Academic journal article Journal of Financial Counseling and Planning

Financial Management Competency, Financial Resources, Locus of Control, and Financial Wellness

Academic journal article Journal of Financial Counseling and Planning

Financial Management Competency, Financial Resources, Locus of Control, and Financial Wellness

Article excerpt

In a 2014 survey of Americans and stress, the American Psychological Association (2014) reported that 72% of Americans experienced stress stemming from money worries. A 2015 nationwide study of consumer financial health indicated that more than 57% of adults in the United States are struggling with personal financial issues (Gutman, Garon, Hogarth, & Schneider, 2015). In a different nationwide study of Americans, 63% were unable to provide correct responses to more than three of the five questions posed in a financial literacy test, indicating that many Americans are lacking appropriate financial decision-making skills (FINRA Investor Education Foundation, 2015). With respect to financial behaviors, 32% stated they paid the minimum due on credit card bills each month and 50% had no savings set aside to cover emergencies (FINRA Investor Education Foundation, 2015). Given these statistics, it is not surprising that consumers have reported having reduced wellness related to their personal financial situations.

Financial behaviors and financial management skill building likely have been guided by consumers' beliefs, perceptions, orientations, motivations, and approaches to planning ahead. Scholars in the field of financial counseling and planning have recognized the importance of theory in guiding research on such topics (Danes & Yang, 2014; Schuchardt et al., 2009; Xiao, 2008). What makes this study different and important is that it was the first study of financial wellness to be guided by a proactive coping theory developed to conceptualize the accumulation, building, and maintenance of resources as a way to minimize stress (Aspinwall & Taylor, 1997). The findings can help researchers understand the orientations and behaviors of those whose efforts at proactive coping in the financial arena were successful and can help educators and practitioners frame interventions as prevention (minimizing effects of a potential financial stressor) rather than as coping with a financial stressor after it has occurred.

Theoretical Framework

Theorists have presented a number of perspectives about how resources are involved in people's efforts to cope with the demands of stressful circumstances (e.g., Boss, 2002; Folkman & Lazarus, 1985). Stress is a relationship between the individual and the environment that is straining the resources and affecting the well-being of the individual (Folkman & Lazarus, 1985). Coping is the response to the stressor and consists of the efforts undertaken to tolerate or alleviate stress or to reduce perceived losses directly resulting from the stressor (Folkman & Lazarus, 1985). In the application of classic stress theories to research and practice, an event perceived as stressful must first take place to initiate the observable coping efforts that use resources of the individual or the family (Boss, 2002; Folkman & Lazarus, 1985).

The proactive coping approach presented by Aspinwall and Taylor (1997) differs from the adaptation-to-stress approach of Folkman and Lazarus (1985) and Boss (2002), and the difference has to do with the timing of the stressor event. Proactive coping represents behaviors to prepare for an event that may or may not happen (Aspinwall, 2011; Aspinwall & Taylor, 1997), as opposed to coping with an event that already has occurred (e.g., dealing with a financial loss). Proactive coping also differs from anticipatory coping (Aspinwall & Taylor, 1997; Breznitz, 1983), which refers to preparations for a negative event that is certain to happen (e.g., getting ready for an approaching hurricane). Proactive coping, then, can be distinguished from coping in that the latter deals with a reaction to a past (rather than future) event and from anticipatory coping by the degree of certainty that the event will occur at all (Aspinwall & Taylor, 1997). This study was designed to determine the contribution of specific financial orientations, motivations, and behaviors, conceptualized as proactive coping efforts, to financial wellness. …

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