Abstract
Various non-economic factors, like social, cultural, psychologic and others strongly affect the decision-making related to the management of personal consumption expenditure (PCE) in households and often compromise its efficiency. PCE management tools and methods currently used by households are not helpful either as rational distribution of funds among the purchases is usually out of their scope. Therefore, rational use of resources still remains a challenging task for many households. The goal of this study is to analyse the PCE management process in households and the obstacles preventing its efficiency. Methods used in the article comprise: comparative and critical analysis methods; vector analysis tools. The paper identifies shortcomings of currently used PCE management methods and tools and introduces a system of quantitative criteria enabling objective evaluation of consumption alternatives. The use of quantitative criteria limits the influence of subjective, non-economic factors on consumption-related resource management in households and can positively affect its efficiency. The criteria are justified theoretically and the benefits from their use demonstrated with some practical evidence.
Highlights
Personal consumption expenditure (PCE) accounts for approximately 2/3 of Lithuania’s gross domestic product (GDP)
Several personal consumption expenditure (PCE) parameters are of key importance for the economy
Efficient PCE management appears to be problematic for many Lithuanian households as the share of unbalanced household budgets amounts to 40% and the share of non-performing loans in retail banking never went below 5.5–6% since 2009
Summary
Personal consumption expenditure (PCE) accounts for approximately 2/3 of Lithuania’s gross domestic product (GDP). The non-performing retail loans (NPL) in Lithuania in 2015 amounted to 5.5% (Bank of Lithuania 2016) This level was significantly lower than the highest rate of over 20% reached in 2010, it still remained several times higher than the pre-crisis level of 1–2% in 2007–2008. Especially those having psychological background, compromise economic logics related to household’s financial decision-making As a result, this process becomes very complex and diverse, budget constrains are often ignored, which leads to complete loss of its control. Management efficiency could improve if decisions made by households were based only on objective and quantifiable criteria From this point of view, the application of special formalised decision-making procedures eliminating the interference of subjective, non-economic motives, should be especially beneficial. Methods applied in the research comprise comparative and critical analysis and vector analysis tools
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