Besides bringing good cheer, the holidays also can invite seasonal stress, a primary source of which is our addiction to spending. Plus, this year, holiday shopping may be more stressful than usual considering the fact that the COVID-19 pandemic has impacted many people’s finances. Merchants are still optimistic, though, and 54% believe holiday sales will increase “somewhat” or “significantly” compared to 2019, though they expect far more of those sales to be online than usual.
In addition to the COVID-19 pandemic, holiday shoppers also face difficulties from credit card debt. In 2020, the average household credit card debt is $7,938, according to WalletHub’s data. At the beginning of the year, there was over $1 trillion in total credit card debt, but WalletHub projects a slight decrease this year due in part to paydowns fueled by stimulus money.
To help consumers avoid post-holiday regret, WalletHub calculated the maximum holiday budget for each of 570 U.S. cities using five key characteristics of the population, such as income, age and savings-to-monthly expenses ratio.
Are you in danger of wrecking your Black Friday spending plans? WalletHub will 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 2020’s Best Black Friday Ad Leaks.
Main Findings
Holiday Budget by City
| Overall Rank* | City | Holiday Budget |
|---|---|---|
| 1 | Palo Alto, CA | $3,056 |
| 2 | Flower Mound, TX | $2,973 |
| 3 | Naperville, IL | $2,867 |
| 4 | Sunnyvale, CA | $2,829 |
| 5 | Newton, MA | $2,768 |
| 6 | The Woodlands, TX | $2,729 |
| 7 | Sugar Land, TX | $2,728 |
| 8 | San Mateo, CA | $2,722 |
| 9 | Mountain View, CA | $2,704 |
| 10 | Weston, FL | $2,698 |
| 11 | Fremont, CA | $2,684 |
| 12 | Santa Clara, CA | $2,673 |
| 13 | Milpitas, CA | $2,610 |
| 14 | Centreville, VA | $2,502 |
| 15 | League City, TX | $2,501 |
| 16 | Bellevue, WA | $2,488 |
| 17 | Mount Pleasant, SC | $2,452 |
| 18 | Ellicott City, MD | $2,430 |
| 19 | Cambridge, MA | $2,414 |
| 20 | Carmel, IN | $2,408 |
| 21 | Fishers, IN | $2,360 |
| 22 | Union City, CA | $2,327 |
| 23 | Pearland, TX | $2,319 |
| 24 | Troy, MI | $2,309 |
| 25 | Maple Grove, MN | $2,304 |
| 26 | Plymouth, MN | $2,285 |
| 27 | San Ramon, CA | $2,267 |
| 28 | Walnut Creek, CA | $2,261 |
| 29 | Roswell, GA | $2,249 |
| 30 | Lee's Summit, MO | $2,233 |
*No. 1 = Biggest
Ask the Experts
Holiday spending is driven largely by the current economic climate, among other factors. In order 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 are influencing household holiday spending decisions?
- Where should people draw the line in determining who to purchase a gift for?
- How can people show love and appreciation over the holidays without spending money on gifts?
- Nearly one 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 COVID-19 negatively impact the holiday shopping season? What are some caveats shoppers should be wary about this year?
Ask the Experts
- Tamar Avnet
Ph.D. – Professor of Marketing; Department Chair of Marketing, Sy Syms School of Business – Yeshiva University
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- Thomas Jungbauer
Assistant Professor of Strategy & Business Economics at the Johnson Graduate School of Management – Cornell University
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- Suzanne B. Shu
Ph.D. – Professor of Marketing, The Charles H. Dyson School of Applied Economics and Management – Cornell University SC Johnson College of Business – Cornell University College of Agriculture and Life Sciences
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- Donna Watts
M.S. – Instructor, Department of Retailing, College of Hospitality, Retail, & Sport Management, University of South Carolina
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- John Gaski
Ph.D. – Associate Professor of Marketing, Mendoza College of Business, University of Notre Dame
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- Maura L. Scott
Ph.D. – Persis E. Rockwood Professor of Marketing; Co-Director, Doctoral Program in Marketing, College of Business – Florida State University
Read More
Methodology
In order to determine the cities with the biggest holiday budgets, WalletHub compared 570 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 takes into account 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, Pitney Bowes, Tax Foundation, IRS.com and TransUnion.