A Multi-Dimensional View of Financial Distress

Introduction

Stress is an unpleasant feeling experienced when something valuable is lost or when the person feels threatened. This loss or threat can be financial (for example, loss of home), social (for example, the breakup of a relationship), symbolic (for example, loss of status), economic (for example, job insecurity). People experience stress when they believe they don't have the coping skills or resources needed to face perceived threat or loss. Factors that cause stress are called stressors. This stressor can be something that comes from the outside world (economic recession, layoff) or inner world and cannot be observed by the outside world (like fear of failure). Stressors can be acute or chronic, predictable or unpredictable, controllable or uncontrollable (Davis & Mantler, 2004, p. 3). It can be assumed that stress from one or more stressors is not just an emotion, but also a physiological response (Heo, et al., 2020, p. 3).

People are happier when they are healthy, are married or in a committed relationship, have a job, work, and feel financially secure (Xio & Garman, 2005, p. 73). An important part of general psychological well-being is contentment in various areas of life. One of these areas is related to the financial situation of the person. The terms used to name constructs that describe one's feelings about one's financial situation vary. In the literature, while positive expressions such as financial well-being, financial wellness, financial satisfaction, financial resilience, financial health, perceived income adequacy are used to describe the financial situation of the person, negative expressions such as financial distress, financial stress, financial strain, debt stress, economic distress and economic strain are also used. In the literature, either objective or subjective measures are used to describe the financial status of individuals. Objective and subjective measures evaluate different aspects of a person's financial situation and provide different sources of information. There is no consensus on which is the best measure. Both measures are useful for providing information about the financial situation of individuals. The ease of access to objective measurements also makes it easy to measure numbers, assuming accurate and appropriate data are provided. But it can be said that knowing one's feelings and judgments about one's financial situation will be more helpful. Because, while objective evaluations express verifiable, calculable, fact-based items (such as total savings, household income); it does not measure the depth of one's feelings and reactions to one's financial situation. Differences in perception, cognition and experience are included in subjective evaluations. Thus, subjective measure provides a richness that objective measure cannot provide. Because it helps to examine not only how people perceive their financial situation, but also how it affects individuals and families, physical and psychological health (Wuth & Cismaru, 2021, pp. 1-3; Prawitz et al., 2006, pp. 34-35). On the other hand, there is not always a strong link between economic hardship and financial (di)stress. People without financial difficulties may also feel financial (di) stress, or some with financial difficulties may not experience as much financial distress (Davis and Mantler, 2004, p. 23).

Due to its impact on individuals and society, financial distress has been a widely researched topic by different disciplines such as finance, psychology, sociology, marketing with different terms and different meanings. Although approached in different fields, some of these terms are similar, have overlapping aspects but not the same. When referring to negative financial health behaviors in the literature, it is seen that subjective measures are used more frequently than objective measures. According to the literature review, the terms economic hardship, financial distress, financial strain and economic deprivation are the most common negative financial terms in the databases, respectively (Wuth & Cismaru, 2021, p. 1-2).