Social Indicators Research

, Volume 114, Issue 3, pp 1109–1124 | Cite as

Evaluating the Link Between Perceived Income Adequacy and Financial Satisfaction: A Resource Deficit Hypothesis Approach

  • John E. Grable
  • Sam Cupples
  • Fred Fernatt
  • NaRita Anderson


Data from an economically and racially diverse sample (N = 258) was used to determine (a) if an association between objectively measured income and perceived income adequacy exists, (b) how well individuals assess the adequacy of their income, and (c) if a bias exists, can these estimates be used to describe a person’s overall level of financial satisfaction? Duesenberry’s (Income, saving, and the theory of consumer behavior. Harvard University Press, Cambridge, 1949) relative income hypothesis and Kyrk’s (The family in the American economy. University of Chicago Press, Chicago, 1953) resource deficit hypothesis were adopted for use as the conceptual framework for this study. A positive but modest association between objective and perceived income adequacy was noted. It was also found that individuals do not do a particularly good job of accurately assessing their income adequacy. Finally, perceived income adequacy estimation bias was found to be associated with financial satisfaction. Those who perceived their income to be deficient were less satisfied financially. Policy and practitioner implications from the study are discussed as a means for improving financial satisfaction at the individual and household level.


Perceived income adequacy Financial satisfaction Well-being 


  1. Barratt, W. (2011). The Barratt simplified measure of social status (BSMSS) measuring SES. Available online:
  2. Borooah, V. K. (2006). What makes people happy? Some evidence from Northern Ireland. Journal of Happiness Studies, 7, 427–465.CrossRefGoogle Scholar
  3. Brickman, P., & Campbell, D. T. (1971). Hedonic relativism and planning the good society. In M. H. Appley (Ed.), Adaptation level theory: A symposium (pp. 287–302). New York: Academic Press.Google Scholar
  4. Burchardt, T. (2005). Are one man’s rags another man’s riches? Identifying adaptive expectations using panel data. Social Indicators Research, 74, 57–102.CrossRefGoogle Scholar
  5. Burns, S. (2008). Promoting applied research in personal finance. In J. J. Xiao (Ed.), Handbook of consumer finance research (pp. 411–418). New York: Springer.CrossRefGoogle Scholar
  6. Caporale, G. M., Georgellis, Y., Tsitsianis, N., & Yin, Y. P. (2009). Income and happiness across Europe: Do reference values matter. Journal of Economic Psychology, 30, 42–51.CrossRefGoogle Scholar
  7. Chan, A., Ofstedal, M. B., & Hermalin, A. I. (2002). Changes in subjective and objective measures of economic well-being and their interrelationship among the elderly in Singapore and Taiwan. Social Indicators Research, 57, 263–300.CrossRefGoogle Scholar
  8. Clark, A., & Oswald, A. (1996). Satisfaction and comparison income. Journal of Public Economics, 61, 359–381.CrossRefGoogle Scholar
  9. Diener, E., Sandvik, E., Seidlitz, L., & Diener, M. (1993). The relationship between income and subjective well-being: Relative or absolute? Social Indicators Research, 28, 195–223.CrossRefGoogle Scholar
  10. Duesenberry, J. S. (1949). Income, saving, and the theory of consumer behavior. Cambridge, MA: Harvard University Press.Google Scholar
  11. Easterlin, R. A. (2001). Income and happiness: Toward a unified theory. The Economic Journal, 111, 465–484.CrossRefGoogle Scholar
  12. Frank, R. (1999). Luxury fever: Why money fails to satisfy in an era of excess. New York: Free Press.Google Scholar
  13. Grier, S., & Bryant, C. A. (2005). Social marketing in public health. Annual Review of Public Health, 26, 319–339.CrossRefGoogle Scholar
  14. Hansen, T., Slagsvold, B., & Moum, T. (2008). Financial satisfaction in old age: A satisfaction paradox or a result of accumulated wealth? Social Indicators Research, 89, 323–347.CrossRefGoogle Scholar
  15. Joo, S., & Grable, J. E. (2004). An exploratory framework of the determinants of financial satisfaction. Journal of Family and Economic Issues, 25, 25–50.CrossRefGoogle Scholar
  16. Kahneman, D., & Deaton, A. (2010). High income improves evaluation of life but not emotional well-being. Proceedings of National Academy of Science, 107(38), 16489–16493.CrossRefGoogle Scholar
  17. Klontz, B., Britt, S., Mentzer, J., & Klontz, T. (2011). Money beliefs and financial behaviors: Development of the Klontz Money Script Inventory. The Journal of Financial Therapy, 2(1), 1–18.Google Scholar
  18. Kyrk, H. (1953). The family in the American economy. Chicago: University of Chicago Press.Google Scholar
  19. Layard, R. (2005). Happiness: Lessons from a new science. New York: Penguin.Google Scholar
  20. Litwin, H., & Sapir, E. V. (2009). Perceived income adequacy among older adults in 12 countries: Findings from the survey of health, ageing, and retirement in Europe. The Gerontologist, 49, 397–406.CrossRefGoogle Scholar
  21. MacDonald, M., & Douthitt, R. A. (1992). Consumption theories and consumers’ assessments of subjective well-being. Journal of Consumer Affairs, 26, 243–261.CrossRefGoogle Scholar
  22. Malroutu, Y. L., & Xiao, J. J. (1995). Perceived adequacy of retirement income. Journal of Financial Counseling and Planning, 6(1), 17–23.Google Scholar
  23. Michalos, A. C. (1985). Multiple discrepancies theory (MDT). Social Indicators Research, 16, 347–413.CrossRefGoogle Scholar
  24. Sanders, S. (2010). A model of the relative income hypothesis. The Journal of Economic Education, 41, 292–305.CrossRefGoogle Scholar
  25. Sansevere, B. (2004). Reality hasn’t become part of Spree’s world (p. D1). Minnesota: St. Paul Pioneer Press.Google Scholar
  26. Stoller, M. A., & Stoller, E. P. (2003). Perceived income adequacy among elderly retirees. The Journal of Applied Gerontology, 22, 230–251.CrossRefGoogle Scholar
  27. Streib, G., & Schneider, C. J. (1971). Retirement and American society: Impact and process. Ithaca, NY: Cornell University Press.Google Scholar
  28. Veenhoven, R. (2002). Why social policy needs subjective indicators. Social Indicators Research, 58, 33–45.CrossRefGoogle Scholar
  29. Veenhoven, R., & Saris, W. (1996). Satisfaction in 10 countries. In Saris et al. (Eds.), A comparative study of satisfaction with life in Europe (pp. 223–231). Budapest: Eotvos University Press.Google Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2012

Authors and Affiliations

  • John E. Grable
    • 1
  • Sam Cupples
    • 1
  • Fred Fernatt
    • 1
  • NaRita Anderson
    • 1
  1. 1.Family Studies and Human ServicesKansas State UniversityManhattanUSA

Personalised recommendations