If high credit-card debt is dragging you down, it's time to start living on a budget

High credit-card debt is one of the biggest issues facing consumers, says Dara Duguay, director of Citigroup Inc.'s Office of Financial Education.

"If people need cash, they're going to use credit cards," Duguay says. "Most people don't pay their balance in full, two-thirds only pay 3 to 4 percent of what they owe" each month. And the average consumer has nine cards.

A survey by comScore Inc. showed the number of online credit card applications submitted by subprime applicants, those with so-called FICO credit scores of 660 or less, increased by 30 percent in the first quarter over the same period last year.

The cash crunch was fueled by many consumers using their homes as a "personal piggy bank" to fund purchases, Duguay says. That, plus a low US personal savings rate, means consumers found themselves in trouble amid the subprime-mortgage meltdown and credit crisis.

The most important step for consumers to get back on track is to create a budget, "not an easy task," Duguay says. It takes cataloguing a minimum of two weeks of all expenses - and a month's worth is better - to determine an accurate picture of spending versus income, she says.

Next, establish your debt-to-income ratio, then start a regular savings program. And put away at least three months' worth of living expenses to cover emergencies.

Many of the Citigroup educational programs are aimed at low- to moderate-income users. A more educated customer will make wiser financial decisions, Duguay says. The bank's programs are offered mainly through partnerships with nonprofits and schools, and learning modules for kids, teens, and adults. Budget and debt-to-income worksheets are available on the bank's website.

Mary L. Hagerty, the New York-based global chief of financial literacy at the nonprofit Operation HOPE Inc., which combats poverty, says Citigroup's support helped teach financial literacy to over 11,000 children in 10 US markets last year.

CEO Vikram Pandit is committed to keeping the unit, Duguay says. Pandit, who took over in December, is cutting costs and shedding assets. The largest US bank reported two straight quarterly losses totaling a record $15 billion. Citigroup has booked more than $40 billion of credit losses and write-downs since the subprime mortgage market collapsed last year, the most for any bank.

Duguay is a former language-school manager for Berlitz International Inc. who previously worked for the Consumer Credit Counseling Service of Los Angeles. She has been with Citigroup's financial education office since its inception.

"It's all about education," Duguay says on becoming a smarter consumer, noting that most parents don't teach personal finance to their children. "It's not rocket science. You don't need a degree from Wharton to do it."

Rick Levinson is a reporter for Bloomberg News.