This is something DH and I struggle with every year. My family is easy, since it's just my mom and my dad. My mom and I don't care if we exchange gifts, since we both know what our financial capabilities are each year. We usually get my dad something in the $20-40 range.
DH's family is another story. We go to their house every year on Christmas Eve, and stay until midnight because they are Catholic and celebrate at midnight. I am Jewish, and DH hasn't been to church since he was a kid, but we think it is respectful to be with the family at a time that is important to them. Around 1am, presents are opened. The past 3 years, we have gotten very thoughtful gifts for each person (I kind of stress out over it, don't know why). This includes: DH's parents, his 3 younger sisters (age ranges from 17-24 this year), his aunt, his 2 cousins, and his cousin's husband and 2 kids. At least one year there have been close family friends or out-of-town family involved, too. Every year, DH and I get maybe 2 or 3 gifts, total. Usually 1 from his sisters, 1 from his parents, and 1 from his cousins/aunt. They group-give, and we don't. Now, I honestly wouldn't mind this if the gifts had any thought put into them, but a lot of the time, it seems like it's last year's gifts that they didn't want and re-wrapped. Even worse, they give each other individual gifts that seem really thoughtful. We always walk out of the house with a complete lack of Christmas spirit.
I would rather just either not exchange gifts, or do handmade gifts. For us, it's the thought that counts. We just want to give gifts that put a smile on their faces. This year, we swear we're not going to put as much effort (or as much $$$) in, but who knows. At the very least, I want to cut down on the cost of the gifts.
When I was younger, the holiday season was always one of my favorite times of the year, but now it's just the most stressful.