Expenditures and financial well-being

Category: Finance Seminar
When: 21 Juni 2016
, 16:15
 - 17:30
Where: House of Finance, E01 Deutsche Bank

 Higher expenditures is the main reason given for significant deteriorations in household
finances, twice as often as lower earnings. The expenditure increases are persistent and linked
to: fluctuations in the prices of necessary goods that make a large proportion of households’
budget, life events and psychological variables. Households respond to worse finances by
cutting down on discretionary spending. In addition, there is a reduction in psychological
well-being that feeds back into an increased probability of a further deterioration in the
finances. Good financial management can mitigate these effects. Our results highlight the
importance of expenditures as a source of background risk and of expenditure management
in financial education.