What is it about Christmas that makes people reckless with their wallets? The holiday season seems to inspire financial abandon, as people set aside their usual caution and splurge irresponsibly. How does the celebration of a baby born in a manger, coupled with images of sleigh-pulling reindeer, spark such budget-busting buying sprees? When Santa arrives, many forget the hard work they’ve put into making ends meet all year.
Christmas fills people with a unique excitement unlike any other time of year. Children start crafting wish lists, and shopping becomes a daily ritual for many as stores flaunt irresistible sale prices. For some, however, this season brings financial stress, leading to maxed-out credit cards and high-interest loans just to keep up. It’s no secret that most people spend far beyond their means during the holidays.
In 2010, the average U.S. household size was 3.16, with only 0.93 people under 18. The median gross income for single-income families was under $50,000, while dual-income households earned around $67,000. That’s not much to stretch over a year, let alone to support holiday splurging.
Understanding Christmas Spending Trends
For the past 26 years, the American Research Group has tracked Christmas spending. In November 2010, their survey found that households spent an average of $658 on gifts. By 2011, spending dropped by 2% to $646. However, 2010 saw a 58% increase over 2009’s $417, a notable jump after years of decline between 2005 and 2009. Below is a summary of the data:
Year | Average Spending | Change by % |
|---|---|---|
2011 | $646 | -2% |
2010 | $658 | +58% |
2009 | $417 | -3% |
Surprisingly, single- and dual-income households spend similar amounts on Christmas, as the income difference often just accounts for an additional family member. Most of this spending goes toward gifts, though decorations and other items are included. Regardless of the year, the average expenditure typically exceeds what families can afford.
Financial experts recommend spending no more than 1.5% of your after-tax income on the holidays. For example, if you earn $47,000 and pay $7,000 in taxes, your Christmas budget should be $600 (1.5% of $40,000). This may feel limiting, especially with a long gift list, but staying within or below this budget is a worthwhile challenge.
With the economy fluctuating in recent years, holiday spending varies annually. Some studies suggest per-person spending can reach $800, or $1,600 for a dual-income household—far too much, according to experts, unless your income is in the six-figure range.
No matter your income, a thoughtful Christmas spending plan can stretch your budget without leading to debt. Here are some strategies to stay on track:
- Shop early for essentials, especially when items are on sale or discounted throughout the year.
- Look for online deals, which often offer savings on electronics and jewelry compared to in-store prices.
- Opt for generic brands—paying for a name brand often drives up costs unnecessarily.
Families eagerly await the holiday season for gift-giving, but they also work hard all year to maintain a stable home. Overspending at Christmas shouldn’t undermine that effort, leaving you in debt for the first half of the new year. Follow the experts’ advice and set a firm budget. You’ll be grateful you did.
