The focus in financial decision-making has shifted from normative to subjective measures of financial wellness. While subjective measures bring the voice of the consumer into the study of financial well-being, there are still objective financial realities to consider. We provide a framework for thinking of financial vulnerability as the risk of financial hardship (i.e., the experience of physical and/or emotional distress related to his or her ability to maintain a standard of living). In this view, financial vulnerability is not a condition but the risk (or probability) of experiencing a negative financial condition. Our study seeks to offer a means of providing a tangible score of one’s vulnerability to financial hardship while illuminating the factors influencing one’s vulnerability. Using the 2016 CFPB National Financial Well-Being Survey, we find that a combination of demographics, behaviors, and social-psychological indicators offers the most comprehensive picture of an individual’s vulnerability to financial hardship.
Author(s): Dee Warmath, Genevieve Elizabeth O’Connor, Casey E. Newmeyer, Nancy Wong
