Americans’ happiness factor when it comes to their finances is up, according to a new study by the American Institute of CPAs (AICP), finding that peoples personal financial satisfaction levels are the highest they have been since they started releasing their Personal Financial Satisfaction Index (PFSi), 24 years ago.
They suggest that the dip in unemployment and the upswing in the stock market helped fuel people’s satisfaction levels during the Q4 2017 PFSi, and overcome increasing inflation. This newest upswing is part of a seven-quarter run, in which the Personal Financial Satisfaction Index (PFSi) showed consistent gains.
“Americans should continue to reassess their personal risk tolerance, and work with their financial advisers to determine how best to approach investment decisions in 2018,” said David Cherill, CPA, member of the AICPA Personal Financial Planning Executive Committee.
“Many of my clients have more confidence than ever in the market, while others are scared to death and have already taken considerable gains off the table. The potential for volatility remains, but this market has thus far been immune to many of the factors that have resulted in large swings in the past,” he said.
Financial pleasure or pain
How do they come up with the PFSi? They actually subtract the Personal Financial Pleasure Index from the Personal Financial Pain Index – and this last quarter pleasure trumped pain.
During the Q4 2017, PFSi was at 26.9, representing a 1.2-point upswing from the quarter before, with this upswing attributed to a 1.3 point gain in the Personal Financial Pleasure Index, outdoing the rather minimal 0.1 point growth in the Personal Financial Pain Index.
That said the Personal Financial Pleasure Index has gone up for four consecutive quarters – having set a record in each quarter. It is now at 69.2, with its 1.3 point increase indicating steady growth.
That said the Personal Financial Pain Index came in at 42.3, which was 12.1% lower than the year before, yet just 0.2% more than the third quarter. They suggest that this minor upswing in the Pain Index was due to 14.1% growth in the Inflation Index but it had virtually no effect on peoples satisfaction levels.
Taxes equal pain
As you may have already guessed the index found that personal taxes was a factor in peoples level of financial pain – and this has occurred steadily for the past seventh quarters. There was a 1.5% upswing from last year, while there was a 0.9 decrease for the quarter before.
The data in this index did not take the new tax bill into account. “The impact of the new tax law on individuals remains to be seen. Americans should monitor their tax situation closely this year as the withholding tables are changing and could result in under withholding of taxes,” said Lisa Featherngill, CPA/PFS, member of the AICPA Personal Financial Planning Executive Committee.
“I suggest meeting with your CPA financial planner in the 2nd quarter and 4th quarter of 2018 to ensure your financial plan is maximizing the opportunities under the new law,” she added.