Financial Ratios and Perceived Household Financial Satisfaction

Abstract

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