Household Finance and Wealth Management: The Influence of Income and Human Capital on Portfolio Strategies

Household finance (HF) plays a central role in the analysis of wealth management across the life cycle, integrating human capital, tangible assets and financial decisions. This work studies the impact of income and human capital on household investment strategies, exploring how different socio-demographic characteristics influence financial behavior and risk appetite. The research is based on a historical database (1977-2022) from the Survey of Italian Household Budgets (SHIW), supplemented with interpolated data and wage forecasts up to 2035 through a regression model. To ensure temporal comparability, all monetary values were adjusted for inflation and restored to the purchasing power of interest. A key element of the study is the estimation of human capital, understood as the present value of future labor income. The calculation was performed by applying a real discount rate of 3 percent to reflect the time value of money. The model integrates gender, age, education, and geographic area, generating summary individual observations to fill gaps in missing data. In addition, an approach was included to determine the year of birth and the year of entry into the labor force, ensuring consistency in career progression and attainment of retirement age at 65. The results show strong heterogeneities in human capital accumulation, with steeper wage paths for those with higher levels of education and a greater appetite for financial risk. In addition, regional disparities remain, affecting income growth and portfolio diversification. The model also explores the interaction between human capital and financial wealth, applying Munk's (2020) investment allocation methodology to analyze how households dynamically adjust their risk exposure over time. This paper contributes to the literature by providing an empirically validated approach to modeling wealth accumulation, focusing on the connections between income dynamics, human capital valuation, and investment decisions in Italian framework. The implications arising from this research are of particular relevance to financial education programs and wealth management plans, stimulating greater awareness in household financial choices.