The Economic Advantage of Counteracting Consumer Financial Spinning with Four Strategic Habits

Consumer Financial Spinning (CFS) manifests as a behavioral dysfunction marked by a debilitating cycle of indebtedness, disconnection, and irrational financial decisions, potentially resulting in heightened debt. This phenomenon bears resemblance to the dynamics observed during the Global Financial Crisis. In my empirical investigations, I elucidate how consumers of financial products can emancipate themselves from CFS by embracing four strategic financial habits, subsequently diminishing the prevalence of CFS. Employing various statistical approaches, such as scale development techniques, principal component analysis, and structural equation modeling, I treat the model constructs as economic states (e.g., the state of indebtedness), offering snapshots of this dynamic system. The theoretical contribution lies in incorporating the role of strategic financial habits into the CFS model, showing how it disrupts the cycle of personal indebtedness. From a managerial and economic standpoint, the research suggests a comprehensive tool for assessing lending risk, serving as a complementary measure to traditional credit score assessments, resulting in more stable households. Furthermore, instead of focusing on the psychosocial characteristics of borrowers (such as financial illiteracy) as most analyses do, I target financial habits instead. I posit that fostering consumers to adhere to strategic financial habits can bring economic benefits and limit the rise of frantic, bear markets.