TIME

5 Reasons You (And the Rest of Us) Are Probably Broke

If Americans were graded on our knowledge of personal finance, we might be looking at summer school, according to he National Foundation for Credit Counseling’s new annual financial literacy survey. “We cling tightly to some financial behaviors that are long ingrained,” says Gail Cunningham, spokesperson for NFCC. “We are great justifiers. We can see the financial facts but often choose to avoid them because if we face them head on it may force us into changing our behaviors.” Here are the biggest of those behaviors that get us stuck in the financial limbo:

Fewer than 4 in 10 have a budget. The survey finds that only 39% of respondents have a budget, the lowest number since the NFCC started asking the question in pre-recession 2007. We had a three-year stretch between 2010 and 2012 where that number ticked up to 43%, but as the economy improved, we’ve lost that ground.

“People tell me all the time, ‘I don’t want to make a budget because then I might know how much I have to spend and then I’d have to stop,’” Cunningham says. “That doesn’t make sense, so why not do something about it?”

A third of us revolve credit card debt. The NFCC survey finds that34% of people revolve balances from month to month and 15% roll over $2,500 or more every month. You might not realize it from the manageable minimum monthly payment you’re paying, but this is a habit that costs you big-time.

“Credit card average prime variable interest rate is 15.38%. At this rate, $2500 would cost the consumer about $370 in interest the first year,” assuming they are only making the minimum payment,” points out Thomas Nitzsche, spokesman and NFCC-certified credit counselor for ClearPoint Credit Counseling Solutions. Even if you stop using the card for purchases and adding to that balance, you’d pay about $1,500 just in finance charges over the course of five years.

A quarter don’t pay our bills on time. Not only does this get you hit with late fees, but it can jack up your credit card APRs — and the amount of interest you’re on the hook for — in a major way. “The average default rate is 27.88%,” Nitzsche says. “At this rate, $2500 would cost the consumer about $660 in interest the first year,” he says.

For the 24% of survey respondents who said they sometimes pay late, there’s another disadvantage: Late payments also turn up on your credit report and drag down your score, which means that even though interest rates on things like car loans and mortgages are at historic lows, you won’t get those great rates.

We have no savings. Roughly a third of survey respondents have nothing saved in an emergency fund. About the same number aren’t putting a dime towards retirement — even though not having enough money saved for a rainy day and for retirement were ranked at the top of Americans’ money concerns. “When you run into a financial emergency, it’s really no fun to have zero in savings. You’re living on a very slippery financial slope,” Cunningham says. “They think they’re financially bulletproof.”

People tend to think they don’t need to save because they have credit cards they can fall back on in an emergency, but that can mean getting trapped in that cycle of high-interest debt that saps so many people’s finances.

And we’re spending more. When the NFCC first asked people how many of them were spending less, year-over-year, back in 2009, 57% said they were spending less. This year, that number has fallen to nearly half, with only 29% reporting lower spending. Spending isn’t bad, per se, Cunningham points out, but problems arise when we don’t cut our spending to meet longer-term goals like ditching credit card debt or building a nest egg.

“For our clients, the greatest benefit of cutting spending is that it helps break the cycle of high credit card debt,” Nitzsche says. “By eliminating spending on credit cards, on-time payments begin to reduce the balances rather than just keep them current.”

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