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The increasing pervasiveness of high-cost alternative financial services (AFS) has captured the attention of policymakers, consumer educators, and financial counselors. Using data from the 2009 to 2012 waves of the National Financial Capability Study (NFCS), this article investigates AFS borrowing behaviors through the lens of a boundedly rational choice framework, with an emphasis on overconfidence. Through repeated testing of isolated samples of individuals with characteristics that make them less likely to objectively need such products, the roles of actual (objective) and perceived (subjective) financial knowledge in the decision-making process are explored. Consistent results indicate that individuals with lower objective financial knowledge and those that are overconfident in their self-assessed knowledge level are significantly more likely to utilize AFS instruments. These results suggest that a significant portion of AFS users may select these products without conducting adequate search, resulting in less than optimal financial decisions holding all else equal.

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Utilizing a unique question on subjective financial satisfaction from the National Financial Capability Study, the goal of this research was to examine the demographic, socioeconomic, and behavioral determinants of financial satisfaction and the moderating roles of gender and marital status in these associations. Results from the ordered logistic regressions indicated that single women and divorcees of both genders reported significantly lower financial satisfaction than married counterparts and that widowed men were generally better off than married men. After documenting large adverse effects of divorce on reports of financial satisfaction, the gaps in financial satisfaction between married and divorced individuals were measured and compared by gender. Results are expected to help individuals, households, and financial professionals understand the perceived financial satisfaction effects of marital decisions.

This article uses data from the Health and Retirement Study for 1998-2010 to investigate whether households respond to the financial stress caused by health problems by increasing their unsecured debt. Results show both the probability of having unsecured debt and the amount of debt increase after an adverse health event among households with low financial assets, who are uninsured, or who have less generous health insurance. The effect of health problems on borrowing is caused by both medical expenditures and disruptions to the income stream. Unsecured debt seems to remain on some households' balance sheets for an extended period.