Academic journal article Journal of Financial Counseling and Planning

Changes in Health, Negative Financial Events, and Financial Distress/Financial Well-Being for Debt Management Program Clients

Academic journal article Journal of Financial Counseling and Planning

Changes in Health, Negative Financial Events, and Financial Distress/Financial Well-Being for Debt Management Program Clients

Article excerpt

The study explored the relationship between health and financial distress/financial well-being and differences in health based on (a) time spent in a debt management program (DMP) and (b) occurrence of negative financial events. Spearman's rho indicated those with lower financial distress, higher financial well-being in 2005 reported better health (N = 1,119, p < .001). Wilcoxon ranked sums test indicated improved health for DMP clients (n = 819) from 2003 to 2005 (p < .0001). Median tests and Mann Whitney post hoc tests indicated better health for clients reporting fewer negative financial events (N = 1,169, p < .05). For DMP clients, health improves (a) over time, (b) with lower incidence of negative financial events, and (c) with lower financial distress and greater financial well-being.

Key Words: financial counseling, financial distress, financial well-being, health status, credit counseling clients


Researchers have established that a relationship exists between health and levels of stress. In particular, researchers examining health in relationship to one's level of financial distress and worry about financial matters have found clear connections (Bagwell & Kim, 2003; Drentea & Lavrakas, 2000; Kim & Garman, 2003; Kim, Garman, & Sorhaindo, 2003; O'Neill, Sorhaindo, Xiao, & Garman, 2005a, 2005b, 2005c). In recent literature, financial distress has been defined as a reaction to the condition of one's personal financial state (Prawitz et al., 2006a, 2006b).

Financial distress is a subjective phenomenon. Two individuals with the same levels of income and economic resources may have different levels of perceived financial distress and financial well-being. Financial distress can last a short time, or it can become a persistent state for families at all income levels. Frequently, financial distress involves a pileup of stressor events such that, before one event can be handled, another is already being felt (Garman, Leech, & Grable, 1996; Kim, Garman, et al., 2003). Occurrence of stressor events, sometimes called negative financial events, can contribute to financial distress. Examples include receiving overdue notices from creditors and collection agencies, issuing checks with funds insufficient to cover them, getting behind on bill payments, family money squabbles, and worrying about whether one is prepared financially for emergencies or major life events such as college and retirement.

Evidence of progressively more financial distress is increasingly visible in U.S. society. Indications include high bankruptcy filings rates ("Bankruptcy filings," 2006), increasing credit card debt ($9,312 in 2004) (Stat bank, 2005), low savings rate and asset accumulation (Bucks, Kennickell, Moore, Fries, & Neal, 2006; Lansing, 2005; "New report finds," 2002), and insufficient liquid savings (Zhang & DeVaney, 2004). Researchers continue to find evidence of relationships among financial distress, negative financial events, and health (Drentea & Lavrakas, 2000; Kim, Garman, et al., 2003; O'Neill et al., 2005c). The purposes of the current study were to explore these relationships further and to track over time the health status of financially distressed consumers in a credit counseling agency's debt management program.

Literature Review

A number of Americans can be described as financially distressed ("2nd American Express," 2004). Worry about money affects many aspects of a person's life, including health and job productivity (Kim & Garman, 2003). The current study sought to determine whether health status was related to the experiencing of specific negative financial events and consumers' reactions to their financial condition manifested as financial distress. The literature review examines past research about relationships among financial distress/financial well-being, health, and negative financial events.

Financial Distress and Health

Stress can cause numerous deleterious changes in health. …

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