The Financial Comfort Index

Written by Karen Bryan

comfort indexThe Comfort Index December 2013, compiled for Hitachi Personal Finance to give a snapshot of UK consumers’ financial and employment perceptions, makes for interesting reading.  Below I have a closer look at some of the findings, along with some possible explanations.

Males generally have a higher Comfort Index than females

I wasn’t too surprised by this, as males who work full-time earn 10% more than females. This gender difference in Comfort Index was particularly marked within the  30 – 35 age group. I wondered if this was because a higher proportion of males in that age group still live with their parents; at age 34, 8% of males are living with their parents, compared to 3% of women.

The financial comfort of UK consumers starts to drop after the age of 34

I found this a bit strange, as I thought that the average person would be earning more in their 40s and 50s than in their 30s. I suppose that higher earnings may well coincide with higher living expenses if people are saving up a deposit to get the housing ladder and/or have kids after their early 30s.

People are more confident about their own finances than the wider economy

There appears to be more optimism among consumers about their own personal finances than in the UK economy as a whole. Could it be that your own personal circumstances are easier to assess, than trying to keep up with the sometimes conflicting reports on the state of the UK economy?

People who rent have a lower Comfort Index than home buyers

I’d read that it’s cheaper to buy your own home than to rent. However, there were regional differences with renters in Yorkshire having a signficantly higher Comfort Index than those in Wales. We certainly find that having paid off our mortgage means that we can live on a lower income, which makes us feel more positive about our finances.

Not much optimism about job prospects

Neither employed or unemployed participants were too optimistic about their job prospects. This is probably justifiable; although the rate of unemployment in the UK is falling, a fair proportion of the jobs created are part-time and/or paid at around the minimum wage.

The Comfort Index is highest among supporters of the Liberal Democrats

This was a bit of a strange one. Stereotypically, I’d have imagined that Conservative Party supporters would have a higher Comfort Index. On reflection, I reckoned that Lib Dem supporters might feel more content with a bit less than Tory supporters.

 How the Comfort Index is Complied

The Comfort Index is calculated by asking 2,000 participants five questions about their personal financial circumstances:

  1. How would you describe the state of the economy?
  2. How would you describe the state of your own finances?
  3. Considering the state of your finances, is now a good time to buy goods or services?
  4. Are you employed?
  5. Do you feel confident about your job prospects?

The participants answered these questions by using a score from 0-100, where 0 was the worst score and 100 the best.

Photo by Adam Mayer