Americans’ personal financial satisfaction dips in fourth quarter

By Samiha Khanna

In the last quarter of 2018, the AICPA’s Personal Financial Satisfaction Index (PFSi) took a downward turn for the first time in two years. The PFSi dropped by 1.4 points (4.4%), largely due to a downturn in the stock market. However, the PFSi is still 4.6 points (17.4%) higher than it was this time last year.

The PFSi is calculated as the difference between two subindexes: the Personal Financial Pleasure Index and the Personal Financial Pain Index. In the fourth quarter of 2018, the Pleasure Index dropped by 4.1 points (5.5%), while the Pain Index declined by 2.6 points (6.3%), leaving the overall PFSi in positive territory.

The decline in the Pleasure Index was driven by a 13.4-point (14.5%) drop in the PFS 750 Market Index, a proprietary AICPA stock index based on the returns of the 750 largest companies trading on the U.S. market. Much of the drop can be attributed to losses in energy and industrial shares and, notably, declines in large-cap stocks, said Lisa Featherngill, CPA/PFS, a member of the AICPA Personal Financial Planning Executive Committee.

“A 13.5%, fourth-quarter decrease in large-cap domestic equities probably feels like a significant impact on long-term financial plans,” Featherngill said. “The key is to use this opportunity to rebalance the portfolio to the target asset allocation and stay with the long-term plan. So far, 2019 is proving to be positive for stocks. So, stay focused on the long term.”

Another component of the Pleasure Index, the CPA Outlook Index, a measure of CPA executives’ impressions of their employers’ financial picture, also dropped by 2.8 points (5.1%) in the fourth quarter. Job openings saw a small decrease (0.2 points or 0.3%) while home equity rose by 0.2 points (0.2%).

The decline in the Pain Index in the fourth quarter was largely due to an 8.9-point (17%) drop in inflation, the most volatile factor in the PFSi. Loan delinquencies decreased 2.4 points (6.9%) from the previous quarter while underemployment ticked up 1.1 points (3.2%). Taxes dropped a slight 0.3 points (0.6%).

American workers will soon file their first income tax returns under the law known as the Tax Cuts and Jobs Act, P.L. 115-97, and those expecting refunds should plan now on how to use that cash strategically, said Mark Astrinos, CPA/PFS, a member of the AICPA PFS Credential Committee. There’s no one-size-fits-all strategy for this, he added.

“Since everyone’s personal financial situation is different, I typically recommend that people think through and prioritize a few things. One of them is to ensure that they have an emergency cash reserve for a rainy day,” he said. Paying off high-interest debt before other debt is also a good strategy when you come into extra cash, he said.

“Regardless, the decision of what to do with your money should be strategic and part of an overall plan, irrespective of your emotions or the current economic environment,” Astrinos said.

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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