Focusing on both sides of the balance sheet
the potential benefit of liability management
DOI:
https://doi.org/10.61190/fsr.v29i2.3450Keywords:
Financial decision making, Behavioral finance, Retirement financial planning, Debt managementAbstract
Debt has become a significant issue among U.S. households with average household interest pay- ments on liabilities exceeding expected returns on investment assets by more than 50%. In this study, we explore the role of U.S. household debt and analyze the impact of different economic, demo- graphic, and behavioral factors on household borrowing decisions, with a particular focus on “good” and “bad” debts, which depend on type and interest rate. We estimate significant potential benefits with improved liability management and find that households with lower asset, income, and educa- tion levels are likely to benefit most from assistance with debt optimization.
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