Death and Taxes

It is tax time again, which means it is time to see people grumbling over the check they had to write to Uncle Sam – or jubilation as people receive their (often generous) refunds in the mail. Most years I get a little something back from the government. It is their way of thanking me for letting them borrow my money for the year. Without interest. I’ve never received a check big enough to celebrate with anything close to “jubilation”. My reaction is usually a little more tempered: “Well, it isn’t much but at least we didn’t have to write a check this year.”

Having worked with lower income folks in a few different jobs, I have seen a tax-time pattern play out time and time again. It is the same thing I saw each semester when student loans were disbursed at the college where I worked. And when the FEMA money came through to displaced tornado survivors a few years ago in Joplin. In all these situations I witnessed the same scenario: A large check arrives in the mail and all you can see is a dust cloud behind the newly-“rich” individual as they race out the door to spend their wealth immediately.

When student loan disbursement time rolled around, I would routinely hear stories about the vacations that got planned, technology that was purchased (i.e. huge flat screen TVs with elaborate surround sound system), new furniture, cars or motorcycles, etc. It was the same story each semester. Always a spending spree and the money would be gone by the time the first assignments were submitted to professors. All with money that will most likely wind up in default as students spend more time on their frivolous spending than they do studying, eventually dropping out.

After the Joplin tornado, the federal government set up a trailer park for displaced tornado survivors and the location of this “FEMA village” was near my house. Everyone in our area knew when the FEMA checks arrived to the residents. It was obvious in the boxes you saw piled up by the dumpsters. A large percentage of residents used their FEMA money to buy large flat-screen TV’s and other cool technology. I would estimate that very few of the people invested that money into down payments for new homes or start-up money for new apartments. They were living rent-free for as long as eighteen months in the FEMA village and I would wager that very few of them wisely invested the money they saved on rent. I’m sure those folks walked away just as broke as they walked into the village after the tornado. Except for their big TV’s, that is.

Same thing happens with tax refunds. In many cases the money is gone within the week it was received.  New smart phones for everyone in the family. New (or newer) vehicles to replace the ones that had been repossessed. New “toys” for the family to enjoy. It’s strange but I never hear stories of how these big tax refunds were used to pay off debt. Or put in savings to cover future unexpected crises, like car repairs or a new A/C unit.

The stories I hear (and the evidence I see with their new “toys”) are ones of frivolity and excess.  It is as if these unexpected checks briefly turn the receiver into Richie Rich. It is more money than they have ever seen at one time and they can’t manage their excitement. Instead of wisely spending the money to pay off debt or save for the future, some folks see the money as an opportunity to live the way they always wished they could. For just a brief moment they get to have all those things they have coveted in their neighbors’ homes. Just this once they can have all the happiness that money can buy…and maybe, just maybe, this time will turn out different and they won’t be broke afterward.

After I graduated from college I got a job that paid $10,000 per year. Thankfully, I didn’t have any student loans or a car payment. I lived with a roommate at the time, until she got married. After my roommate moved out, I didn’t find another roommate so I had to make all my ends meet on about $900/month. Guess what I didn’t do? I didn’t have a cell phone or expensive cable and internet. I didn’t go out to eat or to movies -- except on rare occasions (for which I had saved). On the rare occasions I bought new clothes they usually came from Goodwill or “The Half of Half” store. My TV was used and was definitely not the latest and greatest technology. I watched rented movies on a VHS player that someone gave me. And I still managed to tithe to my church and put a little away into savings.

After I graduated with my master’s degree I did have student loans and a car payment, but even so I made ends meet nicely as a single person on a $20,000 salary and was able to buy a house on my own. I got my first cell phone when I was 32 years old and just got my first smart phone in the last six months. While working for $20,000/year I managed to pay off my student loans and car, so that my only debt was my mortgage – a house payment that was only slightly higher than what I had been paying in rent. I even had money in savings.

I don’t say any of this to brag, but only to point out that it is possible to live wisely on a small income. But I sacrificed a lot. I didn’t have the newest of anything. I cooked at home and then ate all the leftovers to make my budget stretch. If I really wanted to see a movie at the movie theatre, I waited a couple of months until it came to the $2 theatre. A lot of the gifts I gave at holidays were homemade gifts or things I had purchased throughout the year when I saw them on sale. My first car lasted me 11 years and my second car is going on 13. I rarely made impulsive purchases, even if it is something that seemed really enticing. 

It IS possible to say “no” to yourself and your children. My children don’t have the latest gadgets. And they won’t be getting cell phones until they are teenagers. After that, they can have smart phones when they can pay for the data plan and phone upgrade themselves. They receive an allowance which they are expected to spend on the items they want to buy. They know we don’t buy frivolous items on a whim and we rarely eat out. Hopefully someday they will know what to do with their money, regardless of how much or how little they have.