It’s well-known that holiday expenses tend to surge, with costs for gifts, decorations, travel, and feasting likely to pinch wallets. Many Americans are still handling debts from last year’s holiday spend.

The National Retail Federation anticipates holiday expenditures in November and December could hit $989 billion, reflecting a 3.5% increase from the previous year. Economists attribute this lift to growing consumer confidence, price hikes, and increased spending from middle-income earners.

The NRF’s latest consumer survey indicates that the average American plans to spend about $902 on holiday gifts, food, decorations, and other festive items.

“During the holiday season, Americans prepare and save for various holidays and family gatherings all year round,” noted NRF President and CEO Matthew Shay.

Even though a rise in overall holiday spending is expected, many consumers are tightening their budgets due to inflation and rising costs. A new WalletHub survey queries how much Americans intend to spend for the holidays and how their economic perspectives might adjust their budgets.

The survey revealed that nearly 50% of Americans are still repaying debts from last year’s holidays, a figure that has doubled compared to those in 2023.

Santa’s Holiday Budget

According to WalletHub’s findings, 68% of survey participants believe Santa will be less generous this year due to inflation, with one-third indicating they’ll spend less on holiday shopping compared to last year.

Since February 2020, consumer prices have surged over 20%, as reported by the University of Minnesota Bureau of Business and Economic Research. The holiday shopping trends report suggested: “Low-income families often feel the pinch of inflation more acutely than higher-income families. These feelings of reduced purchasing power may alter shopping behaviors this holiday season.”

Another survey indicated that around 66% of U.S. consumers believe inflation and living costs will impact their holiday spending, with about 25% considering cutting back on gift expenses if prices keep escalating.

Cutting Holiday Costs

Financial advisors recommend setting a specific holiday budget to avoid overspending.

The first step in budgeting is to determine how much you’d like to allocate for gifts, decorations, food, and travel. Reflecting on last year’s spending can serve as a useful benchmark.

If this year’s income has decreased, explore different options to lower costs. For instance, you might find savings by opting not to travel or hosting a smaller holiday gathering.

A practical strategy for reducing decoration expenses includes finding the best deals on Christmas trees. An analysis from Square of over 3,000 tree vendors shows how tree prices vary throughout the season. Last year, Christmas tree sales peaked on Black Friday, with an average cost of about $112, dropping to around $90 two weeks later.

“The most economical time to purchase a Christmas tree is just before Christmas. The ideal time is whenever it brings the most joy to your household,” stated Square research lead Ara Kharazian.