We consider the link between individual financial profiles over time and well-being, as measured by life satisfaction. In particular, we look at annual self-reported financial worsening and improvement information for more than 25,000 individuals in Australian panel data from 2002 to 2017. We first find that satisfaction falls (rises) with a contemporaneous major financial worsening (improvement), with the largest correlation seen to be with financial worsening. Second, the experience of these financial events in the past continues to be linked to current well-being. Last, only the order of financial-improvement spells relates to well-being: a given number of past years where finances deteriorated has the same association with current well-being whether the deterioration occurred in one continuous spell or was interrupted. We show that these associations are heterogeneous over the distribution of well-being.

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1 July 2021

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Scandinavian Journal of Economics 123(3) , pp.910-939, 2021

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DOI: 10.1111/sjoe.12426

https://onlinelibrary.wiley.com/doi/10.1111/sjoe.12426

This Journal article is published under the centre's Community Wellbeing programme.