How Poor People Spend Their Tax Refund

Several years ago on my lunch break (back when I had a real job!) I overheard a woman talking to her husband on the phone.

They were asking each other what they were going to spend their tax refunds on.

This woman was young, only 19 and her husband about the same.

They had a kid together and had  been married about a year or so.

Both had full time jobs and were renting a little apartment together.

I’d hear them talk quite often about how much they were struggling financially.

How every month they were just scraping by, every month was paycheck to paycheck, they’d often comment about how broke they were.

Which is why I was so surprised to hear that the husband had decided to spend his tax refund on new speakers for his car, and she was going to spend hers on several new pairs of shoes and outfits.

I thought to myself, “Why is their goal to spend it all?”

They don’t have to spend it. They could save it.


A few years later, as most of you know, I was working at a local car insurance agency where I had many encounters with poor people.

(Now, please understand – I’m not hating on poor people, I used to be one. I’m here to help you identify a few mindsets that need to be changed)

I quickly began to see a pattern.

They made financial decisions that seemed to make no logical sense to me.

To them, money wasn’t used to get ahead, it was used to just get by.

In my head, I coined the phrase, “the gift card mentality.”

What do you do when you have a gift card?

You spend it…all of it. And typically pretty fast.

It’s like you have a goal to deplete all the money on that card. (Whether you realize it or not)

You get a paycheck on the first and fifteenth of each month. It fills your account, then you take the next two weeks depleting it.

But that’s okay right, because in two weeks you’ll get that account filled up again?

I work with the poor and disabled every week through an outreach at my church.

A lot of them get social security checks once a month, and I’ve noticed they too, operate in this “gift card mentality.”

It’s easy to spend all of it because they know once a month, they’ll get another check.

I used to live this way myself.

When I was 21 I was working for an auto-body repair shop as a shop helper.

I was paid $400 cash every friday for my 40 hours of work. ($1,600 a month)

Here’s was how I spent my money in all of my vast financial wisdom:

Week 1: $400 for my rent

Week 2: Got a brand new car – $400 a month payment

Week 3: $400 went towards cell phone, insurance, student loans, bills

Week 4: $400 for food, living expenses, and gas for the month

Boom! Each $400 check was dispersed and used up appropriately. I’m great with money! (sarcasm)

Basically I saw each $400 week like a “gift card” and the race was on to spend it before I got paid again the next week.

Proverbs 21:20 tells us, “The wise have wealth and luxury, but fools spend whatever they get.” -that was me!

(The implication of that verse is that wise people don’t spend all they get. That’s why they have wealth and luxury.)

This is a poor person’s mindset.

This is how poor people operate their financial lives.

It’s shortsighted. It doesn’t think about future self at all.

It’s the reason they never get ahead, and settle into the land of just enough.

Now before you beat me up for being a poor-ist, hear my heart.

I want you to check yourself, have you been operating in a gift card mentality?

Have you had this poverty mindset?

Most of the time it stems from how you were raised. It’s all your grandparents knew, they taught your parents, it’s all they knew, and they taught it to you.

It’s not your fault if you have this mindset.

But it is your fault if you stay there.

Here are a few of the symptoms of a poverty mentality:

  • You make buying decisions based off how much the monthly payments are
  • You spend all your money before each paycheck and can justify all of it
  • You have a scarcity mentality, always afraid of running out
  • You often say “I can’t afford it”
  • You talk about being broke, even “joke” about it
  • You don’t put in money in savings, because you don’t think you can afford to
  • You don’t tithe or give to others, but plan to when you make more money

I bring this up because I care about you.

I see the potential in you.

God has given us every advantage we need to win financially. 

One of the greatest feelings on earth is having financial freedom.

I promise you.

Living paycheck to paycheck should NOT be a way of life for Christians, God’s people.

77% of Americans live paycheck to paycheck . That’s not for us. That’s not for you!

Yes, there may be a season where money is tight, but it’s not to become our lifestyle.

The average tax return in America is about $2,700.

What if that couple in my first example used their $2,700 not to just buy stuff, but to actually get ahead!

Option 1:

  • Spend $2,400 on a top of the line speaker system for your car
  • Spend $300 on new clothes and shoes

The result:

You are exactly where you were before. No further ahead. Still stressed, still living check to check, still worried, still no freedom. And in a month the speakers aren’t cool anymore and the shoes aren’t exciting.

Option 2:

  • Give or tithe $270 (It’s up to you if you want to tithe on your tax return, but it’s always good to sow seed!)
  • Put $500 into a savings account
  • Put $500 in a Roth IRA
  • Put $1,230 towards debt. Pay off a credit card, free up your monthly cash flow!
  • Take the remaining $200 and go buy those shoes or that outfit – treat yo’self

The result:

  • You’ve got financial seed in the ground for your future blessings.
  • You’ve got money in your savings and you started a Roth IRA (which will cause your money to start working FOR you)
  • You’ve paid off a credit card and that lowers your monthly payments by $50 a month so you have a little more breathing room.
  • You have a peace of mind because you actually did something truly productive with your money.
  • AND you went out and got some new kicks.

Everybody wins, including your future self!

I challenge you, this year, do something different with your money.

You’ve been doing the same things over and over and you’ve been getting the same results.

Wealthy people see money as a tool.

Poor people see money as a pain point.

Wealthy people sow their money as seed for a future harvest.

Poor people use all they have right now.

It’s a choice, it’s a mindset, and it requires planning and diligence.

It’s not easy, but it is simple.

I’m here to help you get there.

I hope this article inspired and encouraged you. It continues to be my goal to help Christians live a life of increase and purpose. If you need a boost in your financial life, sign up for my Free blueprint on how to create a simple, online income by turning your passion into your paycheck.  You’ll also learn Biblical teachings on financial increase and overall life success.   – Travis Peters

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