Publishing its monthly Income Tracker survey, produced with the Centre for Economics and Business Research, Asda said after paying tax and essential bills the average household had £203 per week left – the lowest amount since August 2018.
Its data showed 54% of households plan to spend less on Christmas decorations. They also plan to spend less on presents for extended family members and friends.
However, 92% of shoppers plan to spend the same or more on their children despite having smaller budgets.
Consumers have been cutting back on their spending as inflation has soared, hitting 11.1% in October.
Last week, Britain's Office for Budget Responsibility (OBR) said UK household disposable incomes would fall by 4.3% in the current financial year and by 2.8% in 2023-24, the sharpest declines in records dating back to the 1950s.
That two-year slump would wipe out all the growth in living standards over the eight years to 2022, the OBR said.
A survey published on Friday showed consumer confidence improved this month from October but remained close to an all-time low.
A raft of other surveys have predicted a half or more of Britons plan to spend less this Christmas.