Where do you plan to go in New Mexico? If you take I-40, you'll go right past the Grand Canyon.

Lee Ann

I wanna see white sands in NM and visit Albuqurque as well.

Any advice would be really helpful!

Is this a rental car trip or are you planning on driving your own vehicle back to the SF Bay area?
In the case of a rental car, I would consider taking a train to Los Angeles and the Southwest Chief to Albuquerque and then renting the car to see New Mexico and Arizona.
Return the rental car where you rented it to avoid drop off fees and either fly or take the train back home.
When you consider the cost of a rental car, insurance, and the cost of 2 overnight hotel rooms, the train is not such a bad deal.

Actually we are thinking of driving, so that we can stop enroute anytime and enjoy the scenic views

Driving your own car - good enough. Driving a rental car with a big drop off fee - not so good.
You also made no mention of whether you are going back to SF Bay area or continuing the trip from New Mexico.
Where do you plan to be on New Years Day?

The OP mentions going to and fro across Arizona, so I'm guessing this is a round trip.

With stops, I would want to take at least three days to get to Albuquerque. We used to drive from here to near Yosemite every year, which took a day and a half without stopping for sightseeing. Once you get on I-40, you can stop at the Grand Canyon (which you should if you haven't seen it before). Acoma Pueblo, about 40 minutes west of Albuquerque, is worth visiting as well. The Meteor Crater, between Flagstaff and Winslow, is kind of expensive, but interesting.

Spend a couple of days in Albuquerque so you can take a day trip to Santa Fe. Then start heading south. I don't know that you really have time to visit White Sands, but Bosque del Apache National Wildlife Refuge is just off I-25 a few miles of Socorro. Maybe you could swing through White Sands, but it seems a little out of your way. Then head back to CA.

Lee Ann

Inscription Rock is worth a stop at El Morro:

http://www.nps.gov/elmo/index.htm

And El Malpais is worth a stop too.

http://www.nps.gov/elma/index.htm

I'd stop in Death Valley, Grand Canyon, Petrified Forest/Painted Desert, elMorro/Inscription Rock, Acoma Pueblo, and if time permits Canyon de Chelley and Chaco Canyon. Get a National Park pass at your first National Park.

Thanks all. Yes its a round trip. All of you mention about going to Grand Canyon. But wouldn't it be snowing there at that time? I dont want to be stuck in snow

It could be snowing and if it is, and that worries you, take a more southerly route. I've gone to the south rim in the winter when it was fine, light jacket weather and very beautiful. Once in April there was light snow, which melted fairly quickly.

Just check the forecast before you leave.