Money management practices influencing household asset ownership

The purpose of this research is to describe the types and amounts of assets owned by households, and to determine socio-demographic variables and money management practices that influence the household's total asset ownership. The data used for this study are from a survey conducted during the winter of 1982. Definite patterns of financial asset ownership emerged. A majority, 70% or more, of the households owned current and savings accounts, and cars and real estate. A minority, 30% or less, owned certificates of deposit, mutual funds, stocks, bonds and individual retirement accounts. Age, net income and housing tenure were significant socio-demographic variables in explaining variation in total asset ownership among households. Only two money management practices, i.e. number of credit cards owned and the amount the manager felt comfortable charging on these cards, were significant in explaining variations in the amount of total assets owned by a household.     

Keeping Up With the Joneses: Analyzing the Effect of Income Inequality on Consumer Borrowing

Household debt relative to disposable income increased from 60% in 1980 to 104% at the end of 2003. ‘Buying on credit’ has become so popular that an increasing number of firms generate more profit from financing than from selling their products. In this paper, we show that rising income inequality has substantially contributed to increased consumer borrowing. Income inequality affects all components of total household debt, but the impact is strongest on non-revolving debt (installment loans), which is used to finance the purchase of consumer durables. We argue and provide evidence that the income inequality effect on consumer borrowing is a result of conspicuous consumption. Rising income inequality has forced households with smaller income gains to use debt to keep up their consumption level relative to households with larger income gains.JEL Classification: D12, G29, J31, M30     

Measuring households' financial vulnerabilities from consumer debt: Evidence from Chile

This paper is concerned with measuring the financial vulnerability (FV) of households arising from consumer debt. Our case of application is Chile. Our main finding is that by applying a methodology that allows for households' heterogeneities and that accounts for contextual factors (like motives for asking for debt, exposure to shocks, family structure, holdings of assets and perspectives of future income), we better quantify the risks that financially vulnerable households may entail to the financial system.     

Changes in factors influencing consumer debt among Scottish families, 1984—1987

The major objective of this study was to determine socio-economic and debt management factors causing debt problems among Scottish families. Data for this study were collected from the records of the debt counselling segment of the Citizens Advice Bureau in Glasgow, Scotland, during 1984–87. The final sample consisted of 404 cases selected at random. Variables selected for the study included the following socio-economic characteristics: sex, household size, marital status, employment status, sources of income, and total income. Debt variables included in the study were total debt, sources of debt, amount of debt from each source, and total monthly debt payment. Total debt owed by debtors increased by 283% over the 4 year period from 295,113 in 1984 to 836,409 in 1986. The majority of the households had debt to income ratio of 0.50 and on the average owed on eight different types of loans. The largest proportion of debtors (87%) borrowed from finance companies and the largest sums of total debt were also owed to finance companies (52%). Finance companies consistently held this position over the 4 year period. The analysis of variance (ANOVA) results indicate that employment status, number of sources of borrowing, marital status and sex significantly explained the variation in total debt burden. The number of sources is an important factor in debt management. As the numbers of sources of borrowing increases, not only the management of transactions gets complicated and one can easily lose sight of total debt burden, but it also indicates that people start borrowing from high cost sources of borrowing, such as store credit and finance companies. Educators need to emphasize the importance of the variation in cost of borrowing related to various sources in their materials, and these educational efforts should be targeted to females, singles and those who are recently separated and divorced.     

Income thresholds of dissaving in Germany: empirical evidence from the recent sample survey of income and expenditure (EVS 2008)

Saving of private households monotonically increases with income. If the regression lines, which represent the ‘demand for saving’, assume negative values, saving turns into dissaving, i.e. dissolving assets or going into debt. The zeros of the demand functions for saving are called ‘dissaving thresholds’. Dissaving thresholds for Germany are determined econometrically using the Sample Survey of Income and Expenditure. Dissaving thresholds turn out to be far higher than social assistance amounts. Implications for economic, social and consumer policy in Germany are discussed.     

On the bankruptcy of internet companies: An empirical inquiry

In this paper we investigate bankruptcy of Internet (dotcoms) companies. Using a calendar-time model, we identify three key predictors of company failure; net income to total assets, cash flow to total liabilities, and total assets. In addition, we use an event-time model and find that liquidity becomes more important as a predictor than profit potential about one year prior to the failure, but that this finding is reversed (i.e. liquidity is less important than profit potential) three years prior to bankruptcy. Our results also suggest that three years prior to bankruptcy, a higher ratio of total liabilities to total assets is associated with lower odds of survival.     

The increasing financial obligations burden of US households: who is affected?

The purpose of this paper is to examine factors associated with changes in the proportion of households with high financial obligations ratios in the United States. The proportion of households paying more than 40% of income for debt, rent, vehicle leases, property taxes and homeowners’ insurance, which we refer to as having a heavy burden, increased from 18% in 1992 to 27% in 2007. Multivariate analysis of a combination of six Survey of Consumer Finances data sets indicates that the likelihood of having a heavy burden was positively associated with homeownership, self‐employment and retirement status. Those with an optimistic 5‐year expectation of the economy were more likely to be in a household with a heavy burden. Education was positively related to having a heavy burden, suggesting that having a heavy burden is not simply a cognitive error.     

Fueling the Credit Crisis: Who Uses Consumer Credit and What Drives Debt Burden?

Excessive household debt contributed to the worst recession in decades. Insights about borrowing and spending behavior can inform economic recovery forecasts, policy decisions, and financial education. This study identifies life cycle and credit attitude as key determinants of who uses debt. Younger households are more likely to borrow for consumption, as are those who believe that it is all right to borrow to purchase luxury goods or cover living expenses. Furthermore, households that condone borrowing for these purposes have a higher consumer debt burden. Debt capacity (or creditworthiness) and financial discipline are also significant factors in determining household debt use.     

Household Economic Security and Public Policy

There are three challenges to household economic security: Slow income growth at the lower and middle parts of the income distribution, swings in households’ use of debt and leverage, and large numbers of households with low savings. Appropriate policy responses to these include increasing worker skills through greater opportunities for education and training, removing barriers to labor force participation, strengthening the safety net, improving access to credit while reducing exposure to harmful aspects of debt use, and making retirement savings easier and more automatic.     

Debt as a source of financial stress in Australian households

This paper examines the role of demographic, socio‐economic and debt portfolio characteristics as contributors to financial stress in Australian households. The data are drawn from the most recent Household Expenditure Survey and relate to 3268 probability‐weighted households. Financial stress is defined, among other things, in terms of financial reasons for being unable to have a holiday, to have meals with family and friends, to engage in hobbies and other leisure activities, and general money management. Characteristics examined include family structure and composition, source and level of household income, age, gender and marital status, ethnic background, housing value, debt repayment of various types and credit card usage. Binary logit models are used to identify the source and magnitude of factors associated with financial stress. The evidence provided suggests that financial stress is higher in families with more children and those from ethnic minorities, especially when reliant on government pensions and benefits, and lower in families with higher disposable incomes and housing values. There is weak evidence that Australia's historically high levels of household debt cause financial stress.     

Expenditure patterns on food and non food items of Khayelitsha households,Western Cape,South Africa

Food insecurity or lack of access to adequate and nutritious food is a major determinant of under‐nutrition. Expenditure patterns accompanied by unemployment, low level of education, inflation and high food prices have a direct negative impact on food availability within households (Moller, 1997). Ghany and Schwenk (1993) found that as household income increases, the proportion of expenditures on food decreases, the proportion of expenditures on clothing, rent, fuel, and light stayed the same and that of sundries increased. The aim of this study was to investigate household expenditure patterns on food and non‐food items in Khayelitsha. A total of 20 households (10 from the formal and 10 from the informal settlements) were randomly selected from those willing to participate in the study. A questionnaire with open ended and closed questions was used to collect data. The questionnaire comprised four sections namely: biographical information, socio‐economic information which used wealth quintiles to assess households’ social economic status, total expenditure information and a food/hunger scale was used to assess households’ food availability. The findings revealed that households from informal settlements spent more money (62.2%) as a proportion of their income on food compared to households from the formal settlement (39%). There was higher unemployment rate (100%) at the informal settlement compared to the formal settlement (40%). Wealth quintiles scales did not reflect the social status of the households as equipment and assets owned by households were only used as fallback position during times of economic hardships. Households used different purchasing strategies; food and non‐food items were mainly purchased from outside the township (60%). Forty percent of the households bought their items from local shops and spazas because they allowed them to buy items whenever little money was available or to take items on credit. All the respondents preferred to buy bread and small items from spazas and local shops. Prices of items in the spazas and local shops were higher compared to prices of items in bigger shops outside the townships. The food/hunger scale and wealth quintiles showed that informal settlement households were more food insecure (as they were all unemployed and about 50% of the households ran out of food always) and had fewer assets compared to the formal settlement households. The implications of these findings underscore the need to improve socio‐economic conditions of low resource households through empowerment programs. These programs can be in the form of training in management/decision making, work related skills/literacy (to help them access formal employment), business management/income generation skills (to help them to be self‐employed), budgeting, and food gardening. This approach can help to increase the resource base and alleviate food insecurity in low resource households.     

A Behavioral Life-Cycle Approach to Understanding the Wealth Effect

The somewhat surprising strength in consumer spending in recent years has focused renewed attention on the much-debated wealth effect, the notion that when individuals feel wealthier, they consume more. This study utilizes survey data to examine the wealth effect within the context of the behavioral life-cycle model of savings. The results indicate that the likelihood of households spending more when their assets increase in value decreases with the portion of assets held in home equity. This unexpected finding is due to homeowners responding to the perceived wealth gain from increased home values by cashing out their equity. The likelihood increases with the portion of assets held in stock outside of retirement accounts, but is not significantly related to the portion of assets held in stock overall. Moreover, households that have a full-time income earner, are homeowners, have more education, have a younger household head, or expect economic growth, are more likely to report a wealth effect. Households that utilize savings “rules of thumb” are less likely to report a wealth effect. These results can be used to improve the wealth effect specification in consumer demand models and assist firms to target consumer markets.     

Money Attitudes,Credit Card Use,and Compulsive Buying among American College Students

The consumer culture has evolved into one of the most powerful forces shaping individuals and societies (Roberts and Sepulveda 1999 a, b). The desire to become a member of the consumer culture appears to be universal (Droge and Mackoy 1995). Changing attitudes toward money are an important catalyst behind the spread of the consumer culture. Money is important—especially to American college students who have been raised in a credit card society where debt is used freely (Ritzer 1995). Schor (1998) believes that access to easy credit is one of the causes of overspending. Using a causal modeling approach, the present study investigated the role money attitudes and credit card use play in compulsive buying within a sample of American college students (see Figure 1). Findings suggest that the money attitudes powerprestige, distrust, and anxiety (Yamauchi and Templer 1982) are closely related to compulsive buying and that credit card use often moderates these relationships. Study results have important public policy, marketing, and research implications.     

审核待购企业资产负债表

收购企业是一项机会和风险都很大的市场活动。要想尽量降低收购企业的风险,必须仔细核查资产负债表,以便准确了解企业的财务状况,消除账目中的虚假成分,确定企业资产的真正净值,及时识破产权转让中可能出现的欺诈行为。针对收购企业面临的一些实际问题,探索货币资金、应收账款、应收借款、存货、预付款、固定资产、负债和已缴资本等方面的核查重点,以及相应的方法和对策。     

Credit cards,new technology and consumer debt*

There has been a rapid expansion in consumer indebtedness in the U.K. The amount of consumer debt has doubled in real terms during the last 10 years. The majority of consumers are able to cope with their debt repayments, but there are a significant number of credit casualties, often burdened with multiple debts. Credit cards have played a significant but not overwhelming part in this increase in debt. There are now 62 bank credit cards for every 100 adults in the U.K., a much higher incidence than in any other European country. Credit cards have been aggressively marketed and sold, and it is possible that they will now move downmarket, to consumers in lower income groups. This possibility highlights the need for a major consumer education campaign on the cost of credit. U.K. consumers' knowledge of and ability to compare credit interest rates is poor, especially among lower income consumers who are most at risk.     

PUBLIC DEBT AS PRIVATE WEALTH: SOME EQUILIBRIUM CONSIDERATIONS

Government bonds are interest‐bearing assets. Increasing public debt increases wealth, income and consumption demand. The smaller government expenditure is, the larger consumption demand must be in equilibrium, and the larger must be public debt. Conversely, lower public debt implies higher government spending and taxation. Public debt plays, thus, an important role in establishing equilibrium. It distributes output between consumers and government. In case of insufficient demand, a larger public debt entails higher private consumption and less public spending. If upper bounds on public debt are introduced (as in the Maastricht treaty), such constraints place lower bounds on taxation and public spending and may rule out macroeconomic equilibrium. As an aside, a minor flaw in Domar's (American Economic Review, 34 (4), pp. 798–827) classical analysis is corrected.     

家庭债务的变动与居民消费的过度敏感性:来自中国的证据

通过引入家庭债务变量对LC-PIH模型进行扩展,并运用动态最小二乘(DOLS)方法、误差修正模型、暂时性—持久性因子分解和脉冲响应进行实证分析,结果表明:家庭债务、收入和财富的持久性变动对消费存在显著的促进效应,收入的持久性变动影响最大,其后依次为财富和家庭债务;不同于传统分析框架的结论,不但财富的持久性变动会影响消费,其暂时性变动也会影响消费,但收入的暂时性变动对消费的影响并不显著;在家庭债务和财富的持久性和暂时性变动共同作用下,消费变动更为剧烈。因此,政策当局一方面要稳步提升居民预期收入水平,完善消费信贷的相关政策,以推动消费的稳步增长;另一方面还应密切关注家庭负债水平,以防范家庭过度负债而可能引发的债务收缩,导致消费的大幅下滑。     

ANFA – nationale Geldschöpfung als Sprengsatz für die Währungsunion?

The so called ANFA secret protocol brought to the public’s attention the previously only little noticed opportunity for national central banks of individual Eurozone members to create money through purchases of securities at their own expense. The ANFA financial assets amount to the significant share of 51% (gross) or rather 18% (net) of the Eurosystem’s balance sheet total and 41% of its total liquidity, thereby jeopardising the principle that the communities of the emitting and the money accepting countries should be congruent, which is seen as a stability condition for currency unions. There is a danger that the money creation via ANFA acts as an explosive device for the currency union. It is therefore necessary to clearly limit the own funds portfolio in order to restore the community of money emission.     

The Relationship between Retirement Wealth and Householders' Lifetime Personal Financial and Investing Behaviors

While previous research indicates wide wealth dispersion at retirement within households with similar lifetime incomes, there have been few attempts to identify personal financial behaviors associated with retirement wealth in households matched for lifetime income. Householders with similar demographics and lifetime income but differing markedly in net worth near retirement were surveyed in terms of personal financial behaviors undertaken during their lifetime. Results revealed key differences between householders with low and high retirement wealth in their financial behaviors and how these were acquired.