Integrated cross-disciplinary approach to household expenditure management

Abstract

Purpose of the article. To analyze theoretical background of expenditure management process in households with the aim to identify reasons compromising the management efficiency and the ways of their handling. Methodology/methods. Comparative analysis of scientific literature, statistical data analysis, cross-disciplinary approach integrating psychology and economics, Maslow’s hierarchy of needs theory, vector algebra, case-study based testing. Scientific aim. To justify theoretically a new approach to household expenditure management containing formal pre-purchase procedures used to match the value of goods/services purchased with the specific consumer’s preferences by applying value decomposition technique. Findings. Decomposed value components better than aggregate value reflect the ability of good/service to satisfy various complex needs of the consumer, both basic (physiological) and those purely psychological from higher stages of the Maslow pyramid of needs, e.g. esteem and self-actualization. Decomposition gives the possibility to quantitatively evaluate and compare them. Results of case-studies carried out have proved validity of the approach and its potential in being applied as a planning tool in managing household’s expenditure. Conclusions. Decryption of aggregate value of goods and services by decomposing it into components reflecting the hierarchy of consumer’s needs creates a platform for development alternative approach to expenditure management in households, less dependent on influence of various subjective, intuition based factors. This approach should yield to reduction of spontaneous spending, give the possibility to harmonize not only total/aggregate consumption with the income, but also to find a balance between items in the bunch of products/services purchased, thus preventing an unbalanced (excessive or insufficient) allocation of funds.