There are many ways to have a fun and frugal Christmas. Here are a few ideas off the top of my head:
1) Start early and plan early. If you're like me, you can't stomach looking at Christmas anything in January. Get over it. Or start in February. ;) I keep a card and gift binder that has a list of ideas for next Christmas, what crafty supplies I have on hand, and what I have purchased so far. I recommend making a budget worksheet or getting one here.
2) Set a strict budget for each person, activity, and baking/cooking. Carefully plan each purchase with sales and coupons if possible. Remember that cooking supplies start to go on sale in November and coupons for these items are also available during this time.
3) Always be looking for gifts. Good deals are available all the time, you just need to keep an eye out for them. I have more posts on good deals here (September 21) and here. I finished my Christmas shopping before the end of August. It helps me have time to really enjoy the holiday.
4) Make your own Christmas cards! It's lots of fun. You can get the kids involved and have them draw on each card. If you want to have holiday photos, take them yourself or have a friend take them. Develop them cheaply yourself using the knowledge you gleaned here.
5) Use baked items as gifts for coworkers, families at church, unexpected guests, etc. You can save a LOT of money this way. Purchase baskets or plates for your goods at the dollar store or at garage sales.
6) Package your presents nicely with homemade supplies.
7) Attend free community and church activities.
8) Remember that Christmas is not about consumption!!!!!!!! We have taken a celebration of the birth of Christ and turned it into a spend-happy month of gluttony. Celebrating is wonderful. Traditions are wonderful. Do your kids need $500 gifts? Probably not. Just try to keep that in mind when you are crazed and searching for "the perfect gift."