With holiday spending in the US expected to exceed $980 billion, WalletHub’s latest study highlights the stark differences in vacation budgets in over 550 cities. The report, released today, also introduced a free holiday budget estimation tool to help members set realistic spending limits through December 25.

WalletHub’s analysis, based on metrics such as income, age and savings relative to cost, reveals that Newton, Mass., leads the nation with an average vacation budget of $4,206. Meanwhile, Sunnyvale, Calif., tops the mid-sized city category at $3,845, with San Jose marking the major city high of $2,828.

“Vacation budgets in the U.S. vary dramatically, from as low as $200 to over $4,000,” said Chip Lupo, a WalletHub analyst. “Regardless of budget size, it’s critical for consumers to spend within their means to avoid starting the new year in financial distress.”

Experts from academia and finance emphasized the importance of sticking to planned budgets. Christopher S. Tang, a UCLA professor, advised consumers to categorize holiday purchases into essentials, wants and optional items, prioritizing the essentials to avoid unnecessary spending. Similarly, Michael Moody, a retail instructor, urged holiday shoppers to track their spending and avoid impulse purchases.

The report also highlighted creative and cost-effective ways to celebrate. Amber M. Epp, a professor at the University of Wisconsin, suggested indulging in traditions like baking or sending handwritten notes to show appreciation. Other ideas include organizing movie nights or creating handmade gifts, which can strengthen bonds without straining the finances.

Despite inflationary pressures, WalletHub’s commentary noted that many Americans are still engaged in holiday shopping, supported by low unemployment and modest wage growth. Economic disparities remain, however, with some areas, particularly those affected by recent natural disasters, focusing spending on essentials rather than gifts.

“Vacation spending isn’t just a financial decision — it’s often deeply tied to emotional and social factors,” Moody explained. “For many, gift giving is a way to connect and create joy, despite budget constraints.”

WalletHub’s Holiday Budget Estimator tool is now available for use, offering members tailored financial insights for the 2024 holiday season.

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