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    National Norming Data for Financial Well-Being and Financial ... National Norming Data for Financial Well-Being and Financial ... Presentation Transcript

    • National Norming Data for Financial Well-Being and Financial Distress
      • Benoit Sorhaindo, InCharge Institute of America
      • Jinhee Kim, University of Maryland
      • Barbara O’Neill, Rutgers University
      • Aimee D. Prawitz, Northern Illinois University
      • E. Thomas Garman, Virginia Tech University
      • Presented on November 17, 2005 in Scottsdale, Arizona the
      • 22nd Annual Conference of the
      • Association for Financial Counseling and Planning Education
    • The leaders at the InCharge Education Foundation believe that anyone’s efforts to improve personal financial well-being and/or reduce financial distress have to be  validly and reliability measured before attempting to pronounce that the information, education, counseling, advice, or other intervention "worked." The IFDFW has been developed to be one such measure.
    • Organization of Presentation
      • Introduction/Explanation
      • Need for a financial distress/
        • f inancial well-being scale
      • Purposes of the study
      • Literature review
      • Methodology
      • Results
      • Conclusions
      • National norms
      • Closing observations
      • Two IFDFW Subscales
      • Suggested uses of the IFDFW scale
    • Preface
      • Ex ante
        • Need exists for FDFW scale
        • Nearly 20 years in the making
        • Built on several conceptual models
        • Derived from 58 descriptive concepts
        • Three-phase national Delphi study of personal finance experts’ rankings
        • 20+ published academic studies
        • Six national InCharge research studies including three national norming data collections
    • Preface (cont’d)
      • Ex post
      • Each question met 12 validity and reliability criteria
      • Scale selection and each anchor term met 5 criteria
      • Strong statistical findings (0.956 Cronbach Alpha)
      • IFDFW scale has predictive validity for six variables including health, job outcomes, and family relationships
    • Need for a Financial Distress/ Financial Well-Being Scale
      • Key deterrent to psychological well-being is economic distress
      • Growing interest in financial education in USA to improve knowledge and behaviors
      • Limited evidence, often anecdotal, shows that some interventions decrease financial distress and improve financial well-being
      • Accurate and reliable subjective measures of financial distress and financial well-being do not exist
      • If measure existed, levels can be assessed before and after purposeful interventions
    • Purposes of the Study
      • To create an InCharge Financial Distress/Financial Well-Being scale
      • To report national norms of financial distress/financial well-being using the IFDFW
    • Literature Review
      • Conceptual models of overall well-being
      • Overall well-being and personal finances
      • Financial strain
      • Conceptual models of financial well-being
      • Financial well-being and financial behaviors
      • Objective measures of financial well-being
      • Subjective measures of financial well-being
      • Financial distress
    • Literature Review
      • Financial distress and health
      • Financial distress and job outcomes
      • Levels of financial satisfaction, dissatisfaction and happiness
      • Levels of financial distress and over-indebtedness
      • Financial distress and personal bankruptcy
      • Financial distress and credit counseling
    • Methodology
      • History of scale development (Cantril – NIFPEE –InCharge)
      • Six data collections
        • 2000 Panel Study of Financially Distressed
        • 2001 Follow-up Study of Financially Distressed 18 Months Later
        • 2003 Large Panel Study of Financially Distressed
        • 2004 Omnibus Telephone Survey of the General Population
        • 2004 Mail Survey of the General Population
        • 2004 Mail Survey of Initially Financially Distressed Adults
      • Beta Version of IFDFW Scale
      • More than a dozen steps to develop the IFDFW
    • Methodology Review of Over 10 Conceptual Models of Overall Well-being/Quality of Life
      • Andrews & Withey
      • Andrews & Withey
      • Campbell
      • Campbell, Converse & Rodgers
      • Cantril
      • Davis
      • Diener
      • Festiger
      • Frisch, Cornell, Villanueva, & Retzlaff
      • Frisch
      • Olson, McCubbin, Barnes, Larsen, Muxen, & Wilson
    • Methodology Review of Over 30 Conceptual Frameworks and Related Academic Research Studies
      • Beutler & Mason
      • Davis & Helmick
      • Davis & Schumm
      • Deacon & Firebaugh
      • Festinger
      • Fitzsimmons
      • Hira, Bauer & Hafstrom
      • Foster & Metsen
      • Garman
      • Godwin & Carroll
      • Godwin
      • Hafstrom
      • Hafstrom & Dunsing
      • Hira
      • Jeries & Allen
      • Joo
      • Kim
      • Lawrence, Carter & Verma
      • Lown & Cook
      • Porter
      • Porter & Garman
      • Prochaska-Cue
      • Shinn
      • Strumpel
      • Wilhelm, Iams & Rudd
      • Varcoe & Fridrich,
      • Walson & Fitzsimmons
      • Williams
      • Williams
      • Williams
      • Winter & Morris
    • Methodology Review of Over 10 General Population Surveys on Financial Stress/Financial Well-Being
      • Principal Financial (2004)
      • American Express (2004)
      • MetLife (2004)
      • CIGNA (2004)
      • Roper (2003)
      • Caravan Saray (2004)
      • Gallup (2004)
      • ComPsych (2004)
      • Putnam Investments (2004)
      • Thrivent (2004)
      • AARP (2004)
    • Methodology List Relevant Personal Finance Concepts, Attributes and Objects
      • Over 50 concepts were judged relevant to aspects, conditions, or dimensions of personal financial distress and financial well-being
      • Solicited suggestions from more than 50 personal finance college professors and more than 40 personal finance experts in business
    • Methodology List Evolved to 58 Personal Finance Concepts that Describe Aspects of FDFW
      • Concepts are illustrations of certain salient life experiences, behaviors, concerns, perceptions, and personal judgments regarding the common personal finance topics of money, credit, and economic resources
    • Methodology Judge Each Concept Against Three Criteria
      • Concept and its anchor terms describe distinct aspects of FDFW
      • Likelihood that concept would occur in a substantive proportion of the population
      • Concept would occur with adults whether or not they utilized credit cards and installment loans/leases
    • Methodology 20 Concepts (1-10 of 20 Alphabetized Below)
      • Ability to handle $1,000 financial emergency
      • Ability to manage money
      • Assessment of quality of personal financial behaviors
      • Availability of savings to pay for 3 months’ living expenses
      • Availability of money to go out for entertainment
      • Availability of money to pay for minor emergency
      • Confidence about a plan to reach financial goals
      • Confidence about long-term financial future
      • Confidence about being on-track for a financially successful retirement
      • Feelings about level of financial stress today
    • Methodology 20 Concepts (11-20 of 20 Alphabetized Below)
      • Feelings about one’s current financial condition
      • How good or bad finances are likely to be a year from now
      • How well off financially
      • Knowledge of personal finances
      • Living today on a paycheck-to-paycheck basis
      • Satisfaction with present financial condition
      • Secure about one’s personal finances for retirement
      • Spend some time at work on personal financial concerns
      • Stressed about one’s personal finances in general
      • Worry about being able to meet normal monthly living expenses
    • Methodology Identify National Panel of Personal Finance Experts
      • Of the 800+ members in the Association for Financial Counseling and Planning Education, 110 AFCPE members were initially identified who were long-term members, served on boards of directors or committees, made research or best practices presentations at conferences, written educational materials in personal finance, and/or otherwise known as leaders in personal finance
      • Criteria reapplied and list was pared to 52 personal finance experts, and 45 participated
    • Methodology Describe National Panel of Personal Finance Experts (Overlapping Characteristics of 45 Respondents)
        • 31 women and 14 men
        • 30 with doctoral degrees
        • 10 extension specialists and agents
        • 16 academic teaching professors
        • 2 with foundations
        • 5 retirement specialists
        • 7 military financial counselors and financial aid specialists
        • 6 from credit counseling
        • 8 for-profit businesspersons
        • 3 retired persons
    • Methodology Presentation of Concepts to Experts in 3-Phase Delphi Study (95+% continuous participation in all phases)
      • Concepts presented solely as concepts, not in a question format
      • No scales or anchor terms were presented
      • Experts ranked concepts as those deemed important for use in a scale
    • Methodology Top-10 Rankings of the Third Phase of Delphi Study (In Descending Order; “1” is Highest Rank)
      • Ability to handle $1,000 financial emergency
      • Ability to manage money
      • Availability of money to pay for minor emergency
      • Feelings about level of financial stress today
      • Feelings about one’s current financial condition
      • Knowledge of personal finances
      • Living today on a paycheck-to-paycheck basis
      • Satisfaction with present financial condition
      • Stressed about one’s personal finances in general
      • Worry about being able to meet normal monthly living expenses
    • Methodology Review and Apply Criteria for Scaling and Anchor Terms
      • Scale selection criteria: Internally consistent, obtain intensity or strong feelings toward item, provide clear opposing contrasts, increase range of scores to more faithfully reflect individual differences in the attribute
      • Anchor terms on 10-point scales: Four terms or descriptors placed below the numbers “1,” “10,” “4,” and “7” below a 10-point line; no words under center numbers “5” and “6”
      • Content and construct validity: Enhanced by administration to multiple nationally representative samples of adults as well as multiple samples of financially distressed consumers; review of research; surveys of experts; attention to clarity, readability, appearance, and question sequencing
    • Methodology Decide on Items for IFDFW Scale
        • Review six questions from Beta version using data from 2004 Mail Survey of the General Population (N=1,300; 65% return rate on sample nationally representative population of 2,000)
        • Factor analysis, Cronbach Alpha, scree plot, and principal component statistical analyses were promising
    • Methodology Decide on Items for IFDFW Scale
        • Review results again on clarity, comprehension, and content validity from three focus groups
        • Review the questions associated with the top-10 Delphi rankings of personal finance experts using data from 1,300 respondents in the 2004 Mail Survey of the General Population
        • Factor analysis, Cronbach Alpha, scree plot, and principal component statistical analyses were quite promising, yielding a single factor and a very high Cronbach Alpha
    • Methodology Decide on Items for IFDFW Scale
        • Each of the remaining 17 concepts were considered as potential contributors
        • Reapplied the 12-item validity and reliability criteria established for IFDFW scale questions
        • Three Delphi ranked concepts deleted because they were lowest three ranked in that study and each was redundant with other concept/questions
        • The deletions slightly reduced the final 8-question IFDFW Cronbach Alpha to a still quite robust 0.956 and a single factor
    • Methodology Decide on Items 3 Deletions From Delphi Rankings (“1” is Highest Rank)
      • Worry about being able……………. 1.47
      • Paycheck-to-paycheck basis……… 2.24
      • Feelings financial condition..……… 3.06
      • Financial stressed general…………. 3.23
      • Financial stress today……………….. 3.27
      • Satisfaction financial condition…… 3.38
      • $1,000 financial emergency………. 4.00
      • Money for minor emergency……… 4.18
      • Personal finance knowledge………. 4.27
      • Manage money………………………… 4.62
    • Methodology Decide on Items 1 Addition to IFDFW
        • 8. How often does this happen to you? You want to go out to eat, go to a movie or do something else and don’t because you can’t afford to?
    • Methodology Correlations of the 8 Questions on IFDFW © (General Population)
    • Methodology Factor Analysis (General Population)
    • Methodology Component Matrix on the 8 Questions of the IFDFW (General Population)
    • Preliminary Conclusions
      • The InCharge Financial Distress/Financial Well-Being scale is a valid and reliable measure
      • The 8-question self-report IFDFW scale subjectively measures a multi-dimensional construct of financial distress/financial well-being by assessing some combination of the variables of financial well-being, financial distress, financial strain, and financial satisfaction
    • National Norms
      • The following several slides present selected demographic information about the general population and basic norms for the IFDFW
      • The data was collected in summer 2004 from two national samples
    • National Norms: General Population (Mean=5.7; SD=2.4) Source: InCharge Education Foundation, National Norms on InCharge Financial Distress/Well-Being Scale for General Adult Population. 1 Means “Overwhelming Financial Distress/Worst Financial Well-Being”; 10 Means “No Financial Distress/Excellent Financial Well-Being” (1-4: 30%) (7-10: 42%)
    • National Norms: General Population (1 Means “Overwhelming Financial Distress/Worst Financial Well-Being”; 10 Means “No Financial Distress/Excellent Financial Well-Being”)
        • General population
        • Mean= 5.7 ; SD=2.4
        • Employed population
        • Mean= 5.7 ; SD=2.4
        • Financially distressed population
        • Mean= 3.4 ; SD=1.6
    • National Norms: Scores for Individual IFDFW Scale Questions General Population Versus Financially Distressed Population 3.4 5.7 Scale average       2.3 5.6 Q19: How frequently do you find yourself just getting by ... 3.4 6.3 Q18: How often do want to go out to eat, go to a movie or... 2.6 5.9 Q8: How confident are you that you could find the money t... 4.2 5.9 Q6: How stressed do you feel about your personal finances... 4.2 5.9 Q5: What do you feel is the level of your financial stres... 3.3 5.7 Q4: How often do you worry about being able to meet norma... 3.4 5.2 Q3: How do you feel about your current financial situation? 3.9 5.3 Q1: How satisfied are you with your present financial sit... Debt Dist GenPop
    • Two IFDFW Subscales: “InCharge Financial Distress Scale” and “InCharge Financial Well-Being Scale”
      • Financial Distress (4 questions)
        • Mean: 5.65
        • Standard Deviation: 2.23
        • Cronbach Alpha:
      • Financial Well-Being (4 questions)
        • Mean: 5.80
        • Standard Deviation: 2.76
        • Cronbach Alpha:
      0.95 0.91
    • National Norms: Employment General Population
    • National Norms: Household Income General Population
    • National Norms: Education General Population
    • National Norms: Gender General Population
    • National Norms: Marital Status General Population
    • Monitoring US Personal Financial Wellness
      • The next several slides present the results of the ICEF quarterly survey of the national population to measure financial distress/financial wellness.
      • In addition to the 2004 results measurements for the first three quarters of 2005 are shown.
    • Monitoring US Personal Financial Wellness
    • Monitoring US Personal Financial Wellness
    • Monitoring US Personal Financial Wellness
    • Closing Observations
      • The 8-question IFDFW ostensibly measures the single construct of financial distress/financial well-being
      • The IFDFW, in effect, assesses financial health
      • Four questions aim to obtain a sense of one’s present state of financial well-being
      • Four questions aim to obtain a sense of one’s reaction to his or her present state of financial well-being
      • Average financial wellness of US consumers increased for the period considered: 2004/05
    • Suggested Uses of the IFDFW Scale and Norms
      • Explain perceived financial distress and financial well-being
      • Track changes, advances, and progress that individuals, families, and the general population make in their financial condition over time
      • Compare IFDFW scores against the InCharge norms for the general population, employed population, and financially distressed population
      • Create IFDFW norms for population segments
      • Measure levels of severity of FDFW
      • Increase understanding of consumers who are seriously financially distressed and have very low financial well-being
    • Suggested Uses of the IFDFW Scale and Norms
      • Screen large groups of people to determine if they are seriously financially distressed and have very low financial well-being
      • Determine the educational needs of individuals and groups
      • Identify and/or predict which consumers may need various types of appropriately targeted assistance, interventions and referrals (e.g., mental health counseling, employee assistance program counseling, marriage counseling, pastoral counseling, credit counseling, debt consolidation, bankruptcy, financial planning)
    • Suggested Uses of the IFDFW Scale and Norms
      • Compare treatments designed to reduce financial distress and improve financial well-being
      • Compare measures of subjective and objective FDFW
      • Provide insights into objective measures of FDFW
      • Predict which consumers are likely to report poor health, poor family relationships, and poor job outcomes
      • Assess productivity benefits to employers for employees who improve their FDFW
    • Suggested Uses of the IFDFW Scale and Norms
      • Compare means and standard deviations of findings with results of other studies
      • Allow more generalizations about probabilistic relationships and other variables
      • Formulate and test hypotheses
      • Test causality in longitudinal research
    • Contact Information
      • Benoit Sorhaindo, Director of Research, InCharge Education Foundation, Inc., 2101 Park Center Drive, Suite 310, Orlando, FL 32835; Tele: 407-532-5704. Fax: 407-532-5750
      • Email: bsorhain@incharge.org
      • Web: www.InCharge.org
      • E. Thomas Garman, Author, Researcher and Advisor; Fellow and Professor Emeritus, Virginia Tech University, 8044 Rural Retreat Court, Orlando, FL 32819; Tele/Fax: 407-363-9048 Email:tgarman@bellsouth.net
      • Web: www.EThomasGarman.net