Americans Are Bad at Budgeting and Great at Making Excuses

The results of a new survey from Experian on the habits and thoughts of consumers has revealed some striking statistics about our thoughts on debt, credit cards, student loans and more. Experian surveyed consumers ranging in age from 18 years old to beyond 65 years old.

To get a clear sense of what our fellow consumers are thinking and why they’re making the decisions they make, we talked with Sandra Bernardo, Experian’s manager of consumer education.

We covered four different areas with her: shifting economic philosophies, budgeting, credit card debt and student loans.

Consumers Are Looking for Experiences Over Possessions

If there’s anything that’s stood out to Sandra during her time in the personal finance industry, it’s the shift in the mentality of the average consumer from goods-based spending to experience based spending. That change, she said, came in the wake of the 2008 financial crisis.

“I think there was a big shift in consumers’ habits, attitudes, and perceptions when the economic downturn happened,” she said. “You definitely see how it impacted young adults – Millennials – even though they were not yet working or handling finances at that point.”

The resulting mentality is one of short-term thinking, she said. This has long been the ailment of younger consumers, but it’s even more apparent with Millennials.

“Millennials tend to spend their money on the here and now, but I think you can say that about any young adult,” she said. “I think Millennials are experience-driven as opposed to spending their money on cars and homes. There also doesn’t seem to be a lot of trust in financial institutions.”

Millennials (18-34, by Experian’s standards) were just part of the survey, though. Respondents were pretty evenly distributed across six different age groups.

Sandra pointed out that the mindsets expressed by respondents weren’t necessarily linked to one age group. In some cases, as many as half the respondents answered a question the same way, reinforcing the idea that consumers share ideologies regardless of age.

Consumers and Budgeting: “It’s Not Necessary”

One of the most stunning facts we learned from Experian’s survey was that half of the study participants said they don’t have a monthly budget.

“Today’s consumer approaches their finances sort of as they go along, paying for basic needs they have and trying to save a little bit,” Sandra said.

When we asked Sandra why so many people don’t make budgets, her answer was simple: They don’t think it’s necessary and they have serious doubts about its effectiveness. Respondents also said they didn’t have enough time to do it.

“For those who think it’s ineffective or unnecessary, it’s unfortunate,” Sandra said. “It may go back to not having the education growing up and there’s no personal finance class in college.”

In our conversation with Sandra, we sensed that deficiencies in budgeting had a lot to do with upbringing. Budgeting, she said, is usually a skill that someone in your family teaches you.

Related: How I Used a Budget to Get Out of $22,000 of Debt

“Unless there are family members introducing budgeting to them, whether it’s a parent or older sibling or friend, they get into college without the knowledge they need,” Sandra said.

And, at that point, college students are left without the financial tools they need to create a budget, let alone contribute to a retirement account and other investments they could make while they’re young.

When those students graduate from college, they’re saddled with debt and they feel like they don’t have enough income to pay their bills and credit cards. And that leads us to our next section…

Consumers and Credit Card Debt: The Blame Game

The Experian survey found that 36% of consumers blame a lack of cash flow for their credit card debt, while 27% say their balances are due to overspending.

Meanwhile, 7 out of 10 people who took the survey said they “somewhat agree” that their debt prevents them “from living their life to the fullest.”

As we’ve written in the past, consumers tend to blame other people for their debt. Doing so, however, increases the chances that you stay in debt.

“Not making enough money at your current job, blaming other factors or making an impulse purchase is not the right approach,” Sandra said. “It’s not going to be beneficial for you.”

The solution? Sandra says it’s a multifaceted approach. First, consumers need to take responsibility for their choices.

“You have to live within your means,” she said. “It’s not the credit card’s fault that someone becomes in debt. It’s your personal choices that put you there.”

Once you acknowledge that, you have to create free time to take a hard look at your numbers.

“I think part of the problem is that consumers don’t take the time to look at what they’re making and what they’re spending, making a budget or meeting with their spouse to talk about finances,” she said.

Creating a budget and talking about it with someone can work wonders – we wrote an article about how using a budget can get you out of tens of thousands of dollars of debt.

But, when you’re in a relationship, it needs to be a team effort. You can work together with your spouse or significant other to corral spending, start saving and make goals for your financial future.

Holding each other accountable can be a powerful weapon, so powerful, in fact, it can help you pay down even the most intimidating and depressing debt: student loans.

Consumers and Student Loans: Think It Through

While some of the facts in the Experian study surprised us, one did not: 66% of respondents with student loans said they regret taking them out.

We covered the history of student loans, the types of repayment plans there are as well as options for discharging loans, and our conclusion was that, while student loan debt is growing as colleges increase tuition, there is still tons of value in getting your degree.

In fact, a 2016 White House study showed that getting a bachelor’s degree will earn you $1 million more over your lifetime than a high-school diploma. However, all the stats in the world can’t soften the sting of regret.

“I think the regret percentage is so high because students chose a path at the beginning of their college years that didn’t match up to how they ended as a graduate,” she said.

That’s a common theme – student loan expert Mark Kantrowitz even told us that America’s student loan problem is a failure-to-finish problem. College drop-outs walk around with debt that hasn’t gotten them anywhere.

Sandra explained to us the typical scenario.

“Maybe they started out and were set on becoming a doctor and needing to go to the best, most expensive medical school,” she said. “And as they went along they changed their major and they have huge debt from the previous route. They’re saddled with debt for something they won’t pursue.”

Part of the problem is that students don’t really grasp the impact of their loans until they graduate.

“You don’t realize it until it really hits you in the face and you start working and you have this huge debt you have to pay off every month,” she said. “I think that’s what contributes to this negative mindset of, ‘Oh, gosh, this isn’t even worth it.’”

Sandra says curbing this debt takes planning. When you’re in high school, take some time to think about whether or not college is a good fit for you. Then, look at the salary of the jobs you want and figure out how much debt that salary can sustain.

If there’s a gap between how much you think you’ll make and how much your monthly payments will be on your student loans, then ask yourself if you’d be willing to work a part-time job to make up the difference.

“I encourage young adults to seek out help and advice from another person who can give them perspective,” Sandra said. “Don’t make a quick decision about it without thinking it through really thoughtfully.”

Conclusions About Consumer Behaviors

Our chat with Sandra was really insightful. Our big takeaway from the conversation is that consumers have some really dangerous mindsets and habits.

We tend to blame others for our debt, we want to live in the moment and it’s hard for us to think in the long-term. As a result, we rack up credit card and student loan debt as we try and figure out where we’re headed.

See Also: The Top 7 Money Mistakes: How Many of Them Have You Made?

Avoiding these dangerous financial scenarios is a matter of honesty and determination, Sandra said:

  • Create a budget
  • Enlist the help of someone you trust to work through your finances with you 
  • Identify areas where you can cut back
  • Come up with a plan for paying off debt and building a savings account
  • Create a road map of where you are at financially and where you want to be

“My number one piece of advice is to make sure you spend time on your finances and be accountable, Sandra said. “Find something that works for you so that you can live within your means, pay for your basic expenses, have a little room to live life and do the things you enjoy, and have room to be able to save.”

Budgeting Software That We Have Reviewed:

J.R. Duren

J.R. Duren is a personal finance reporter who examines credit cards, credit scores, and various bank products. J.R. is a three-time winner at the Florida Press Club’s Excellence in Journalism contest. He is a member of the Society of Professional Journalists and his insight has been featured on Investopedia, GOBankingRates, H&R Block and Huffington Post.