Financial distress/financial well-being: do length of time spent in a debt management program and changes in debt burden and financial stressor events make a difference?
The study investigated whether reduction in credit card debt Credit card debt is an example of unsecured consumer debt, accessed through ISO 7810 plastic credit cards.
Debt results when a client of a credit card company purchases an item or service through the card system. and financial stressor events as well as longer time in a debt management program (DMP DMP Dossier Médical Personnel (France)
DMP Debt Management Plan
DMP Debt Management Program
DMP Digital Media Project
DMP Dot Matrix Printer
DMP Designated Mailer Protocol
DMP Dynamic Multi-Pathing ) made a difference in the financial distress/financial well-being of 828 credit counseling Credit counseling (known in the United Kingdom as debt counselling) is a process offering education to consumers about how to avoid incurring debts that cannot be repaid. This process is actually more debt counseling than a function of credit education. agency clients. A series of multiple regression Multiple regression
The estimated relationship between a dependent variable and more than one explanatory variable. models tested the hypotheses. While reduction in credit card debt and more time in a DMP helped predict less financial distress/more financial well-being, reductions in financial stressor events were found to be the most important predictors.
Mailed surveys in 2003 and 2005 produced data from consumers who had contacted a credit counseling agency, resulting in a combined sample of 4,331 (2003, N = 3,121; 2005, N = 1,210). Findings reported are based on analyses using data from those consumers who responded to both surveys (n = 828).
Participants ranged in age from 21 to 89 years (M=47). Incomes ranged from $160-$8,000/month, (M=$2,182; Mdn=$2,000). Participants reported outstanding credit card debt ranging from $200-$180,000; (M=$16,254; Mdn=$12,328). Days spent in the DMP averaged 140.
Occurrence of financial stressor events: Participants were asked, "During the past 6 months, how often have you experienced the following?" for each of nine specific incidents. The response categories consisted of never = 0, once = 1, more than once = 2. Factor analysis produced two distinct factors: Factor 1, negative bill-paying events (e.g., paying bills late, receiving calls from creditors) and Factor 2, exhaustion Exhaustion
Situation in which a majority of participants trading in the same asset are either long or short, leaving few investors to take the other side of the transaction when participants wish to close their positions. of liquid assets Cash, or property immediately convertible to cash, such as Securities, notes, life insurance policies with cash surrender values, U.S. savings bonds, or an account receivable. (e.g., took cash advance, maxed out credit card). Summed scores provided data for subsequent regression regression, in psychology: see defense mechanism.
In statistics, a process for determining a line or curve that best represents the general trend of a data set. analyses.
Financial distress/financial well-being was measured using the InCharge Financial Distress/Financial Well-Being (IFDFW) scale; scores can range from 1.0 = overwhelming financial distress/lowest financial well-being to 10.0 = no financial distress/highest financial well-being (Prawitz et al., 2006). Scores for the sample in this study ranged from 1.0 to 10.0, with a mean score of 4.89.
H1: Those reporting less credit card debt, fewer negative bill-paying events, and less exhaustion of liquid assets will report less financial distress/more financial well-being.
H2: Those reporting longer participation in a DMP, less credit card debt, fewer negative bill-paying events, and less exhaustion of liquid assets will report less financial distress/more financial well-being.
A series of multiple regression models tested the hypotheses. Model 1 explored the influence of individual characteristics; IFDFW scores were regressed on age, monthly income, and outstanding credit card debt. Of these, only age was significant in predicting financial distress/financial well-being (p<.05). Older consumers were more likely to report less financial distress/more financial well-being.
Model 2 tested Hypothesis 1, that those reporting fewer negative bill-paying events and less exhaustion of liquid assets would have less financial distress/more financial well-being. Predictors in the model were age, monthly income, outstanding credit card debt, and occurrence of both negative bill-paying events and exhaustion of liquid assets. All predictor variables Noun 1. predictor variable - a variable that can be used to predict the value of another variable (as in statistical regression)
variable quantity, variable - a quantity that can assume any of a set of values were useful in explaining financial distress/financial well-being (p < .001). Those who were older, had greater monthly income and less credit card debt, and who indicated fewer negative bill-paying events and less exhaustion of liquid assets experienced less financial distress/more financial well-being. The addition of negative bill-paying events and exhaustion of liquid assets to the model increased the explanatory ex·plan·a·to·ry
Serving or intended to explain: an explanatory paragraph.
ex·plan power 26% over that of Model 1.
Model 3 tested Hypothesis 2 that longer participation in a DMP and fewer financial stressor events would result in less financial distress/more financial well-being. In Model 3, IFDFW scores were regressed on age, monthly income, outstanding credit card debt, negative bill-paying behaviors, exhaustion of liquid assets, and number of days in the DMP. Length of participation in the DMP, as well as all of the individual characteristics and the occurrence of both negative bill-paying behaviors and exhaustion of liquid assets, were significant in predicting financial distress/financial well-being (p<.001). As in Model 2, older consumers and those who reported more income had less financial distress/more financial well-being. Those with less credit card debt, fewer negative bill-paying events, and less exhaustion of liquid assets reported less financial distress/more financial well being. While longer participation in the DMP resulted in less financial distress/more financial well-being, reduction in negative bill-paying events and less exhaustion of liquid assets were the best predictors in the model.
Discussion and Implications
There was support for both hypotheses. Financial distress/financial well-being is a function of occurrence of financial stressor events and time spent in a DMP. The results provide evidence that a decrease in both negative bill-paying behaviors and exhaustion of liquid assets, and an increase in time spent in a DMP decrease financial distress Financial distress
Events preceding and including bankruptcy, such as violation of loan contracts. and enhance financial well-being. DMPs, in addition to helping consumers get out of debt, also provide information and credit counseling to help improve financial behaviors. Past research has demonstrated that credit counseling and financial education is helpful in motivating consumers to handle personal finances more appropriately (Bagwell Bagwell is a surname.
Bagwell may also refer to:
orphan wanders streets of India with lama. [Br. Lit.: Kim]
See : Adventurousness , 2003; Kim, Garman, & Sorhaindo, 2005).
The results offer important implications for financial counselors and educators. Scores from the IFDFW scale can serve as a barometer for use with those experiencing financial problems, both initially and following interventions designed to help consumers replace negative financial events with healthy approaches to money management. Measurement of consumers' financial distress/financial well-being can help provide evidence about the success of such programs, for as consumers decrease negative financial events, their financial well-being improves. Knowledge about money management represents a first step toward improving financial health. Real learning, however, means changing behaviors. The easing of financial distress that accompanies a decrease in inappropriate handling of finances can provide needed relief and motivation for financially distressed consumers who make positive changes.
Bagwell, D. C. & Kim, J. (2003). Financial stress, health status, and absenteeism ab·sen·tee·ism
1. Habitual failure to appear, especially for work or other regular duty.
2. The rate of occurrence of habitual absence from work or duty. in credit counseling clients. Journal of Consumer Education, 21, 50-58.
Kim, J., Garman, E. T., & Sorhaindo, B. (2005). Credit counseling and debt management impacts on financial stressors and financial management behaviors. Journal of Family and Consumer Sciences, 97(2), 35-39.
Prawitz, A. D., Garman, E. T., Sorhaindo, B., O'Neill, B., Kim, J., & Drentea, P. (2006). The InCharge Financial Distress/Financial Well-Being Scale: Development, administration, and score interpretation. Financial Counseling and Planning, 17(1), 34-50.
Aimee D. Prawitz, Northern Illinois University (1)
Barbara O'Neill, Rutgers Cooperative Extension (2)
Benoit Sorhaindo, InCharge Education Foundation (3)
Jinhee Kim, University of Maryland University of Maryland can refer to:
E. Thomas (language) Thomas - A language compatible with the language Dylan(TM). Thomas is NOT Dylan(TM).
The first public release of a translator to Scheme by Matt Birkholz, Jim Miller, and Ron Weiss, written at Digital Equipment Corporation's Cambridge Research Laboratory runs Garman, Virginia Virginia, state, United States
Virginia, state of the south-central United States. It is bordered by the Atlantic Ocean (E), North Carolina and Tennessee (S), Kentucky and West Virginia (W), and Maryland and the District of Columbia (N and NE). Tech University (5)
(1) Aimee D. Prawitz, Ph.D., Associate Professor, School of Family, Consumer and Nutrition Sciences, Northern Illinois University, DeKalb, IL 60115; phone: 815-753-6344; fax: 815-753-1321; email: firstname.lastname@example.org
(2) Barbara O'Neill, Ph.D., Professor II and Cooperative Extension's Specialist in Financial Resource Management, Rutgers Cooperative Extension, Cook College Office Building, 55 Dudley Road, New Brunswick New Brunswick, province, Canada
New Brunswick, province (2001 pop. 729,498), 28,345 sq mi (73,433 sq km), including 519 sq mi (1,345 sq km) of water surface, E Canada. , NJ 08901; phone: (732) 932-9155 ext. 250; fax: (732) 932-8887; email: email@example.com
(3) Benoit Sorhaindo, Director of Research, InCharge Education Foundation, InCharge Education Foundation, 2101 Park Center Dr, Suite 310, Orlando, Florida The city of Orlando is a major city in central Florida and is the county seat of Orange County, Florida. According to the 2000 census, the city population was 185,951. A 2006 U.S. 32835; phone: 407-532-5704; email: firstname.lastname@example.org
(4) Jinhee Kim, Associate Professor and Extension Specialist, Department of Family Studies, 1204 J Marie Mount Hall, University of Maryland, College Park The University of Maryland, College Park (also known as UM, UMD, or UMCP) is a public university located in the city of College Park, in Prince George's County, Maryland, just outside Washington, D.C., in the United States. , MD 20742; phone: 301-405-3500; email: email@example.com
(5) E. Thomas Garman, President, Personal Finance Employee Education Foundation; Professor Emeritus e·mer·i·tus
Retired but retaining an honorary title corresponding to that held immediately before retirement: a professor emeritus.
n. pl. and Fellow, Virginia Tech University, 9402 SE 174th Loop, Summerfield, FL 34491; phone: 352-347-1345; email: firstname.lastname@example.org