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NEW YORK (MainStreet) — Too many Americans are following a trend of saving woefully too little and spending too much - thus racking up loads of debt.

Consumers are still saving too little despite watching their lifestyles change during the recession and having only meager savings for emergencies while nearly one in four people would run out of money in 30 days, according to a NeighborWorks America survey, the Washington, D.C.-based trainer of community development and affordable housing professionals.

This lack of savings means millions of adults are faced with minimal options such as obtaining high-cost loans such as payday or title loans if an emergency occurs.

The survey also found that 40% of consumers say that their cash reserves would last only for three months and 28% expect their emergency fund to hold them over for a year.

“These data have to light a fire under all of us who want to see Americans better able to withstand a financial crisis, especially a recession as devastating as the one we’re climbing out of now,” said Eileen Fitzgerald, NeighborWorks America CEO.

The personal savings rate in the U.S. remains anemic at 5.3% in June, according to the U.S. Bureau of Economic Analysis. Between 1959 and 2014, the average rate was 6.82%. In 1975, a high of 14.6% was reached while April 2005 reported a record low of 0.08%.

Although experts continue to urge Americans to save 10% to 15% of their salary, too many are not living within their means. One factor that affects the ability of consumers to save more money is that many people wait until the end of the month to save what is left over instead of trying to save daily, said Greg McBride,’s chief financial analyst.

“Too often nothing is left over,” he said. “You need to automate the process by having

direct deposit from your paycheck

into a dedicated savings account. It is easy and doable, but no one is going to do it for you. You have to have the discipline to make tough decisions on your spending, so you can funnel money toward

debt repayment rather than adding to your debt load


If you are worried that you are getting in over your head, here are ten warning signs that you need to reevaluate your financial situation.

10. Not knowing how much you owe on a credit card

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The first step is to know how much you currently owe on each credit card, said Gail Cunningham, spokesperson for the National Foundation for Credit Counseling (NFCC), the Washington, D.C.-based national nonprofit financial counseling organization.

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“Burying your head in the financial sand won’t solve anything – there are no answers down there,” she said.

9. Your credit score is below 600

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Reviewing your credit report and score in the past 12 months can point you toward any discrepancies or errors which you can dispute easily. Ensuring that your credit score is higher than 600 important and will enable you to receive lower interest rates when it comes to buying a car or house or obtaining other loans. Your creditworthiness is ranked from 300 to 850.

8. You're nearing the maximum limit on a credit line

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Another indicator that you are heading for trouble is if you find yourself near the maximum amount allowed on your lines of credit. If you’re considering applying for new lines of credit because the existing ones are maxed out, you’ll only make matters worse, Cunningham said. “The last thing you need is more credit,” she said. “Instead, probe to see why you are relying so strongly on credit cards to support your lifestyle.”

It’s important to minimize “percentage utilization” and maximize “credit available,” said Kevin Gallegos, vice president of the Phoenix operations with Freedom Financial Network, a company which helps consumers with debt issues.

“If you have a credit card with a limit of $10,000, and you owe $3,500 on it, that's 35% utilization,” he said. “Anything over 35% is considered is high, a warning sign that you may be living beyond your means and can impact credit scores."

7. You're behind on vehicle payments

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Consumers who are current on their vehicle payment are a step ahead of their counterparts; if you're behind, you're on a rocky financial road.

If you are facing a money crunch, prioritize your bills, including making payments for your apartment or house and your monthly auto loan.

6. You overdraw your checking account

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Another indicator that you are nearing serious financial issues is you have overdrawn on your checking account more than twice in the past 12 months. The overdraft fees are only adding to your dilemma. Instead, use free budgeting software or load an app from your bank that allows you to check your balance as often as you need to, even if it is daily. Some bills take longer to clear, so your current balance may not reflect that.

5. You lack emergency savings

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If you lack an emergency savings account, you could be headed for disaster if you run into car problems, lose your job or have a minor accident that prevents you from working. Only 51% of Americans have more emergency savings than credit card debt, according to a report. The survey also found that 28% of people have more credit card debt than emergency savings, the highest percentage in the past four years while 17% have neither emergency savings nor credit card debt.

“Since the recession, people recognize how important emergency savings is,” said Bankrate's McBride. “They have less appetite for credit card debt. Despite that recognition, people have had a difficult time making headway for savings in an environment where income is stagnant.”

4. You receive collections calls

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Receiving collection calls and notices is another sign that you are not living within your means. Many creditors are willing to negotiate your payment amount or waive some fees temporarily so consumers who try to seek a remedy before their debt goes into collection are facing less damage to their credit score.

Consumer spending can easily wind up being bad debt, which is debt that is used for the consumption of goods with little to no long-term value or goods with diminishing value, said Jason Ayala, a private wealth advisor in Phoenix, Ariz. for Ameriprise, the financial services company.

“An example of bad debt is carrying credit card debt that was used to subsidize a standard of living that exceeds your income,” he said. “If used appropriately, debt can be a very powerful and beneficial tool – if not it can derail even the best laid financial plans.”

3. You take out a payday loan or borrow from your retirement funds

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Even if it was a one-time occurrence, applying for a credit card cash advance, payday loan, title loan or borrowing from your 401(k) or IRA in the past 12 months is a sign that you need to regain control of your finances.

“Adding new debt on top of old is a financial death trap,” said Cunningham. “Balances grow, and you end up paying interest on the interest. Digging out of debt is impossible unless this practice stops.”

2. You spend more than 28% of gross salary on rent or mortgage

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If you are spending more than 28% of your gross salary paying rent or your mortgage that hampers your ability to maintain a moderate standard of living. Some lenders approved mortgages for homeowners to borrow up to 35% of their income during the past decade, but experts advise against spending that close to the threshold. Consider refinancing your mortgage, obtaining a roommate or at least cutting back on other bills or expenses. The 28% mark is a good rule of thumb, but it may vary depending on where and how you live, said Gallegos.

“Someone who lives in the heart of San Francisco or Manhattan and doesn’t own a car may have a higher percent for the home category, but a lower allocation for transportation,” he said.

1. You're reliant on credit cards to maintain your lifestyle

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Being able to maintain your current lifestyle without using your credit cards is a good sign. In July, total consumer revolving debt, which includes credit card debt, rose by 7.4% from June.

“This is a time when consumers can and should be saving more of their personal income compared to driving up debt," said Gallegos.

Consumers should aim to save 10% of their income.

Living within your means on a daily basis and using credit cards only in real emergencies is the best option.

“Paying down credit card debt is one of the best investments you could ever make since the effective rate of return easily can approach 20%,” he said. “In addition, having no credit card debt is in itself a financial cushion. It will require strict discipline, belt-tightening and a revision of your goals.”

--Written by Ellen Chang for MainStreet