Financial Ratios and Perceived Household Financial Satisfaction

Abstract

This paper tests the relative strength of three objective measures of financial health (using the solvency, liquidity, and investment asset ratio) in predicting a household’s subjective feeling of current financial satisfaction. Using a sample of 6,923 respondents in the 2008 Health and Retirement Study this paper presents evidence of two main findings: 1) the solvency ratio is most strongly associated with financial satisfaction levels based on a cross-sectional design and 2) changes in the investment asset ratio are most strongly associated with changes in financial satisfaction over time.