Financial satisfaction of people in the U.S. rebounded strongly in the third quarter of the year, according to a new survey by the American Institute of CPAs, reversing the lows in the second quarter in the midst of the recession brought on by the novel coronavirus pandemic.
The AICPA’s Q3 2020 Personal Financial Satisfaction Index measured 33.1, representing a whopping 99 percent (16.5 point) increase from the previous quarter. That’s the biggest quarterly increase in the 27-year history of the PFSi, and a complete turnaround from the second quarter, when the index had its largest ever quarterly drop.
Anna E. Mallen is a J.D. candidate at Drake University Law School, Des Moines, Iowa.
John F. Fatino is a member attorney at Whitfield & Eddy Law in Des Moines, Iowa. He counsels financial cooperatives in proactive measures and risk avoidance including client education for board members and senior management regarding corporate governance and employment matters.
Frank Vari, JD, MTax, CPA, is the practice leader of FJV Tax, a CPA firm that specializes in complex international and U.S. tax planning. He can be reached via email at frank.vari@fjvtax.com or telephone at (617) 770-7286 or (800) 685-2324. He began his career in international and corporate tax consulting with Deloitte and KPMG in the Midwest and Dallas. He has also served as senior vice president of tax for a large publicly traded manufacturer as well as a large private equity-owned global publisher. Vari has also been an adjunct professor of taxation to law and business students on international tax and corporate mergers and acquisitions. He is also a frequent speaker and author on complex international tax topics and issues. He is a licensed CPA in Massachusetts and Ohio and a licensed attorney in Ohio and the U.S. Tax Court. His education includes a Bachelor of Science in Accounting, a Master of Taxation, and a Juris Doctorate degree.
The PFSi is built around various factors, including the labor market. The gains can be mainly attributed to improvements in job openings per capita and underemployment. Those had the biggest impact on increasing the overall PFSi. The biggest factor driving the quarter-over-quarter rally was a 35 percent (37 point) decrease in underemployment. A decrease in underemployment improves overall financial satisfaction in the index. While there was an improvement in underemployment in the third quarter from Q2’s record high, it’s still 117 percent above its level a year ago. For the second consecutive quarter, underemployment is still the biggest negative contributor to the average American’s personal financial satisfaction. The Q3 underemployment level reflects data measured through the middle of September.
“As Americans continue to navigate the economic impact of the COVID-19 pandemic, it is important to remember that the fundamentals of financial planning haven’t changed,” said AICPA PFS Credential Committee chair Dave Stolz in a statement Thursday. “Though the stock market’s record performance is encouraging, 2020 has served as a reminder of the volatile nature of markets. As the impact of COVID-19 continues to play out across the country, investors should weigh their risk tolerance and ensure they have ample cash on hand. Further, a tax-efficient financial plan that includes a diversified portfolio can give confidence that long-term financial goals will remain within reach through this period of extreme uncertainty.”
The coronavirus put millions out of work, prompting job openings per capita to show a record plummet earlier this year. In the third quarter, job openings started to recover, climbing 37 percent (20 points) compared to Q2. That factor is now only 10 percent below its measurement a year ago before the pandemic. The Q3 index comes from July data from the U.S. Bureau of Labor Statistics.
