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

Abstract

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.