Living beyond one’s means: evidence from Malaysia
International Journal of Social Economics
ISSN: 0306-8293
Article publication date: 31 December 2015
Abstract
Purpose
The purpose of the paper is to identify the determinants of the probability of living beyond one’s means. The paper also explores the coping mechanisms of those financially distressed as well as the debt taking behaviour of consumers.
Design/methodology/approach
The study uses data obtained from the OECD International Network on Financial Education pilot study on Measuring Financial Literacy in 2010 for the case of Malaysia. A logistic regression model is used to identify the main determinants of the probability that a consumer will live beyond his/her means. The analysis is carried out by using a set of socio-economic factors and the individual’s financial behaviour and attitudinal characteristics as explanatory variables.
Findings
The findings indicate that low income and seasonal income earners are more vulnerable to financial distress. Furthermore, having a higher education, higher financial knowledge and prudent financial behaviour and attitude do not necessarily translate into better financial management. Family and friends provide the main source of financial assistance in times of need.
Research limitations/implications
The assessment of financial knowledge should go beyond individual’s knowledge on financial concepts and theories. Practical knowledge on financial and cash flow management should be assessed.
Practical implications
The study reiterates the importance of financial education. It is imperative to include financial education as part of the schools’ curriculum and also to be incorporated as part of the Continuous Professional Development modules for working adults.
Originality/value
The study is based on the first nationwide study of consumer finances in Malaysia. It contributes to the literature by integrating financial behaviour and attitudinal factors into the analysis of the ability of individuals to live within their means. The findings also show the limitations of the existing self-assessment of financial behaviour and attitude and the assessment of financial knowledge.
Keywords
Acknowledgements
The author would like to thank Bank Negara Malaysia for the data used in the study. Opinions expressed are those of the author. Financial support from the Research University Grant of Universiti Sains Malaysia (1001/PSOSIAL/816213) is acknowledged.
Citation
Loke, Y.J. (2015), "Living beyond one’s means: evidence from Malaysia", International Journal of Social Economics, Vol. 43 No. 1, pp. 2-18. https://doi.org/10.1108/IJSE-11-2013-0248
Publisher
:Emerald Group Publishing Limited
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