Consumer Spending Trends in 2021
The holidays are always a fascinating time to observe market trends for consumer spending. This serves as a significant marker for the state of the economy, consumer confidence and unemployment rates. Several factors contribute to consumer decision making regarding holiday spending.
The holiday shopping experience in itself, for instance, has changed dramatically over recent years as a result of the pandemic. Due to restrictions, store closings and most recently, lack of inventory, many find it preferable to shop online rather than in store. The average selling price online has a tendency to be higher, especially when using convenience shopping apps such as Instacart or delivery services like Uber Eats, leading to increased spending. The reduced visits to brick-and-mortar shopping locations has led to overbuying and stocking-up tendencies by consumers since visits are less often and spaced further apart. The lack of inventory has also incentivized consumers to buy in bulk when quantities are in supply for fear of not finding the item in question when needed in the future.
The Pandemic mindset has led to a mentality of prioritizing necessities, even if at a higher price point for better quality. Since there is less in store shopping, there is also less temptation to buy items on a whim because of sales or impulse purchases. The greatest incentive for a consumer in today’s online shopping trend is free shipping and convenient free returns. In fact,
85% of consumers will shop only online this holiday season
74% will shop both online and in store this holiday season
47% stated they would only shop online on sites where free shipping was offered
Through October 2021, there has been a 16% increase in sales regarding merchandise in comparison to 2020. This is a promising economic recovery indicator. This may also be due to the fact that consumers are shopping earlier than usual for their holiday gifts. With the knowledge that goods and products are trapped on ships at sea with a significant chance of not reaching port in time to restock local store shelves, sales are happening when products are seen at first sight. If early buying is an indicator, the 2021 holiday shopping season is off to a great start. People are open to trying different retailers and brands to obtain the items they want that are out of stock with their preferred stores.
Technology has also boosted consumer spending by offering convenience and opportunity for discounts and coupons through apps and websites. Consumers easily and quickly rotate through various options before settling on a purchase knowing they are getting the best deal. Apps such as Retail Me Not and Honey offer coupons and discounts for numerous retailers guaranteeing the best deal with a few clicks.
Shopping online allows the convenience of searching several stores for the same product, comparing price, quality and specifications in minutes rather than the hours it would take to go to several stores. While online holiday shopping has been a trend for years, the trend for 2021 has definitively indicated a drastic increase towards online shopping exclusively or predominantly for consumers. This trend has also opened consumers to trying new retailers and brands that they would not have if they were to visit stores in person and changed the priority of the types of products purchased. The 2021 holiday season is off to a great start that should translate to a boosted economy.
A Guide to Charitable Giving*
Charitable donations are a financial incentive for taxpayers in the United States. When giving financially to a 501c(3) public charity, an income tax charitable deduction can be taken to reduce taxable income at the time tax bills are filed. The incentive to help those less fortunate also helps the person making the donation, therefore befitting both parties.
In order for the contribution to apply, your taxes must be itemized and the total added deductions including charitable donations, must exceed the standard deduction for the year as declared by the IRS. For the year 2021, standard deductions are as follows:
Single - $12,550
Married Filing Jointly - $25,100
Head of Household - $18,800
Deductions can add up in several ways, therefore taxpayers should keep track of them throughout the year so as not to miss any. The most common itemized deductions taxpayers apply are:
State and Local Taxes (capped at $10,000)
Medical and Dental Expenses
Less common itemized deductions include:
- Real estate expenses such as mortgage insurance premiums and real estate taxes.
- Lifetime Learning Education Credit also allows taxpayers to attend classes for higher education for an unlimited number of years to receive a $2,000 credit per tax return, deducting a maximum of $10,000 for an unlimited number of years.
- American Opportunity Tax Education Credit provides an annual $2,500 credit for the first four years of higher education.
- Retirement credits are also available for those that make contributions to a retirement plan such as a 401(k) or Roth IRA. All contributions to a Roth IRA are tax deductible.
- Those self-employed can deduct 100% of health insurance premium payments if anyone enrolled, such as a spouse or older child, is not eligible to participate in an employer provided plan.
- Student Loan Interest deductions are $2,500 in some cases. A single taxpayer must have an income of under $80,000 and a married or joint filing taxpayer must have income under $165,000.
Once you’ve found an organization to which you would like to make a donation, there are important details that must be confirmed to assure it will count as a charitable deduction. First, the organization being donated must be a private foundation or 501c(3) public charity. Secondly, keep a receipt of the transaction for your records. Third, if the donation is not monetary, obtain an appraisal to confirm the value of the deduction. Fourth, be sure to itemize the deduction when you file your tax return.
The Annual Report on Philanthropy for the Year 2020 reported a record $471.44 billion donated to U.S. charities. That is an increase of 5.1 % from the year before and it is especially significant considering the global situation of the year: Global pandemic, economic crisis and overall widespread need which took a larger toll on charities and non-profit organizations. While various communities had mixed results from the pandemic, ranging from hardship to increased wealth, seemingly, those that could be generous opened their pocketbooks with a flourish. The S&P 500 has had notable growth in the last few years and the market has recouped in 2020, allowing and motivating many more fortunate to contribute where there was a need.
*The foregoing information is not intended to be tax or legal advice. Consult a professional tax advisor for guidance.