consumer trends

Americans’ Personal Financial Satisfaction Pulled Back Slightly In Q4

Increase in Inflation adds to Personal Financial Pain

NEW YORK January 30, 2017 – Americans saw a slight decline in their personal financial satisfaction in the fourth quarter of 2016, according to the AICPA’s Personal Financial Satisfaction Index (PFSi), released today.

The slight reversal in momentum this quarter was primarily driven by an increase in inflation that was somewhat offset by greater optimism about the U.S. economy and their own organizations from CPA executives post-election, as well as gains in the stock market.

However, as the Trump administration takes office, the PFSi remains firmly in positive territory, indicating that Americans’ financial pleasure outweighs their financial pain.

The PFSi, calculated as the Personal Financial Pleasure Index minus the Personal Financial Pain Index, represents the financial standing of a typical American. Positive readings indicate that Americans are feeling more financial pleasure than pain. The Q4 index measured 18.5, a 0.2 point decrease from the prior quarter and a 2.8 point increase from one year ago. The decline from the prior quarter was due to the small increase in the Personal Financial Pleasure index (1.2 points) being outweighed by a 1.3 point increase in the Personal Financial Pain index.

Even though financial pleasure continues to edge up, the increase in the Personal Financial Pain Index outpaced it by a small margin in Q4, reaching its highest level in 18 months. The Pain Index is 1.3 points higher than the previous quarter and 1.1 points higher than the year before. The rise from the preceding quarter was driven largely by a 9.7 point increase in inflation. Inflation, the most volatile factor in the PFSi, continues to climb up from historic lows. It is the largest contributor to the movement Q4 index of any individual factor, either for pain or for pleasure. Though inflation drove the increase in pain in Q4, it remains below the Federal Reserve target of two percent.

Improved credit can offset tax-increase

“The Federal Reserve raised the target interest rate by a quarter percent in December and indicated that there may be additional hikes in 2017. All Americans can negate the higher costs that may come with rising interest rates by taking steps to improve their credit now,” said Kelley Long, CPA/PFS, member of AICPA’s Consumer Financial Education Advocates Group. “Checking your credit reports and correcting any errors is the first step. From there, paying bills on time and keeping your credit card balance down can have a strong positive impact on your credit score, another key component in keeping borrowing costs down.”

Personal taxes, the leading overall contributor to financial pain, showed a 0.6 point increase from the previous quarter, although they declined 1.6 points from the year-ago level. While personal taxes finished the quarter higher than the historical average, they are still far from the all-time high from late 1999 to mid-2001.

All Americans can negate the higher costs that may come with rising interest rates by taking steps to improve their credit now.

On a more positive note, loan delinquencies continued their downward trend and were 2.9 points lower than the third quarter and 12.9 points below a year ago. This demonstrates the continued strengthening of the housing market, as delinquencies on mortgages finished below the historical average for the first time since the third quarter of 2008.

“The PFS Market 750 and the CPA Outlook Index are the two components of the PFSi that react the quickest to events at the macro level, and both of those were up for the fourth quarter when the election results were the big news story,” added Long.

The Personal Financial Pleasure Index, at 63.0, is 1.2 points higher than the prior quarter and 3.9 points up from the prior year. The gain over the previous quarter was due to improvements in three of the four factors, led by a 4.6 point increase in the CPA Outlook Index, followed by a 2.6 point increase in the PFSi 750 Market Index and an increase of 1.5 points in home equity. The only factor that did not improve from the previous quarter is the job openings index, which declined 4.1 points.

The AICPA Economic Outlook Index, which captures the expectations of CPA executives in the year ahead for their companies and the U.S. economy, was 4.6 points higher than both the prior year level and the previous quarter level. The survey was conducted in November, beginning the day after the election. Optimism for the U.S. economy was the biggest contributor to both the year over year and prior quarter improvement with positive sentiment for respondent’s own organization as the number two contributor.

The PFS 750 Market Index has been the biggest contributor to the Pleasure Index for several years, a trend that continued in Q4. Most market commentators agree that we there was a post-election rally fueled by expectations of reduced taxes and relaxed regulations. Share prices began an uptrend immediately after the election and trading volumes increased dramatically in December. Financials had the strongest gains in the 3 month period, followed by industrials and materials.

Additional Findings from the Q4 2016 PFSi:

  • Real home equity per capita grew due to increases in the market value of real estate, which have exceeded increases in outstanding mortgages. Oregon and Washington lead the way with the highest home price gains from a year ago.
  • The only exception to the upward ticking trend of Pleasure Index components this quarter is job openings per capita which declined 4.1 points. For the past two years, job openings were the second strongest contributor to the strength of the Pleasure Index.
  • Underemployment decreased 2.1 points from the prior quarter and is now 3.2 points below Q4 2015.

Additional information on the PFSi can be found here.





The Personal Financial Satisfaction Index (PFSi) is the result of two component sub-indexes. It is calculated as the difference between the Personal Financial Pleasure Index and the Personal Financial Pain Index. These are comprised of four equally weighted factors, each of which measure the growth of assets and opportunities, in the case of the Pleasure Index, and the erosion of assets and opportunities, in the case of the Pain Index.
About the AICPA’s PFP Division
The AICPA’s Personal Financial Planning (PFP) Section is the premier provider of information, tools, advocacy, and guidance for CPAs who specialize in providing estate, tax, retirement, risk management, and investment planning advice to individuals, families, and business owners. The primary objective of the PFP Section is to support its members by providing resources that enable them to perform valuable PFP services in the highest professional manner.
CPA financial planners are held to the highest ethical standards and are uniquely able to integrate their extensive knowledge of tax and business planning with all areas of personal financial planning to provide objective and comprehensive guidance for their clients. The AICPA offers the Personal Financial Specialist (PFS) credential exclusively to CPAs who have demonstrated their expertise in personal financial planning through testing, experience and learning, enabling them to gain competence and confidence in PFP disciplines.
About the American Institute of CPAs
The American Institute of CPAs (AICPA) is the world’s largest member association representing the CPA profession, with more than 418,000 members in 143 countries, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for the profession and U.S. auditing standards for private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives professional competency development to advance the vitality, relevance and quality of the profession.
About the Association of International Certified Professional Accountants
The Association of International Certified Professional Accountants (the Association) combines the strengths of the American Institute of CPAs (AICPA) and The Chartered Institute of Management Accountants (CIMA) to power opportunity, trust and prosperity for people, businesses and economies worldwide. It represents 650,000 members and students in public and management accounting and advocates for the public interest and business sustainability on current and emerging issues. With broad reach, rigor and resources, the Association advances the reputation, employability and quality of CPAs, CGMAs and accounting and finance professionals globally.