Personal financial satisfaction hits record high - what’s in it for me?
Let’s start with some background. The PFSi is a quarterly economic indicator that measures the financial standing of the average American. It’s calculated as the difference between two sub-indexes: The Personal Financial Pleasure Index, which measures the growth of assets and opportunities, and the Personal Financial Pain Index, which calculates the loss of assets and opportunities. Most recently, the Pleasure Index (68.1) greatly outweighed the Pain Index (42.1), bringing the PFSi to a positive reading of 25.9, the highest reading since 1994.
Jonathan Lynch: What do you think about the PFSi reaching this record high?
Michael Eisenberg: It’s great for Americans. The stock market is in its second longest bull market in history, overall job openings are setting records and inflation remains favorably low. While we can all benefit from the current environment, we need to remember that the economy is cyclical, so what goes up is going to come down. Don’t let current satisfaction steer you away from long-term goals. Staying aware and positioning your financial plan appropriately can help safeguard your finances for when the economy is less prosperous.
JL: What financial opportunities and decisions should Americans consider?
ME: This is a perfect time to analyze your cash flow. Calculate how much money you’re bringing in after taxes and how much you have left after covering your monthly bills. If you have extra cash, consider increasing your savings. This may be a good time to build up that emergency fund. If your financial situation allows it, put some money aside to treat yourself, too. Whatever you do, keep in mind how your decision impacts your financial plan.
JL: What’s your advice for people who are still feeling the effects of the 2008 recession?
ME: It’s important to not let your current financial situation get you down. Start small. If you pay all your bills, be proud. If you're taking steps to fund your retirement, give yourself a pat on the back. Think logically and reasonably – don’t dwell on something that you have little or no control over. Instead, choose to focus on what you can control and create a plan that puts you on the path towards your goals.
JL: What do you think will happen in the months ahead?
ME: It’s tough to predict the future. Based on previous trends, it’s likely that the regions affected by the recent hurricanes, floods and wildfires will see a negative impact on the housing market and a significant increase in loan delinquencies. Those who weren’t affected should take this opportunity to prepare in case they ever face a similar situation. The AICPA’s Disaster and Financial Planning: A Guide for Preparedness and Recovery is a great resource. Remember, if you’re having trouble navigating your financial situation, consider meeting with a CPA financial planner.
Jon Lynch, Manager, Public Relations, Association of International Certified Professional Accountants