Holiday Spending: Is It Time to Cut Back on Christmas Presents?

Family expectations, consumer culture and a reluctance to talk about money can lead to overspending, but there are ways to cut back without losing the spirit of the season.

A family enjoys a holiday meal together.
(Image credit: Getty Images)

Both of my parents are one of 10 children (I know, right?). As you can imagine, holidays in my family were boisterous affairs full of grandparents, aunts, uncles, cousins, second cousins, first-cousins-twice-removed and more. Holiday spending on feeding, hosting and buying gifts for that many people could rival the national budgets of some countries. But my family made sure that the financial and physical burdens were distributed evenly.

Instead of the host shelling out for main dishes, appetizers and alcohol, each family unit brought several dishes. When the meal was over — with tons of leftovers ­— we all helped to clean up. And we never bought gifts for the whole clan. Our tradition was to draw names and buy only one gift outside our immediate family. And when Santa visited our house, he brought just one small gift for the kids, usually socks or books.

We came away from the holidays with full hearts and full bellies, and no one went into debt. Now that I have a family of my own, we have the same traditions, although with a few tweaks. But the idea is the same: We spend time with the people we love, and we stay within our budget.

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Unfortunately, that's not the experience a lot of people have around the holidays. Family expectations, a relentless consumer culture and money silence lead to overspending during the holidays.

The Holiday Spending Squeeze

Just tune in to any holiday special and you see the requisite roast, a tree brimming with gifts, a home decked out in designer furnishings. When that's the image of what the holidays are supposed to be, reality might seem like a poor imitation.

It's no wonder then that the average American spent $900 during last year's holiday season, the National Retail Federation says. Now, with spiking inflation on things like food and gas, this year's outlay could be even bigger, probably 6% to 8% more, according to the NRF. To pay for all the merrymaking, 36% of consumers racked up debt during last year’s holidays, with an average load of $1,249.

I wonder if holiday expenses like those will seem as meaningful in July when the credit card balance hasn't budged much.

The Gift-Giving Arms Race

For many, “the holidays” and “gift giving” are synonymous — at least that's what our consumer culture would have us believe. Black Friday, Small Business Saturday, Cyber Monday fill our inboxes, urging us to buy, buy, buy. It's nearly impossible for even the grinchiest Grinch to resist the supposed bargains. Early January on most school playgrounds is a bragging competition comparing everyone's haul.

Gift giving takes on a life of its own, and it's not just kids who are the gift recipients. These days, there's an expectation of gift giving for just about everyone who comes into our orbit, whether it's a fruit basket for the office, a silk scarf for your child's teacher or a box of cookies for the mechanic.

All that holiday spending adds up. This year, Americans are on track to spend $932 on presents, according to a Gallup poll.

It's More Than Gifts

Gifts might seem like the big-ticket item when it comes to the holidays, especially if your list is long. But the holiday-related expenses don't end there. With a month or more of merrymaking, the holiday season is full of expenses.

Here are just a few of the pricier holiday line items that might be hitting your wallet this year:

  • Travel
  • Decorations
  • Holiday meals
  • Holiday parties
  • New outfits
  • Tips
  • Hostess gifts
  • Nutcracker performances

Unspoken Expectations

Underlying all these expenses are cultural and family expectations about what makes holidays meaningful. And because as a culture we are reluctant to have open conversations about money, it can be hard to prioritize your financial well-being over holiday expectations.

Take, for example, travel. Maybe when you were a young professional, it was no problem to buy a plane ticket home for the holidays. But now that you're coming with a spouse and a few kids in tow, that's a huge expense. Add in record inflation, and you could be looking at a holiday travel bill of several thousand dollars.

Forgoing travel might be the financially prudent thing to do in a year when wage increases aren't keeping up with inflation. But on the other side is a family dynamic, generations in the making. Will your family be disappointed? Will they wonder if you don't want to spend time with them?

Another big expense is food. I think about my mom and her legendary Christmas cookies. We've all been the beneficiaries of her baking talents over the years and feel like the holidays wouldn't be the same without her baked treats. This year, the price of butter alone is up more than 20%. Is it fair to expect someone who is retired and living on a fixed income to foot the bill for this? We've come up with some alternatives for how to deal with this, so my mom doesn't feel financially squeezed.

Meaning Without the Debt

How do we buck these forces and create a holiday season that speaks both to your need for connection and your financial well-being? I think it starts by being honest with both yourself and your loved ones. What is it that you prize most about the holidays? Is it the big meal? Is it traveling across the country to be with people you love? Is it creating magical memories for your children that you hope will stay with them forever?

Maybe after thinking about it, you'll conclude that the traditions and rituals of the holidays, though pricey, are too important to let go. If it's not pushing you to spend more than you can afford, then by all means continue doing what works for you and your family.

But if the holidays leave you feeling financially stressed, then it might be time to find alternatives. For example, instead of a big meal cooked entirely by one person, maybe others can contribute to the meal, too. Rather than building a mountain of gifts, perhaps you set a dollar limit on presents, or maybe you forgo gift giving entirely and instead make a charitable donation to an organization or a cause that speaks to you.

There are so many creative ways to make the holidays less expensive while still preserving the essence of what makes them special for you.

In the case of my mom, I plan to contribute some of the ingredients to her marathon baking sessions this year. She loves the baking, we love the eating, and this way, the sweetness of the holidays is what we'll get, not resentment.

Erin is a non-registered associate of Cetera Advisor Networks LLC. Cetera is under separate ownership from any other named entity.

Securities offered through Cetera Advisor Networks LLC, Member FINRA/SIPC. Investment advisory services offered through CWM, LLC, an SEC Registered Investment Advisor. Cetera Advisor Networks LLC is under separate ownership from any other named entity. Carson Partners, a division of CWM, LLC, is a nationwide partnership of advisors. Erin is a non-registered associate of Cetera Advisor Networks LLC.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Erin Wood, CFP®, CRPC®, FBSⓇ
Senior Vice President, Financial Planning, Carson Group

Erin Wood is the Senior Vice President of Financial Planning at Carson Group, where she develops strategies to help families achieve their financial goals. She holds Certified Financial Planner, Chartered Retirement Planning Counselor and Certified Financial Behavior Specialist designations.