In 2006, about 1.5 million financially desperate consumers turned to the nonprofit National Foundation for Credit Counseling for help in managing their debts. In 2008, that number had more than doubled to 3.2 million, and it's climbed an additional 34% so far in this year.
That front-row seat to the recession is uncovering some hair-raising numbers.
"One of the most astounding statistics is that people who came to us had six credit cards with unsecured debt totaling 62% of their total household income," spokeswoman Gail Cunningham said Monday. "To put this into perspective, realize that this debt does not include their house or vehicle payment but strictly represents credit card debt."
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NFCC member agencies' nearly 3,000 counselors offer budgeting advice even for those who aren't in distress, debt counseling for people who are struggling, housing counseling from pre-purchase to foreclosure prevention, along with providing the now-mandatory bankruptcy pre-filing counseling and pre-discharge education.
Cunningham said the biggest increase in counseling was related to housing, growing by 244% from 2006 to 2008. The number of bankruptcy sessions grew by 110% in the same period.
Bad at money, and we know itThe organization's Financial Literacy Survey, released in April, found that nearly a third of Americans had no savings of any kind outside their retirement plans, and a full third hadn't saved a nickel toward retirement in the past year. One in four had paid at least one bill late.
And 28% of those who had mortgages didn't know the rate and terms of their loans.The NFCC's new X-ray of its clients tends to reinforce that survey's results. Even as job losses soar, reduced income is only the No. 2 reason clients cite for their financial distress, Cunningham said. The first? Financial mismanagement.
In the NFCC survey, "41% of adults, more than 92 million people, gave themselves a grade of C, D or F when asked about their knowledge of personal finance," Cunningham said. "To me, this strongly suggests that there is considerable room for improvement."