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Given the increasing relevance of Behavioral Economics in understanding decisions, this paper has analyzed the role of Mental Accounting (MA) in influencing Personal Financial Planning (PFP) decisions of Indian Households. Using the components put forth by the behavioral life cycle theory, MA variables are identified and validated. Individual tendencies for engaging in PFP are captured through identified dimensions. A significant influence of MA on PFP of investors is being empirically established in the study and the implications for business research are put forth. Using PLS-SEM technique, a structured questionnaire exclusively designed for this purpose has been analyzed on a total of 310 responses. The analysis strategy involved three-stage approach through establishing structural and path relationship between MA and PFP, including second order factoring to corroborate validations.

Financial decisions are the most important and life-shaping decisions individual make in their life. The increasing body of literature evidences the role of the individual psychological influence in their financial decisions. More specifically, the role of mental accounting is established in the domain of individual behavior towards money and financial matters. The present study also explores the influence of cognitive components on individual financial decision making and named the antecedent as financial cognition. The study hypothesizes a significant association of financial cognition on mental accounting process and on personal financial planning of Indian households and also hypothesizes mediating role of mental accounting. Study uses partial least square structural equation modeling in SmartPLS 3.0, to analyze the data of 310 responses. The hypothesized relationships are established and a partial mediating role of mental accounting in between financial cognition and mental accounting process of Indian households is evidenced.

The term financial planning has been an area of research interest since few years. Studies have underlined the influence of various cognitive factors in individuals’ financial decisions. The present study is also trying to underline the influence of various cognitive factors in personal financial planning of Indian households. The term financial cognition considered three components namely financial attitude, risk attitude and financial knowledge and raise the concern about the influence of various cognitive factors on individual personal financial planning. Especially in India, being a conservative attitude towards financial decisions, individual households do have higher influence of various cognitive and behavioral aspects in their suboptimal decision towards personal financial planning. The present study is putting forward those aspects of personal financial planning decisions of Indian households. The main objective of the model is to create the bare minimum structure to demonstrate the influence of financial cognition on personal financial planning among Indian households. The study mainly tried to explore the fundamental principle of subjective thinking towards financial decision. The model would represent the influence of financial cognition towards people financial decisions and can be helpful in exploring the financial information process. The study used PLS-SEM to explore PFP process in all the area of financial interest i.e. cash flow management, investment, insurance, retirement, tax and estate planning. The salaried individuals from different sectors are considered as sample for the study. The analysis has been done with 452 responses from Indian households.