Household Finance Resources

This article gives perspective on the academic literature on personal financial decision making. I explore three main domains of financial choices: savings versus consumption, investment decision making, and choices around debt. In each domain, people behave in ways that deviate from normative prescriptions of financial economics. I explore the main drivers of financial decisions that result in these deviations. The article concludes with a forward-looking perspective of how generative artificial intelligence (GenAI) might reshape the landscape of individual's financial decisions.

Beliefs about future events are crucial to the decisions that people make when developing financial plans over the life cycle. Yet peoples' subjective beliefs can often differ from the objective probabilities that economists and financial planners use in their models. This chapter discusses findings on subjective beliefs, how people might form their beliefs, and how these beliefs affect conclusions drawn from a classical economic life cycle model. I highlight a specific divergence between subjective beliefs and objective probabilities: subjective beliefs about peoples' mortality.

A practical guide for researchers working with credit bureau data — covering acquisition from vendors, understanding the panel structure, constructing key variables (credit scores, utilization, delinquency flags), merging with external datasets, and common pitfalls. Written from hands-on experience with Equifax, TransUnion, and the NY Fed Consumer Credit Panel.