The article explores how borrowing constraints affect wealth accumulation and investment choices. By analyzing different types of constraints and factors like education and preferences, the researchers found that income-based constraints lead to less borrowing and risky investments. Collateral constraints, on the other hand, may not always limit borrowing and risky asset holdings. Tight constraints can change the impact of precautionary motives on wealth and borrowing behavior. When constrained by income, households tend to hold less risky assets and borrow less. Including constrained households in studies with unconstrained ones can skew results, making precautionary effects on wealth and investments appear smaller than they actually are.