Financial satisfaction measure hits record for 5th straight quarter

By Samiha Khanna

The AICPA’s Personal Financial Satisfaction Index (PFSi) reached the highest point in its 25-year history at a value of 32 in the third quarter of 2018, a 3.1-point (10.7%) increase from the previous quarter, according to results released on Thursday.

The PFSi’s strong performance was due in large part to gains in the stock market, record job openings in August, a slight decrease in loan delinquencies, and a year-over-year drop in underemployment.

The PFSi is calculated as the difference between two subindexes: the Personal Financial Pleasure Index and the Personal Financial Pain Index. The Personal Financial Pleasure Index comprises four equally weighted components: home equity; job openings; the PFS 750, a proprietary stock index; and the CPA Outlook Index, a measure of CPA executives’ views on the state of the economy. The Personal Financial Pain Index also consists of four equally weighted components: inflation, loan delinquencies, underemployment, and personal taxes.

The Personal Financial Pleasure Index rose 2 points (2.7%) from the previous quarter, largely due to a 5.3-point (6.0%) bump in the PFS 750 Market Index. At 93 points, the PFS 750 Market Index also set an all-time record and made up almost one-third (31.5%) of the total value of the Personal Financial Pleasure Index.

Growth may leave many Americans with confidence in their investments, but markets can be volatile. It’s important to plan for portfolios that will endure, said Leonard Wright, CPA/PFS, a member of the AICPA Personal Financial Specialist Credential Committee.

“Investors should double-check the impact of risk on their portfolios,” he said. “Ask yourself, ‘Have I rebalanced recently? Have I checked in on my current risk tolerance?’ Properly constructed investment portfolios based on your risk tolerance keep financial instability within reason.”

The number of job openings per capita was the second-largest contributor to Americans’ personal financial pleasure, increasing 1.1 points (2.1%) from the previous quarter. According to the U.S. Department of Labor’s Bureau of Labor Statistics, there were more than 7.14 million job openings in August, which exceeded that month’s 6.23 million unemployed Americans.

Over the past year, industries seeing the most job growth are leisure and hospitality, trade, transportation, warehousing, and utilities. Although some of these jobs may be entry-level or lower-paying, availability means workers have more choices, and employers have to be more competitive to win qualified hires.

“While there will always be lower-paying jobs to provide an opportunity to enter the job market, the good news is that almost all jobs are experiencing pressure to rise,” Wright said. He noted that, for instance, Disney has increased its signing bonus for housekeepers this year to $1,250, and that employers in many other industries, including retail and fast food, are paying bonuses.

The Personal Financial Pain Index dropped by 1.1 points (2.6%) from the previous quarter. This included a 2.7-point (7.2%) drop in loan delinquencies from the previous quarter. However, natural disasters such as hurricanes Florence and Michael are expected to cause an uptick in loan delinquencies in the coming year, even with lenders temporarily suspending actions against homeowners affected by the storms.

Personal taxes held steady from last quarter but declined 4.7 points (9.1%) from the third quarter of 2017. Underemployment dropped only slightly from the previous quarter but has declined 6.4 points (16.3%) since the third quarter of last year.

The PFSi’s blended inflation measure was 2.2% for the third quarter, down slightly from the previous quarter, but up from its 1.5% level a year ago and over the Federal Reserve’s target of 2%. Inflation is an area for consumers to watch as the Federal Reserve is expected to raise interest rates over the coming year, experts said.

“Inflation is a risk that most consumers forget about,” said Brooke Salvini, CPA/PFS, member of the AICPA Personal Financial Planning Executive Committee. “But over 10 years, a 3% rate of inflation reduces the purchasing power of a dollar by 26%, over 20 years by 45%.”

“This is why it is so important — absolutely necessary — to invest for growth with at least a portion of retirement savings,” she said. “The money intended for one’s elder years has to be growing to outpace the hidden risk of inflation.”

More information about the PFSi is available at

Samiha Khanna is a freelance writer based in North Carolina. To comment on this article or to suggest an idea for another article, contact Ken Tysiac, the JofA’s editorial director, at

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