“I tend to live for today and let tomorrow take care of itself.”
“I am impulsive and tend to buy things even when I can’t really afford them.”
Potential responses are “Agree Strongly”, “Tend to Agree”, “Tend to Disagree” and
“Disagree Strongly”. I use the responses to the first statement to proxy an individual’s
time preference, and responses to the second statement to proxy an individual’s degree of
self-control. In particular, I create dummy variables “Live Today” and “Impulsive” which
are equal to one if an individual responds that they either agree strongly or tend to agree
with the statements, and zero otherwise. As shown in Table 2, over 40 per cent of the
sample has a time preference of today relative to tomorrow, while close to a quarter of the
sample agrees that they are impulsive, i.e. that they lack self-control.
Financial Management and Organisation
Several papers show that different styles and degrees of financial management and planning
have an important effect on the debt status or degree of financial coping of a household
(Lea et al. (1995), Gunnarsson and Wahlund (1993), Livingstone and Lunt (1992) for
example). Specifically those households that plan or manage their money better tend
to have less debt and cope financially better than those households that do not plan or
manage their money as well. In this study, I proxy for respondents’ financial management
or organisation behaviours using responses to several questions/statements available in the
Financial Capability Survey. Firstly, respondents are asked about their degree of agreement
or disagreement with the following statement:
“I am very organised when it comes to managing my money day-to-day.”
Furthermore, respondents are asked how accurately they know how much money they
have/owe in their various savings, current, and loan accounts. Answers range from “I
know within a pound/euro or two” to “I have no idea at all”. Respondents are also asked
if they ever check statements for their various accounts and investments. Based on this
information, I create a dummy variable “Organised” which is equal to one for organised
individuals and zero for disorganised individuals. Specifically, I classify those individuals
who disagree with the statement on money organisation or who agree with it but claim to
have no idea at all as to how much money they have available to them or that they never
monitor their investments or check statements for any of their accounts, as disorganised with
their money. Organised individuals agree with the statement and do not display evidence