Okay, we don't just live frugally over here because of personal conviction, but we're also downright poor. Not broke, poor. $27,000 a year for a newly expanded family of four. We make it work because we don't buy things we don't need except upon rare occasions, such as birthdays and the random "just because" gift. Since we just had a new baby, we're getting a good $6,000 back for tax returns this year. SO, we get to finish paying off the car, finish paying the midwife (since, although she was not exactly affordable for us at first, she helped us a bit so we COULD afford her, and it was important to me to not have another hospital birth so we made it fit into our budget), pay off the credit card which, thankfully, isn't too much. Our big purchase? I FINALLY get the deep freezer I've been wanting for 4 years now- from a dent-and-ding shop. The rest of the money is going into savings for emergencies. So, we're not going to be changing what we claim on our taxes since we can live on what we bring home now, and will be living even MORE comfortably now that we won't have any car payments. We don't want the extra little bit of money in our paycheck because $20 a check disappears. Besides, we own our own house, which is where so much of our monthly income goes, but otherwise we have no bills. So, although we're technically poor, we're rich in every other way.
As far as getting hubby's head out of the clouds regarding his list of things you can get now, let him daydream but also ask him to be realistic. You should/could each take $100 of the new earnings for yourselves and spend it however you see fit. That way, if he wants a new pair of shoes and you want to donate to the tsunami fund, you both can do what you like and be satisfied. If it's things for the family, make sure it's realistic. If he wants a new speedboat but you don't live anywhere remotely near a lake or ocean, put it out of his mind! But if he wants a hiking backpack and you live near the mountains or hike all the time, that may be warranted. Know what I mean? Just some thoughts.