Wealth accumulation and the propensity to plan
Abstract
Why do similar households end up with very different levels of wealth? We show that differences in the attitudes and skills with which they approach financial planning are a significant factor. We use new and unique survey data to assess these differences and to measure each household’s “propensity to plan.” We show that those with a higher such propensity spend more time developing financial plans and that this shift in planning is associated with increased wealth. We uncover a strong relationship between the propensity to plan and budgeting behavior.