Many consumers spend early rebates on soaring cost of living

Alas, when the money showed up it was less than expected at $300, owing to the fact that she was unemployed for much of last year. So by the time she wrote two $250 checks to her son Michael and her daughter Jenna to support them on unpaid college internships, it was more than gone.

Despite the disappointment, she was thankful.

"Anything I can do to set a couple of bucks aside so I can pay for the increased cost of living, I'm grateful," said Anderson, public relations director for an art school. "As a single parent, earning just a bit over $50,000, things are always tight for me."

Hung Nguyen is one of those who dreamt of a fancy new TV and got it, thanks to his payment. The 26-year-old New Orleans resident spent his $600 stimulus check the same day he received it on a 32-inch plasma television for the bargain price of $400, using the rest to pay credit-card bills.

Nguyen, who works for the Federal Emergency Management Agency, lives with his parents and lost everything in Hurricane Katrina. They have since rebuilt, and he felt secure enough financially to spend the rebate on something that wasn't a necessity.

"I guess I kind of just spent it as it was intended for, to boost the economy," he said.

For three years, he drove a car with no air-conditioning — a major sacrifice in the sticky-hot South. Now he finally feels he has a good job and can buy things he wants, not just needs.

While Nguyen doesn't consider himself overly thrifty, he didn't start out intending to buy a TV. Initially, he thought he'd buy himself new glasses and pay off bills. But his brother saw the TV at a store and Nguyen thought 'Why not?' "It was worth it," he said. "The picture is awesome."

Moderately affluent Americans, too, are showing increasing signs of economic strain. Swonk says more and more households are shopping for groceries at big-box retailers rather than their local grocer, not going out to movies as often, or watching regular TV instead of rented DVDs or on-demand movies.

Chuck Gutman, 40, who lives in the well-off Chicago suburb of Lincolnshire, Ill., says he feels an underlying financial security but finds himself facing tougher decisions with his money.

"It's a constant battle," he said of rising costs. "I like leading the good life — going to plays, concerts, restaurants — but it's harder."

Gutman, who teaches English as a second language at a heavily Hispanic high school, didn't let the increasing money squeeze prevent him from spending his rebate on his passion: helping prepare students from disadvantaged communities to go to college. The $600 paid for a large portion of a summer tour of colleges where he will meet with admissions counselors who may be in a position to assist his students.

"I got into teaching as a vehicle to salve my desire for making a difference," he said. "Helping these students is really satisfying. Just seeing the spark in their eyes makes it worthwhile."

Savings an option

Gene Murray also demonstrated the high value he places on education with his family's rebate money.

He came up with an interesting twist for his son's 15th birthday in May: He used the $300 dependent stipend to open a bank card account for him as a gift.

"I thought it was a good way to teach him how to be responsible," said Murray, 55, an instructor of information security at a technical institute outside Denver. "He can go online and look at his account balance and see his transactions."

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