Consumers Using Payday Loans and Tax Refunds to Pay Bills
Paying off bills with tax money, payday loans
Consumers are using payday loans and their tax refunds to pay necessary bills. In the past, taxpayers saw their tax refunds as additional money to do something fun with. Whether it was a vacation, a new TV or a down payment on a vehicle, people used the money for unnecessary items. This year a new poll is showing that most Americans are looking forward to paying off bills and expenses with their tax money. In fact more than 54 percent of those receiving refund money intend to either pay credit card bills, utility bills or other housing-related expenses. This is up from the 35 percent who were in the same position just one year ago.
This news is no surprise to analysts who have spent months studying the economy and the recession. They predicted long ago that people’s attitudes toward spending would be conservative at best. Michael Fortman, economist for Smartmoney.com, stated, “Even with big sales and discounts, many Americans are going to be very cautious going into the future. … They have seen the recession and what it did to many families and they don’t want to get caught up in the issue later on down the road.”
Taxpayers are trying to stretch their budgets
The Obama administration wants this year’s refund money to be fueled back into the economy. Their hope is that the added money will spur the economy out of a recession quicker. However, with the loss of more than 5 million jobs since the end of 2007,this is a difficult task. Add that to research showing the people are focusing any increase in funds to necessary bills, and the result is less discretionary spending. As Fortman concluded, “It makes sense to be frugal when the economy is in such bad shape, but it hurts the economy when everyone does it.”
Taxpayers are trying to stretch their budgets, using payday loans, extreme budgeting, thrift-store shopping and bartering to meet their everyday needs. One mother from Sarasota, Florida stated, “For the past year and a half, I have been trading clothes with other mothers at my son’s school. Without that bartering, it would have been next to impossible to keep our five children clothed.” Creativity is the new way of 2009, as consumers are eager to find new ways of saving money.
Government interventions with the stimulus plan
The question remains whether the government’s intervention with the $787 billion stimulus truly served its purpose. It’s going to be difficult to say whether it did because of the unknown.
Critics maintain that the stimulus’s mixture of government spending and tax cuts benefited large businesses, but did little for immediate relief in the lives of American families. Harvey Leven, lawyer in New York, stated, “The little guy is always down. … Sure, the government extended huge packages to corporate America, but taxpayers — the ones who in the end will pay for the stimulus — are left in the cold. They have to fend for themselves suffering through unemployment, rising interest rates and lowered home values.”
Americans wonder about the future
In the end, many Americans are wondering where the post-recession life will leave them. They are being resourceful when paying bills, using payday loans and tax refund money to cover the costs. Everyone hopes, though, that their return to normalcy will be quick. Hopefully the economy will level itself out and allow people to return to normal spending.