in the U.S., they examine the proposition that attitudes and skills influence a household’s
propensity to plan, while differences in propensities to plan influence wealth accumulation.
They find evidence that individuals with a high propensity to plan spend more time devel-
oping financial plans and save and accumulate more wealth than those with a lower such
propensity. The authors argue that their findings are consistent with broad psychological
evidence concerning the beneficial impacts of planning on goal pursuit.
On a similar theme, Lusardi and Mitchell (2007) examine the effect of planning and
financial literacy on wealth holdings of individuals in the U.S. who are nearing retirement.
They compare the wealth holdings of two cohorts of the same age (51-56 years) at different
points in time (1992 and 2004) and find that in both cohorts, planners tend to have higher
levels of financial literacy and end up with higher wealth levels at retirement than non-
planners. The authors find that the relationship between planning and wealth remains
strong in a regression controlling for several socio-demographic factors. They also explore
the possibility that reverse causality may be a problem in their regression of wealth on
planning, but conclude that this is not the case.
Secondly, while a number of papers specifically examine the role of behavioural factors in
financial distress, these papers tend to be based on very small sample sizes that pre-date the
economic boom and rapid debt expansion period of the late 1990s and early 2000s. Among
these, Walker (1996) uses a sample of only one hundred respondents to study the key factors
affecting individuals’ perceptions of their financial situation following a significant life event
with financial implications - the birth of a new baby. She interviews new mothers in the UK
and constructs a measure of ‘financial coping’ using responses to a question about whether
or not respondents believed they had enough money to cope with life (before and after
the birth of the new baby). She finds that time-preferences, financial management and
attitudes towards debt tend to be important predictors of a household’s financial distress
level, after controlling for demographics and income.
Another paper in this field comes from Livingstone and Lunt (1992), who examine the
social, economic and psychological factors related to debt in the UK, using a sample of
just 279 respondents. These authors explore the factors distinguishing debtors from non-
debtors, the amount of debt individuals take on and the amount of debt that gets repaid.
The authors use data collected from a custom designed survey of the debt experiences of
individuals based in and around Oxford, England during September 1989, to undertake their
analysis. They find that socio-demographic factors play only a minor role in personal debt