Focusing on both sides of the balance sheet

the potential benefit of liability management

Authors

  • Zhikun Liu Empower Retirement
  • David M. Blanchett Morningstar Investment Management LLC

DOI:

https://doi.org/10.61190/fsr.v29i2.3450

Keywords:

Financial decision making, Behavioral finance, Retirement financial planning, Debt management

Abstract

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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Published

2021-06-30

How to Cite

Liu, Z., & Blanchett, D. M. (2021). Focusing on both sides of the balance sheet: the potential benefit of liability management. Financial Services Review, 29(2), 121–145. https://doi.org/10.61190/fsr.v29i2.3450

Issue

Vol. 29 No. 2 (2021): Summer 2021

Section

New Original Submission

License

Copyright (c) 2021 Academy of Financial Services

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