Toward a new conceptualization of financial well‐being

• Published date: 01 May 2022
• Author: Mandeep Mahendru,Gagan Deep Sharma,Marta Hawkins
• Date: 01 May 2022
• DOI: http://doi.org/10.1002/pa.2505

ACADEMIC PAPER

Toward a new conceptualization of financial well-being

Mandeep Mahendru

1,2

| Gagan Deep Sharma

3

| Marta Hawkins

4

1

State Bank Institute of Leadership, Kolkata,

India

2

State Bank Institute of Credit and Risk

Management, Gurugram, India

3

University School of Management Studies,

Guru Gobind Singh Indraprastha University,

New Delhi, India

4

In-Light-of, London, UK

Correspondence

*Gagan Deep Sharma, University School of

Management Studies, Guru Gobind Singh

Indraprastha University, New Delhi, India.

Email: angrishgagan@gmail.com

Research on financial well-being is still in its nascent stage, despite being an impor-

tant topic in consumer research. Research on the antecedents of financial well-being

is even more limited. Using in-depth interviews with consumers and practitioners,

and expert discussions, this article conceptualizes the construct of financial well-

being from underdeveloped countries' perspective. We conceive financial well-being

as a confluence of four situations—namely, meeting present and future financial com-

mitments; feeling of financial security; freedom of choice; and improved quality of

life. Our findings reveal that the objective and subjective financial measures are criti-

cal predictors of consumers' financial well-being. Financial behavior, which is caused

by antecedents such as financial knowledge, personality traits, and mindful finance,

intervenes this relationship. Based on this analysis, we propose five propositions con-

cerning antecedent-based interventions for future scholarship in the field. The paper

suggests a theoretical framework illustrating behavioral interventions in a given

socio-economic environment to achieve financial well-being. Our results pave the

way for the advancement of the theory in financial-well being and its antecedents in

different socio-economic environments. The managerial contribution of this

study lies in informing the marketers to contextualize their strategies to the financial

well-being. We also inform the macroeconomic policymakers to design behavioral

interventions to improve the financial well-being.

1|INTRODUCTION

Financial well-being of the individuals continues to attract multi-

disciplinary interest in recent times. Governments and policymakers

use financial well-being to measure the success of economic prosper-

ity and to plan future policy interventions. Corporations use financial

well-being when making decisions regarding new products, market

segmentation, and new market entries. Financial institutions condition

their lending policies in accordance with the financial well-being of

their consumers. Consumers are interested in improving their financial

well-being in order to attain this eligibility. This multifaceted applica-

tion renders consumer financial well-being highly relevant for theo-

rists and policymakers. To inform policymakers, corporations, and

consumers, the research community has been approaching financial

well-being by (a) highlighting the objective and subjective measures of

financial well-being (Delafrooz & Paim, 2011, Consumer Financial Pro-

tection Bureau, 2015a; Kempson, Finney, & Poppe, 2017),

(b) emphasizing the relevance of financial educati on and financial

behavior in financial wel l-being (Binti Azmi & Ramak rishnan, 2018;

Grable & Joo, 2006), and (c) conf orming disparity in fin ancial well-

being across different soci o-economic environme nts (Kempson

et al., 2017). Some studies have hig hlighted the characteri stics of

financial well-being, while others have atte mpted to identify its ante-

cedents. In general, the e xisting conceptualiza tions of the term tend

to include a single stratum of factors, rather than an inter-strata

approach. We propose an or ganic conceptualizat ion of financial

well-being, which is nov el in more than one way. We exp lore the

antecedents of financi al well-being, such as fi nancial knowledge,

objective and subjective fi nancial situation, person ality traits, but in

addition to the commonly e stablished drivers, su ch as objective and

subjective situatio n, we identify three variables (financi al knowledge,

personality traits, a nd mindful finance), whi ch mediate the relation-

ship between objective and su bjective situation, an d financial

behavior.

Received: 17 August 2020 Revised: 13 September 2020 Accepted: 15 September 2020

DOI: 10.1002/pa.2505

J Public Affairs. 2022;22:e2505. wileyonlinelibrary.com/journal/pa © 2020 John Wiley & Sons Ltd 1of15

https://doi.org/10.1002/pa.2505