presents to every year? Do you buy gifts for family members, friends, co-workers, neighbors? Be honest and ask yourself if you really need to exchange gifts with all of them?

If you have a big family, it will be hard to limit your gift list. But if you still buying gifts for relatives you ever hardly see, consider dropping them off your list and just send the holiday cards instead of presents.

Consider a DIY alternative and buy fewer gifts.

glass mugs with chocolate-homemade gifts for holidays

Another way to control your holiday spending is to buy fewer gifts. Change your shopping habits to fit your holiday budget.

With fewer store-bought gifts, you can get creative and make one DIY gift for everyone on your list. It can be homemade cookies or holiday sweets in a glass jar, a framed family photo, or a special ornament.

Here is the list of free or affordable holiday gifts for family and friends:

Homemade treats – put a dozen of home baked cookies in a cute tin or mason jar with a ribbon.
Homemade bath gift set – fill a box with bath salts, soap, candles, matches, and chocolate.
Christmas tea box – fill a box or a canvas bag with your loved one’s favorite tea bags and a cute ornament or card.
Holiday plant box – fill a box with the cute succulents.
Hot cocoa party gift – fill the Christmas-themed mugs with hot chocolate and marshmallow bags.
Christmas potpourri – fill a small glass jar with candy canes, greenery, cinnamon (it will smell like Christmas), and decorate with a festive ribbon.
Ready-to-bake cookies gift – prepare a cute sack filled with a dry mixture of ready-to-bake cookies.
Make a colorful printout of the 10-minute meditation or relaxation guide and wrap it with a ribbon or ornament.
Frame a memorable family photo.
Offer to put actual photographs in a photo album and catalog them.

After all, homemade gifts are a great alternative to store-bought gifts. Most people understand the current state of the country and economy and would be grateful for whatever gift you get them.

Other alternatives to holiday spending – Sacred Santa gift exchange, holiday e-cards, holiday potluck party, etc.

Shop online.

laptop - shopping online during the holidays

Shopping online became so convenient in recent years. The number of people shopping online instead of going to retail stores is growing every year.

Most of us prefer to shop online in the comfort of our homes and avoid the stress of fighting traffic on the roads, and then circle the lot looking for a parking space.

Also, the online shopping brings a lot of advantages if you want to control your holiday spending. The biggest advantage is how easy it makes for you to compare prices.

Check out these deal-oriented websites:

Retail Me Not

e Deal Info

Deal Hunting

You can automatically check prices all over the Web by using the browser extension Honey. Also, this browser will help you find and apply coupon codes to save money.

Honey

Moreover, you can earn cash back on your online shopping by signing up for a website like Rakuten.

Rakuten

Pay with cash and leave the credit card at home.

It is so easy to get caught up in the moment during holiday shopping. You are in a store, you put everything you like in a shopping cart, and it is overflowing.

It will be so convenient to pay with your credit card. But do not use your credit card unless you are sure you can afford to pay your bill off at the end of the month.

Once you figure out your holiday budget, take that money out of the bank account and stop shopping when the money is gone. Paying with cash can help to limit your spending.

It is smart to pay with cash and leave your credit card at home. Which means you will pay only for what you can afford. Ask yourself if you really need everything you put in that shopping cart?

Be selective on holiday gift deals.

Do not fall for all those holiday gift deals. Many of these big deals you find during big sales on Black Friday and Cyber Monday are not actually deals at all. I personally do not like to get into this holiday deal bonanza and prefer to start shopping early.

Recently, I have read that ‘Black Friday is a better time to buy newer, big-ticket items. And Cyber Monday is a better day to shop for tech deals and smaller gifts’

Even we see thousands of deals during the holiday season, it does not mean they are all worth shopping for. Be selective. Create a list of things you are hoping to purchase and make sure to do your research on what you will be buying.

To save money, check and compare prices online before setting foot in a store. The goal should be to buy the best product at the best price.

Resist temptation and know when to stop.

It is so easy to go overboard with holiday shopping. While visiting a mall it is hard to resist temptation and do not buy something “extra”. It could be a little present for yourself, new towels for the bathroom, new luggage set for future travels or nice lunch with your daughter.

If you buy too many “extras” you can blow your holiday budget fast without having any idea where your money went. I found it easier to set a budget for my holiday “extras” so I can enjoy spending the money within that limit.

Once you have bought everything on your shopping list, it is time to go home. I know it is not that easy to resist the temptation to stop at other places and see “what they have on sale”.

But no matter how good the discounts are, you should not be buying things that are not on your list.

Enjoy your holidays.

You do not need to spend a lot of money to be happy. The joy of hosting fancy Christmas dinners, giving expensive gifts, and throwing big parties will soon be replaced with the stress that comes later when you have to pay for it all.

Planning, dealing with a budget, and controlling holiday spending can be frustrating for many people. But what makes holidays memorable is not the money you spend but the time you spend with your family and friends.

Time is often harder to give than anything else. Spending time with your loved ones can be as simple as baking holiday cookies, decorating a Christmas tree, lighting candles, or just watching a movie together.

How do you control your holiday spending? Do you make a holiday budget? Do you prefer to shop online instead of driving to the mall?