In addition to bringing good cheer, the holidays can invite seasonal stress, a primary source of which is our addiction to spending. This year, holiday sales are expected to grow between 3% and 4% from last year and set a record of more than $957 billion. On top of spending more, shoppers also face difficulties from credit card debt. In Q3 2023, the average household credit card debt came in at $9,068, a 12.7% increase over Q3 2022, according to WalletHub’s data. A holiday spending spree can easily add to your financial burden, especially if you carry the balance on your credit card into the new year.
To help consumers avoid post-holiday regret, WalletHub calculated the maximum holiday budget for over 550 U.S. cities using five key characteristics of the population, such as income, age, and the ratio of savings to monthly expenses.
WalletHub will also calculate custom holiday budgets for all WalletHub members between now and Dec. 25, so make sure to join our community today. And if you want to get ahead of the shopping crowds, check out our preview of 2023’s Best Black Friday Ad Leaks.
Main Findings
Holiday Budget by City
*No. 1 = Biggest
In-Depth Look at the Highest Holiday Budgets in 2023
Palo Alto, CA
Palo Alto, CA has the highest average holiday budget, both among small cities and overall, at $3,596. The fact that Palo Alto ranks high isn’t too surprising given that it has the third-highest median annual household income in the nation. Plus, Palo Alto residents have around $6,400 left every month after paying all their expenses, on average. They're able to pull this off because the average ratio of monthly income to expenses is 1.75 in Palo Alto, which means they take in nearly twice as much as they have to pay in expenses.
Since people in Palo Alto are living luxurious lifestyles, it makes sense that they shell out quite a bit of money over the holidays, especially since they’re among the best in the country at money management.
Bellevue, WA
The medium-sized city with the highest holiday budget is Bellevue, WA, at $3,576 on average. That’s also the second-highest budget among all cities in the study.
Bellevue is one of the top 10 most educated cities in the country, so its residents naturally have high incomes. Bellevue’s median household income is over $150,000, and the average savings-to-expenses ratio for Bellevue residents is 3.12, meaning that they’re able to save over three times as much money as they shell out for expenses each month. Residents can afford to spend a lot on their holiday celebrations and gifts as a result.
San Francisco, CA
San Francisco has the highest holiday budget among large cities, at $2,313 on average. It only ranks 46th among all the cities studied, though, with many small and medium-sized cities having higher budgets. This makes sense given that large cities tend to have more economic diversity. A bigger mix of affluent and non-affluent residents means a lower overall budget average.
That said, San Francisco’s median annual household income is not too shabby, at over $136,000, boosted by the tech hub in the Bay Area and neighboring Silicon Valley. Plus, San Francisco residents’ average debt-to-income ratio is extremely low, at just 23.9%, meaning their monthly payments toward credit cards, mortgages, student loans, etc., take up less than a quarter of their monthly income. San Francisco also has the second-most billionaires in the U.S., behind only New York City.
Ask the Experts
Whether you plan to shop in person or online, holiday spending can add up quickly. To help consumers keep their holiday budgets in check, we asked a panel of experts to share money-saving advice and insight on factors that affect holiday spending. Click on the experts’ profiles below to read their bios and thoughts on the following key questions:
- What tips do you have to help people avoid holiday overspending?
- How do you think the current social and economic environments is influencing household holiday spending decisions?
- How can people show love and appreciation over the holidays without spending money on gifts?
- Nearly 1 in 10 adults are shopaholics. How can someone tell if he or she is a shopaholic?
- Should we expect a rise in holiday spending this year or will inflation negatively impact the holiday shopping season?
Ask the Experts
Methodology
To determine the cities with the biggest holiday budgets, WalletHub compared 558 cities across five key metrics: 1) Income, 2) Age, 3) Debt-to-Income Ratio, 4) Monthly Income-to-Monthly Expenses Ratio and 5) Savings-to-Monthly Expenses Ratio. Our calculation is based on WalletHub’s proprietary algorithm, which considers the aforementioned five factors to determine the holiday budget for a particular city.
At a high level, our algorithm considers a consumer to be in a comfortable financial position to engage in holiday spending if they have: 1) enough emergency savings to cover at least six months of expenses and 2) a debt-to-income ratio smaller than 22 percent for a renter or 43 percent for a homeowner. Depending on a city’s specific characteristics, the algorithm adjusts upward or downward to create a custom estimate.
Finally, we use the same algorithm to provide a personal holiday-budget estimate for all WalletHub members between now and Dec. 25.
Sources: Data used to create this ranking were collected from the U.S. Census Bureau, U.S. Bureau of Labor Statistics, SimpleTuition, Tax Foundation, IRS.com, SlickDeals and TransUnion.
WalletHub experts are widely quoted. Contact our media team to schedule an interview.