Crisis forcing debt-saddled Americans to budget

WAUKEGAN, Illinois (Reuters) - The bleak outlook for the U.S. economy and the worst credit crunch in decades are pushing many stressed-out consumers to learn some new skills -- budgeting and saving.

The trend was on display at a free seminar called "Building a Better Budget" in this working class suburb north of Chicago on Wednesday night. An overflow crowd of 180 people showed up to hear advice of how to make ends meet in tough times.

"I know for many of us saving is a foreign concept," Lizbeth Sanchez, a manager at financial counseling service Balance told the crowd.

"It's not easy to save because the way our culture works, the person who dies with the most stuff wins, right?"

Almost no one cracked a smile.

Dianne Miller, 44, an insurance agent, lamented the fact that she bought too much too fast during the U.S. housing boom, including an expensive new car. Now she is saddled with debt.

"I'm here because I want to get out of debt," she said. "To do that I'm going to have get a second job, start saving and go without.

"I'm not alone, look at the way we Americans have spent money," Miller added. "We're all going to have to go without."

Sales clerk Maria Miranda, 31, wants to plan for the future of her two small children and said she will probably start her budgeting by going for a less expensive cell phone package.

"I'm scared about what's happening to the economy," she said. "But I have to balance my own budget before I can start worrying about anyone else."

'THIS IS KILLING ME'

As Sanchez rolled through ways to manage your budget so you can save money -- including opting for cheaper cell phone package deals -- many of the people packed into the conference room at the Ramada Inn looked battered and discouraged.

"This is killing me," said local resident Danielle Sampson, holding her head in her hands.

Sampson, 40, a dental assistant, said she had two daughters in college and could not take on any more debt.

"My spending has exceeded my income and that has to stop," she said. "All of us are going to have to adjust."

That mood is washing across the country. On Tuesday the U.S. Federal Reserve reported that outstanding consumer credit fell $7.9 billion in August, the first shrinkage in that measure since January 1998.

As belts tighten, the economy could suffer since U.S. consumer spending accounts for at least two-thirds of overall demand. On Thursday shares of General Motors Corp., the largest U.S.-based automaker, fell to their lowest level since 1950.

But those at the seminar, while worried about the economy, were more worried about their own household economy. Marilyn Kucia, a consumer credit counselor, said she has been inundated with clients struggling with debt.

"I've come looking for some fresh ideas of what to tell people because I'm running out," she said. "I also thought that I was well protected financially, but with everything that's going on, I am not so sure anymore."

The event was organized by the Consumers Credit Union, a financial cooperative owned and controlled by its 50,000 members in Illinois and Wisconsin.

"Are our members struggling? Sure they are," said CCU vice president Hal Coxon. "Employers are cutting back on overtime, and food and gas prices are still high."

Volunteer Mary Krause says she has helped out at budgeting seminars for a decade and never seen anything like this.

"The state of the economy and the lack of easy credit have really focused people's minds," she said.

(Editing by Peter Bohan and Xavier Briand)