Subjective Financial Well-being Research Articles

Personal Tax Changes and Financial Well-being: Evidence from the Tax Cuts and Jobs Act

We estimate the effects of personal income tax decreases on financial well-being, including qualitative subjective assessments and quantitative measures. A plausibly causal design shows that tax decreases in the Tax Cuts and Jobs Act made survey respondents more likely to say they were "living comfortably" financially, with null effects at lower levels of subjective financial well-being. Estimates from a similar design using credit bureau data show that people who had larger tax decreases were modestly more likely to open new accounts, and more likely to have higher consumer credit balances. Tax decreases had effects on credit scores that are indistinguishable from zero. Results suggest that larger tax decreases improve financial well-being in ways not fully proxied by typical administrative data.

The Effect of COVID-19 on Subjective Financial Well-Being

We conducted two studies investigating how financial well-being was affected by the COVID-19 outbreak. Across both studies conducted in Sweden, we find that COVID-19 was associated with an overall improvement in subjective financial well-being. The positive effect was driven by a general decline in anxiety toward current financial matters, while financial security with regard to the future declined (Study 1) or was unaffected (Study 2). These results might seem paradoxical. But we propose two explanations: (a) People have a limited ability to worry about two things at the same time. Financial problems might therefore be less emotionally salient in the face of more urgent nonfinancial problems, and (b) Some people likely experienced an initial slack in their household finances due to decreased spending opportunities at the onset of COVID-19, which to some extent could counteract increased worry about future financial security.

How Are You Doing? Financial Well-being During COVID-19

Optimal financial well-being is a goal for both financial professionals and consumers. The COVID-19 pandemic raised concerns about consumers’ financial well-being. This study sought to explore the factors related to financial well-being using the Personal Financial Wellness framework (Joo, 2008). Data was collected from a diverse sample during the COVID-19 pandemic. Results indicated that objective financial status (e.g., income), positive pre-pandemic financial behaviors, financial satisfaction, and being older and single mattered in one’s increased level of financial well-being during the COVID-19 pandemic. Subsequently, financial satisfaction was found to be a mediating factor between subjective financial knowledge and financial well-being. Implications for financial professionals, researchers, and policymakers are provided.

Long COVID and financial outcomes: evidence from four longitudinal population surveys

BackgroundLong-term sequelae of COVID-19 (long COVID) include muscle weakness, fatigue, breathing difficulties and sleep disturbance over weeks or months. Using UK longitudinal data, we assessed the relationship between long COVID...

Financial Education Effects on Financial Behavior and Well-Being: The Mediating Roles of Improved Objective and Subjective Financial Knowledge and Parallels in Physical Health

How does financial education lead to improved financial behavior and higher financial well-being? An influential Consumer Financial Protection Bureau model introduced in 2015 proposes that the goal of financial education is to improve financial well-being and that financial education does so by increasing financial knowledge, which improves financial behavior, which improves financial well-being. In this study, the authors test links in the Consumer Financial Protection Bureau model, examining the differential roles of objective and subjective knowledge. They also test whether an analogous model might capture effects of physical health education on physical health knowledge, behavior, and well-being. They report a quasi-experiment comparing changes in financial and physical health knowledge, behavior, and well-being at two time points in a semester for students enrolled in a personal finance class, a personal health class, or neither. This study reports the first causal estimates of flow from financial education to financial knowledge to financial behaviors to a validated measure of subjective financial well-being. Financial education caused large changes in both objective and subjective knowledge. Yet only subjective knowledge mediated the large effects of financial education on changes in downstream behaviors. The authors find weaker but similar results for physical health. The findings suggest that financial education efforts should be refocused to foster subjective knowledge and improved behavior.

One (Financial Well-Being) Model Fits All? Testing the Multidimensional Subjective Financial Well-Being Scale Across Nine Countries

A multidimensional model of emerging adults’ subjective financial well-being was proposed (Sorgente and Lanz, Int Journal of Behavioral Development, 43(5), 466–478 2019). The authors also developed a 5-factor scale (the Multidimensional Subjective Financial Well-being Scale, MSFWBS) intending to measure this construct in the European context. To date, data using this instrument have been collected in nine countries: Austria, Canada, Finland, India, Italy, Portugal, Romania, Slovenia, and Turkey. In the current study, data from these countries were analysed to test the validity of this model internationally. In particular, using an international sample of 4,475 emerging adults, we collected the following kinds of validity evidence for the MSFWBS: score structure, reliability, generalizability, convergent, and criterion-related evidence. Findings suggest that the MSFWBS (1) yields valid and reliable scores, and (2) works well in individualistic and economically developed countries, producing comparable scores. Implications for researchers and practitioners are discussed.

Impact of financial literacy, mental budgeting and self control on financial wellbeing: Mediating impact of investment decision making.

The topic of financial wellbeing is a current concern within the realm of personal and household finance. This study aims to examine the influence of cognitive factors, specifically financial literacy, mental budgeting, and self-control, on subjective financial wellbeing. While there exist multiple determinants of financial wellbeing, this research focuses on these particular cognitive factors. The present study aims to examine the mediating role of investment decision-making behavior in the association between cognitive factors and financial well-being. The study employed Partial Least Squares Structural Equation Modeling (PLS-SEM) to analyze the data collected from a sample of 449 Chinese university students, with the aim of assessing the empirical associations. The results indicate that financial literacy, mental budgeting, and self-control exert a favorable and noteworthy influence on an individual's financial well-being. The results indicate that individuals with a greater degree of financial literacy are more prone to achieving superior financial well-being. Moreover, individuals who practice mental budgeting, a technique that entails mentally classifying and monitoring their expenditures, demonstrate elevated levels of financial well-being. Likewise, the exercise of self-regulation is identified as a pivotal element that impacts an individual's financial wellbeing. The findings indicate that there is evidence to support the mediator, investment decision-making behavior. This mediator partially mediates the association between the independent variables, namely financial literacy, mental budgeting, and self-control, and financial well-being. The results suggest that individuals with elevated levels of financial literacy, proficient mental budgeting skills, and self-regulatory abilities are inclined towards demonstrating favorable investment decision-making conduct. Consequently, this contributes to their general financial welfare. In general, the study's theoretical implications augment the current knowledge repository, while its practical implications provide feasible perspectives for policymakers, financial institutions, and individuals to foster financial wellness and enhance financial results.

Sustaining Retirement during Lockdown: Annuitized Income and Older American’s Financial Well-Being before and during the COVID-19 Pandemic

The landscape of employer-sponsored retirement plans in the U.S. has changed dramatically during the past few decades as more and more private-sector employers have decided to freeze or terminate traditional pension plans. Defined contribution (DC) plans became the primary choice or the only choice for employees to participate in employer-sponsored retirement plans. In the next ten to twenty years, the income from pension plans will only count for a third of the total retirement income for GenXers when compared to their baby boomer counterparts. It is important for research to provide evidence on how the change in retirement income resources impacts retirees’ retirement security and financial wellness. Using Health and Retirement Study (HRS) data before and during the COVID-19 pandemic, this study examines the association between annuitized income and various measures of older Americans’ financial well-being over time, particularly during the pandemic. This study finds that receiving annuitized income has a statistically significant relationship with reduced subjective financial well-being for both measurements, while only one of the measures of objective well-being, having liquid assets greater than the median household income, has a statistically significant positive relationship with receiving annuitized income.

HOW DO SAVINGS AND PERSONAL BUDGETING MATTER ON FINANCIAL LITERACY AND WELL-BEING

Purpose – the well-being of individuals plays a vital role in fostering sustainable economic development. The differentiation between subjective and objective well-being in selected EU and selected non-EU countries, with a particular focus on financial literacy, as individuals’ assessments of their own well-being can significantly differ from objective economic indicators, emphasizing the subjective nature of well-being. The research objective is to investigate how savings and personal budgeting indicators affect both objective and subjective well-being and to examine the role of these indicators in promoting financial literacy. Research methodology – the research investigates the impact of savings and personal budgeting indicators on financial literacy (FLI), financial well-being (FWB), and gross domestic product at purchasing power parity per capita (GDP PPP per capita). We applied Pearson’s pairwise correlation between nine indicators of personal budgeting and savings and the method of principal components to identify the reasonable factors according to their statistical significance based on data from 22 countries included in the Organisation for Economic Cooperation and Development/International Network on Financial Education (OECD/INFE) survey data, Global Findex Database. The application of the Varimax procedure made it possible to identify factor groups of indicators. Findings – we identify two factors for the whole sample and a sample of selected EU-countries; for non-EU-countries were identified three factors. Our research reveals that subjective FWB across all countries and non-EU countries is under the significant influence of factor group 1 mainly represented by savings indicators, with no significance for EU countries. FLI also significantly depends on factor group 1 for the entire sample of countries and across EU and non-EU countries. GDP PPP per capita is under the significant influence of all factors both in the sample of countries and across EU and non-EU countries. Research limitations – FLI databases started to be gathered relatively recently and are not regularly updated. This can cause a situation when data for different countries are provided with time gaps. Moreover, due to the high cost involved, not all countries conduct such research, which hinders the creation of large datasets for more accurate country comparisons. Practical implications – the results of this study may have interest for policymakers since they focus on improvement of the financial literacy and FWB of individuals, that results in a higher level of financial stability. Originality/Value – this research is to address existing gaps in understanding of the interplay between subjective and objective FWB. Also, it proposes a novel approach that views savings as a factor that enhances financial literacy, in contrast to the conventional approach that considers savings as a consequence of improved FWB.

Are Financial Well-Being and Financial Stress the Same Construct? Insights from an Intensive Longitudinal Study

Since the 2008 economic crisis, research on financial well-being has grown exponentially. Most of the studies have investigated the predictors of financial well-being, but there is still no consensus on the conceptualization of financial well-being itself. As of yet, little is known about the relationship between subjective financial well-being and subjective financial stress. Some scholars believe those two constructs are two sides of the same coin, while others consider them to be two different phenomena. The current study aims to contribute to disentangling the construct of financial well-being from the construct of financial stress. We conducted an intensive longitudinal study, collecting data for 14 consecutive days from 158 emerging adults. Participants had to report their level of financial well-being and financial stress each evening. Findings suggest that the two constructs are not coincident for the following reasons: they exhibit low-to-moderate associations at both the within- and between-level and they were not similarly affected by the same predictors. Furthermore, we showed that subjective financial well-being and subjective financial stress fluctuate considerably from one day to the next. Further research is needed to determine the source of this daily variability.

Linking subjective financial well-being and compulsive buying behavior among college students: How Islamic financial literacy makes different

This study aims to enhance our understanding of the reciprocal association between subjective financial well-being and compulsive buying behavior while also considering the role of Islamic financial literacy as a boundary condition. The data for this research were collected in two phases from a sample of 266 students in Jakarta. The collected data were then analyzed using macro process version 4 to assess the proposed hypotheses. The study's findings confirm that subjective financial well-being and Islamic financial literacy negatively impact compulsive buying behavior. Moreover, the study reveals a subsequent influence of compulsive buying on future financial well-being, supporting a reciprocal relationship. Additionally, Islamic financial literacy plays a crucial role in mitigating the effect of financial well-being on compulsive buying behavior.
 Public interest statements 
 Technological developments have brought changes in consumer behavior and sometimes have a negative impact on compulsive buying behavior. This research helps mitigate the effects of subjective financial well-being on compulsive behavior and how the two influence each other. In addition, students need to be given an understanding of Islamic financial literacy to control their buying behavior.
 Article history
 Received: 6/12/2023 | Revised: 7/4/2023 | Accepted: 7/4/2023 | Online First: 7/5/2023

Deterioration of the subjective financial well-being during the coronavirus pandemic: a latent transition analysis

PurposeThe authors seek (1) to identify the profiles of subjective financial well-being (SFWB) of bank customers before and during the coronavirus disease 2019 (COVID-19) pandemic, (2) to analyze the transition to profiles of lower SFWB during the pandemic and (3) to identify the factors driving such transitions.Design/methodology/approachThe authors surveyed five countries during 2019 and 2020 to measure SFWB. The authors applied latent class analysis (LCA) to identify profiles of bank customers according to a mix of SFWB indicators in pre-pandemic times (Study 1). The authors validated the profiles during the pandemic and identified the SFWB dimensions that deteriorated during the crisis (Study 2). Finally, the authors applied latent transition analysis (LTA) to explore transitions to profiles of lower SFWB and identify the drivers.FindingsThe authors identified three profiles of customers in pre- and post-pandemic periods for four dimensions of SFWB: control over finances, capacity to absorb financial shocks, ability to track financial goals and financial freedom. Gender, age, trust in banks and bank-supporting policies were related to transitions across profiles of SFWB during the pandemic. These relationships are contingent upon contextual country-related variables.Research limitations/implicationsBanks and policymakers should reduce customers' exposure to the pandemic's long-lasting adverse effects on SFWB and should identify and control the multiplier role that contextual variables play.Originality/valueExtant literature has not fully identified the dimensions of SFWB that changed due to the COVID-19 pandemic. The authors narrow this gap by identifying three SFWB profiles of customers, analyzing the patterns of SFWB change and connecting these changes to individual, provider and contextual factors.

Financial well-being, family financial support and depression of older adults in China

PurposeThis study aims to examine the relationship between objective and subjective aspects of financial well-being, the role of family financial support and depression symptoms of Chinese older adults.Design/methodology/approachThis study used two waves (2015 and 2018) of the Harmonized China Health and Retirement Longitudinal Study. Two financial ratios: the expenditure-to-income ratio and the financial assets ratio, were used to measure the objective aspect of financial well-being. Perceived money management difficulty was employed to measure the subjective aspect of financial well-being. Depression symptoms were measured using the Center for Epidemiologic Studies Depression Scale (CES-D) score. Three analytical models, including an ordinary least squares (OLS) model, an OLS model controlling for lagged depression and a random effects model using panel data, were used to examine the relationships between the objective and subject aspects of financial well-being and depression.FindingsThe results from the three models showed consistent relationships: the expenditure-to-income ratio was a positive contributor, while the financial assets ratio was a negative contributor to depression of older adults in China. The robustness check using binary-coded financial ratio thresholds showed that reaching the suggested thresholds was negatively associated with depression. Perceived money management difficulty contributed positively to depression. The robustness check using the fixed effects model showed no significance of the two ratios, while perceived money management difficulty was positively associated with depression. The insignificance might be due to data limitation (limited waves or rare changes across waves).Originality/valueThe findings indicate that both objective and subjective financial well-being matters in relation to depression symptoms and, therefore, to the overall mental health of the Chinese elderly. Developments in public policies are needed to promote accessible financial services, assistance programs, mental health services and facilities for the older population in China.

Are credit scores and financial well-being associated with physical health?

ABSTRACT Consumer credit score has been used as an indicator of financial strain that could potentially impact health. Subjective financial well-being, or one’s feelings about one’s expectations, preferences, and satisfaction with their financial situation, is related to financial strain. This study examined whether subjective financial well-being mediates the association between credit score and self-reported physical health in a national representative sample. Using structural equation modeling (SEM), we test whether a mediating association exists between self-rated credit score and self-rated physical health. Results suggest that, after controlling for sociodemographic variables, those who reported higher credit scores have better health (β = 0.175, p < .001) and higher financial well-being (β = 0.469, p < .001), and those who reported higher financial well-being have better health (β = 0.265, p < .001). The mediation effect of financial well-being on the association between credit and physical health is also positive and statistically significant (β = 0.299, p < .001). Thus, subjective feelings about one’s financial situation would enhance the observed positive association between credit and health. Practice and policy implications are included.

Influence of intrapersonal conflict on women’s consumer behavior

The research aimed at testing hypotheses about the link between various types of internal conflict and women’s impulse purchases. The most detailed consideration is the value-semantic conflict as a phenomenon caused by the interaction of the most important personal structures. The author studied consumer values, subjective financial and personal well-being, as well as varieties of irrational consumer behavior as additional ones: conspicuous consumption and orientation towards materialism. The paper revealed the consistency between certain types of internal conflict of the individual and a certain type of impulse consumer behavior. The patterns found open a wide scope for further development of this problem by introducing additional personality constructs, expanding the sample, and using more accurate diagnostic instruments.

Assessing Financial Well-being of Undergraduate University Students during COVID-19 Pandemic

The COVID-19 pandemic poses financial challenges for students worldwide, especially for those in higher education where free and universal access is not guaranteed. Students in developed economies, a long-neglected group for pandemic studies, are not exceptions. The motivation of this study is to examine subjective financial well-being of undergraduate students during the COVID-19 pandemic. Accordingly, we conducted a self-administered survey composed of 31 questions that assesses students&amp;rsquo; demographic information and impact of COVID-19 on their financial status. The sample includes 655 students enrolled at the University of Toronto Mississauga during the academic year 2020-2021.The survey results show that most students are concerned about the impact of COVID-19 on the ability to meet overall financial obligations or essential needs. Using factor analysis, we further identified relevant matters of subject associated with this concern on subjective financial well-being: 1) concern on tuition costs and financial obligation; and 2) concern on living and traveling costs. The result clearly identifies the associations between university students&amp;rsquo; perceptions of financial well-being and its associated matters, and how these relations differ by students&amp;rsquo; demographic information. We conclude that educational leadership, local community, and the government should use their judgement to reduce students&amp;rsquo; financial distress by offering different types of financial supports with regards to student demographics.

Digital financial services usage and subjective financial well-being: evidence from low-income households in Malaysia

PurposeThe first objective of this study is to analyze whether financial behavior (FB), financial stress (FS), financial literacy (FINLIT) and the locus of control (LOC) influence subjective financial well-being (SFWB) among low-income households in Malaysia. The second objective is to investigate whether the use of digital financial services (DFS) moderates the influence of FB and FS, on SFWB.Design/methodology/approachMotivated by the literature on transformative service research (TRS), this study examines how the use of DFS impact SFWB among low-income households in Malaysia. Low-income households are chosen as they are more likely to be financially excluded and lack financial knowledge and skills. Using an interviewer-administered survey, trained enumerators collected data from 1,948 low-income households in Malaysia, selected using a two-stage sampling based on the National Household Sampling Frame obtained from the Department of Statistics Malaysia.FindingsResults reveal that SFWB is positively influenced by FB and the LOC, and is negatively impacted by FS and FINLIT. The evidence shows that the use of DFS counterintuitively weakened the strength of the relationship between FB and SFWB, but effectively reduced the adverse effect of FS on SFWB.Practical implicationsTo reverse the signs of relationship, financial services marketers need to identify the specific types of DFS that low-income households use in order to provide targeted marketing efforts and financial education to promote the use of DFS on a more holistic basis to increase financial well-being.Originality/valueThe findings of this study add to the body of knowledge deliberating on the opposing effects of technology on consumers' welfare and well-being. This study focuses on the lower-income stratum of Malaysian households as this group of the population is more likely to be financially excluded and have deficiencies in financial knowledge and skills. Findings of this study show that DFS use can actually diminish the positive impact of FB on SFWB while reducing the adverse effect of FS on SFWB.

An Empirical Investigation on Subjective Financial Well-Being and Life Satisfaction of Older Adults in Vietnam

This research examined factors predicting the financial well-being of older people and how financial well-being was associated with life satisfaction among older adults in Vietnam using a national survey. We found that income, assets, health status, and demographic factors were significantly associated with older adults’ financial well-being. The results also revealed that, for older adults, subjective financial well-being was positively associated with life satisfaction, but among the objective financial well-being indicators only the number of assets was directly related to life satisfaction. On the other hand, income might be indirectly related to life satisfaction through subjective financial well-being. The results were consistent across various measures of subjective financial well-being.

Understanding the Influence of Psychological and Behavioural Factors on Subjective Financial Well-being—An Indian Context

This study aims to understand some of the psychological and behavioural factors that drive subjective financial well-being in an Indian context. Family resource management model forms the foundation of the study with financial self-efficacy, propensity to plan and risk aversion as inputs; short-term and long-term financial behaviour as the throughput; and one’s subjective financial well-being as the output. Data was collected by administering a web-based standardized questionnaire on 520 financially active respondents. The hypothesized model was evaluated by structural equation modelling, and results revealed that while financial self-efficacy had a direct positive effect, propensity to plan and risk aversion had an indirect positive impact on financial well-being through one’s financial behaviour. Insights from this study can aid financial practitioners, educators and policy-makers to design intervention programmes to improve such personal traits to help their clients make better financial decisions and enjoy better outcomes.

Financial Well-being and Its Psychological Determinants— An Emerging Country Perspective

Financial well-being (FWB) is critical to subjective well-being—a crucial component in measuring social progress. This study explores the simultaneous influence of five psychological traits of financial self-efficacy, risk tolerance, a propensity to plan, materialism and the tendency for social comparison on FWB. The study is a cross-sectional causal investigation using a web-based survey. The survey was administered to individuals who were active in financial decision-making activities and selected using a combination of judgmental and snowball sampling. Structural equation modelling revealed a positive influence on financial self-efficacy and propensity to plan and the negative impact of risk-tolerance, materialism and a tendency for social comparison on subjective FWB. Financial institutions and educators may utilize the study results for improving characteristics that help their clients make better financial decisions and enjoy higher levels of financial and subjective well-being. The study makes two contributions to the existing literature on the subject. First, the study simultaneously investigates the effect of the five psychological traits on subjective FWB—not attempted hitherto. Additionally, the study provides an Indian perspective on the subject, an emerging country covering one-sixth of the world population.