Three-Dimensional Financial Well-being: Longitudinal Evidence from Subjective Perceptions and Objective Financial Data

Financial well-being (FWB) is fundamental for mental health and life satisfaction, but there is no consensus on how to define, measure or affect it. We contribute to this in our multi-stage mixed-methods study by developing a three-dimensional, human-centric measure of FWB, comprising of security, freedom, and pleasure, testing the scale in two languages, and conducting a longitudinal FWB study among bank customers. We find that security is fundamental, and the most significant gap lies in the freedom to change course in life without worrying about money. We are the first to observe a substantial gender gap while controlling for objective financial data - men report higher FWB than women while holding equivalent assets or liabilities. We also find that assets play a more evident role in FWB assessment than liabilities. Importantly, the predictors of the FWB elements partly differ, highlighting the multidimensional and multifaceted nature of FWB.