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

Abstract

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.