Healthy, Wealthy, Wise:

The Relationship Between Physical Health and Financial Health

UNDERGRADUATE DISTINCTION THESIS

Presented in Fulfillment of the Requirements

For the Degree with Distinction in Marketing in the

Fisher College of Business at The Ohio State University

By

Marek Michalski

The Ohio State University

May 2015

Thesis Examination Committee: Approved by

Dr. Shashi Matta, Advisor ________________________

Dr. Patricia West

Dr. Rebecca Walker Reczek

Shashi MattaDepartment of Marketing & Logistics

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TABLE OF CONTENTS

Page

Abstract……………………………………………………………………………………3

Acknowledgements………………………………………………………………………..4

Chapters:

I. Introduction……………………………………………………………………..5

II. Theoretical Foundation………………………………………………………...X

III. Study………………………………………………………………………..XX

IV. General Discussion…………………………………………………………XX

References……………………………………………………………………………....XX

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Abstract

Researchers in diverse fields, including consumer behavior, are studying individuals’ health

habits. Particularly, researchers are interested in physical health and financial health behavior, as

understanding how to improve health in these domains is very desirable and relevant in modern

society. Whereas Physical health and financial health have been studied individually, some recent

evidence suggests that they affect each other, or at least may be correlated with each other.

Further, two variables have been found to underlie healthy behaviors in both physical and

financial health - self-efficacy and self-control. If both physical health and financial health are

driven by the same two individual traits, there is reason to believe that they are correlated. In this

research, I examined the relationship between self-reported physical and financial health

indicators and behaviors with a large sample of millennial consumers. Further, I measured

respondents’ self-efficacy and self control to uncover how and to what extent they affect physical

health and financial health. Study results show that self-reported physical health and financial

health are indeed correlated. Study 1 and 2 revealed that BMI calculated from self-reported

height and weight, predicted self-reported financial behaviors such as paying off credit card debt

on time, reaching credit limit on credit cards and loan payment behavior. Respondents with high

self-reported BMI had a higher propensity to engage in behaviors that negatively affected their

financial health. This study developed the ground floor for my research, and provided validation

to conduct a third study with a larger sample size. Study 3 revealed that when self-control was

measured in the same study as self-efficacy, only self-efficacy was significant predictor for

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physical health and financial health. Novel findings from this research have broad implications

for researchers, consumers, policy makers, and business organizations.

ACKNOWLEDGEMENTS

The completion of this thesis is a culmination of many generous and knowledgeable individuals’

time and energy. Most notably, I would like to thank Dr. Shashi Matta, his support, expertise, and

guidance had an enormous impact on this thesis, and it would not have been possible without

him.

I would also like to thank Dr. Rebecca Walker Reczek and Dr. Patricia West for serving

on my thesis review board.

A Fisher Undergraduate Research Scholarship awarded by The Fisher College of

Business supported this research. I am very thankful to The Ohio State University for awarding

these funds, as their contribution has afforded me the resources to complete my research.

Last but not least, I would like to thank my fellow students for their

overwhelming support, throughout this project and through my entire academic career.

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I. INTRODUCTION

The emphasis on physical health has never been stronger in the United States. A report by

The Commonwealth Fund (2013), based on data by the Organization for Economic Co-operation

and Development (OECD) and other sources found that the U.S. spent more on health care per

capita than any other developed country ($8,745), but had among the worst health outcomes (for

e.g., the highest obesity rate of any developed nation, 28.6%) Not surprisingly, researchers in

diverse fields, including those in consumer behavior, are studying individuals’ health related

habits and how to improve them.

A similar, if not greater, emphasis when it comes to millennials, is on financial health. For

instance, with student loan debt at an all time high financial health is serious concern for young

Americans. A study commissioned by Wells Fargo (2014) found that 56% of millennials reported

living paycheck to paycheck, over 50% said they receive support from family, and over 40%

mentioned that they do not save. Consequently, researchers in multiple fields are investigating

individuals’ financial habits and how to improve them.

Whereas these two aspects of well being – physical health and financial health – have

been studied individually, there is some evidence that they may in fact affect each other. For

instance, stress is a leading cause of many physical health issues, and stress related to money and

work are the leading causes of stress (Stress in America, APA 2013). Similarly, a recent study of

people aged 24 to 32 found people with high debt are more likely to have poorer self reported

health (mental and physical), as well as higher diastolic blood pressure (Sweet 2010). Though

this may suggest that financial health affects physical health (e.g., Bloom and Canning 2000),

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there is some research that posits the reverse. Health and health expectations can affect multiple

factors of financial health such as productivity, hourly wages, and labor supply at the intensive

and extensive margin (Michaud and Soest 2007). In sum, there is some evidence that financial

and physical health affect each other. However, these findings are mainly about poor outcomes

on one negatively affecting the other.

Self-efficacy and self control have been shown to positively affect physical health, and

the lack of self-efficacy and self-control have been shown to negatively affect physical health. If

a person believes they will be successful in performing specific actions they are more likely to

actually undertake the actions, attempt to perform the particular tasks, or meet certain goals

(Bandura 1986). Therefore, a person with high self-efficacy is more likely to complete physical

health or financial health goals. In order to stick to their plans consumer’s need self-control as it

predicts a wide range of self-regulatory behaviors (Oaten & Cheng 2006), such as saving,

budgeting, dieting, and exercise routines. Self-efficacy and self-control are factors in all

behavior, especially in the domains of financial health and physical health.

The relationship between financial and physical health has broad implications for

employees, employers, and insurance agencies. The lack of a thorough understanding between

health and finances creates issues for insurance companies and employees. For employees and

consumers, those who are less healthy pay more for health insurance, because statistically they

are more likely to develop an ailment or injury that would require expensive medical

consideration. In point of fact, smokers pay 14% higher insurance premiums than non-smokers

(ehealth). Furthermore, many people do not have health care, and the last census revealed that

13.4% of the U.S. does not have health insurance (Census 2013). These issues could be lessened

if the correlation between financial health and physical health could be better understood.

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Employers could find more efficient ways to distribute compensation to make employees happier

and reduce insurance costs. Insurance companies could provide insurance to more people,

through a new criterion.

We conducted three questionnaires to examine how consumers self reported physical

health and financial health are related, and to see how potential mediators self-efficacy and self-

control affect the relationship. We used known scales to identify respondents with high levels.

High self-reported health was then examined against subset groups with high self-control and

high-self efficacy. Findings indicate that physical health is correlated with financial health, and

those with high self-control and high self-reported physical health have the highest levels of self-

reported financial health.

II. THEORETICAL FOUNDATION & HYPOTHESIS

Financial Health and Physical Health

Financial Health’s effect on Physical health

Financial health has an impact on physical health. Poor health can often be caused by

consequences of financial instability. For instance, stress is a leading cause of many physical

health issues, and stress related to money and work is the leading causes of stress (Stress in

America, APA 2013). Similarly, a recent study of people aged 24 to 32 found people with high

debt are more likely to have poorer self reported health (mental and physical), as well as higher

diastolic blood pressure (Sweet 2010). In sum, there is some evidence that financial and physical

health affect each other. However, these findings are mainly about poor outcomes on one

negatively affecting the other.

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Physical Health’s effect on Financial Health

Though this may suggest that financial health affects physical health, and could be a

potential causal factor of good physical health (e.g., Bloom and Canning 2000), there is some

research that posits the reverse. This is especially notable on the global or national level, when

looking at measures of the population’s physical and financial health. Health and health

expectations can affect multiple factors of financial health such as productivity, hourly wages,

and labor supply at the intensive and extensive margin (Michaud and Soest 2007). The unhealthy

individual is not only affected by the increased cost of personal medical expenses, but the whole

population can expect a fiscal penalty as well. As a population, better health leads to cost-savings

for health insurance (Goldman 2010). Therefore, positive physical health outcomes can be

indicative of positive fiscal outcomes.

Mediators

Self-Efficacy in Physical Health

Research in psychology and related fields has identified factors that encourage positive

physical health habits and behaviors. Self-efficacy is one such factor. Self-efficacy refers to the

belief of an individual in a particular context or situation that he/she has the properties,

possibilities, and ability to successfully execute the behavior required to produce an outcome

(Lazarus & Folkman 1984). For instance, self-efficacy judgments have shown to be an important

link between functional status and physical performance of exercise (Ewart 1986). Additional

studies have shown that self-efficacy is not only related to healthy behavior, but may act as a

predictor of exercise behavior change. For instance, a study indicated that independently, self-

efficacy is a predictor of adaption and maintenance of physical exercise (Sniehotta 2005). In

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essence, with any sort of behavior the factor of self-efficacy affects the probability of converting

an intention into an actual action. This is particularly important in our scenario, as we are

measuring self-reported self-efficacy.

Self-Control in Financial Health

Self-regulation or self-control has also been implicated in an individuals’ financial health.

In a recent study over a four-month period it was found that when people engaged in financial

monitoring their self-control strengthened (Oaten & Cheng 2007). Further, little self-control will

lead one to poor saving and spending habits, key elements of financial health. This notion is

confirmed by a recent study that followed a cohort of 1,000 children from birth to the age of 32

years, that identified childhood self-control predicts health and wealth (Moffitt et al 2011). Self-

Control is indicative of financial health.

Self-efficacy in Financial Health

Self-efficacy affects all types of behavior, and it inevitably touches financial behavior

outcomes. Beliefs about self-worth and self-efficacy have been found to positively correlate with

financial satisfaction, and perceptions of present, and future financial health, and negatively

correlate with overspending and financial stress (Hira & Mugenda, 1999). Further research has

shown that perceived financial health is partially moderated by self-efficacy and may be a pivotal

predictor of fewer financial problems (Selenko 2011, Lapp 2010). Self-efficacy is a strong

determinant of execution on financial goals.

Self-Control in Physical health

A factor that is closely linked with self-efficacy is self-control. Like self-efficacy it is a

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strong determinant of behavior. Self-control predicts the maintenance and uptake of an exercise

program and strengthens a wide range of self-regulatory behaviors (Oaten & Cheng 2006). Self-

control has also been studied in the context of control of consumption (i.e. overeating, excessive

smoking and drinking) Research has shown, for example, that the most problematic failures of

self-control, especially in terms of physical health, rely in excessive drinking, eating, and

smoking (Baumester 1994). Failing to cease impulses to undergo unhealthy, often addictive,

behavior is a result of a lack of self-control.

After conducting a thorough and rigorous search and analysis of secondary data

three key hypothesis were formed.

Hypothesis:

H1: There is correlation between physical health and financial health

H2: BMI will be a significant predictor of financial health

H3: Self-control, and self-efficacy mediate the relationship between financial health

and physical health

Overview of Research

We conducted descriptive research to investigate the relationship between physical

health on financial health with varying levels of self-efficacy and self-control. Overall, three

surveys were conducted. Surveys 1 and 2 we’re conducted to receive initial validation of

hypothesis prior to engaging in larger, more expensive, conclusive research. Each survey

was conducted online via Qualtrics. Studies 2 and 3 utilized Amazon Mechanical Turk,

which has been proven to be an effective recruitment tool that achieves results consistent

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with studies that typically cost much more money, yet achieves more representative

demographic samples of the United States than unpaid student surveys (Berinsky 2011).

Order bias was accounted for by randomizing the order for which the panel of physical

health and financial health questions appeared.

III. STUDIES

STUDY 1 and 2: BMI and Financial Behaviors

Overview

Studies 1 and 2 were designed to test hypothesis 1 and 2. The aim was to validate prior

research that had indicated links between financial health and physical health separately, but in

one comprehensive survey.

Method Studies 1 and 2 were similar in their design – measuring self reported physical health

and financial health – but were conducted with different populations of millennial consumers and

used different measures of physical health and financial health. Study 1 was conducted with 107

respondents who were recruited from a first year MBA class (average age: 27.85 years), whereas

study 2 was conducted with 100 respondents recruited using Mechanical Turk (average age:

33.01 years). The questions were identical, except for the measures of physical health. In study 1,

participants were asked to evaluate how they feel about their physical health on a scale from 1-6

(1=worst and 6=best), but in study 2 their physical health was evaluated using BMI. Financial

health was then determined using questions from the Financial Management and Behavior Scale

(Dew and Xiao, 2011), which measures financial behavior (Cronbach's Alpha = .81).

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Respondents were asked how often they have engaged in the following activities in the past six

months:

Paid bills on time. Comparison shopped when purchased a product or service. Kept a written or electronic record of your monthly expenses Stayed within your budget or spending plan Paid off credit card balance in full each month. Maxed out the limit on one or more credit cards Made only minimum payments on a loan Began or maintained an emergency savings fund. Saved money from every paycheck. Saved for a long term goal such as a car, education, home, etc Bought bonds, stocks, or mutual funds Contributed money to a retirement account.

Results and Discussion

Across both studies, which used different measures, we found that respondents’ self

reported physical health and financial health are correlated. In both studies, we calculated

respondents’ Body mass Index (BMI) from their self reported height and weight. We found

that high BMI was correlated with the propensity to engage in poor financial behaviors

such as maximum utilization of credit, and making only the minimum required payments

on loans and credit cards.

This provided strong initial evidence that physical health and financial health were in fact

related (Hypothesis 1), and also revealed that BMI was a significant predictor of financial

health in some way which is discussed later in the report. Having uncovered this

correlation between physical health and financial health, we designed study 3 which

included measures of the two drivers – self-control and self-efficacy.

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STUDY 3: Health, Wealth and Self Efficacy

Overview

Study 3 was designed to be a, longer, more robust, and comprehensive survey. It was

conducted over Amazon Mechanical Turk, and had a larger sample size (n=196) than study 1 and

2. The key difference in this study was that it included the measurement of potential mediators,

self-efficacy and self-control.

MethodRespondents were screened and recruited using a two-step process on Mechanical Turk.

They were in the age range of 18-35 and lived in the United States. We included multiple

measures of self reported physical health and financial health, including their overall assessment

of their current and future (expected) physical health and financial health (Overall 1-100 Scale),

negative and positive behaviors, and body height and weight. We also measured self-control and

self-efficacy using established scales from psychology and consumer behavior.

Two general scales were used to measure self-efficacy and self-control. Perceived self-

control was measured using the Self-Control Management Scale (SCMS) (Cronbachs alpha = .

81), which is a general scale of self-control and self-management (Mezo 2005). Self-efficacy

was measured using the Generalized Self Efficacy Scale (Cronbachs alpha = .88 Avg)

(Schwarzer 1995)

To analyze financial health we took a comprehensive look into their self-reported saving

habits, long term and short term financial planning, and spending habits under the measurements

of the same Financial Management and Behavior Scale consistent with studies 1 and 2 (FMBS)

(Xiao 2011).

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Understanding of the health of our participants, particularly their diet is also necessary.

The Three Factor Eating Questionnaire (TFEQ) (Cronbachs Alpha = Avg .863) was conducted to

understand their eating habits and self-control in regards to eating (Stunkard 1985). Although

eating is a factor in physical health, so is exercise. Therefore questions were constructed to asses

participants activity levels based on the guidelines set forth by the U.S. office of Disease

Prevention and health Promotion (health.gov) Another measure of physical health measured, was

Body Mass Index (BMI), a commonly accepted index for basic physical health based upon

height and weight.

Results

We analyzed data using Correlations, Analysis of Variance including comparison of means

between groups, and Linear Regression.

Figure 1.1

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0.0010.0020.0030.0040.0050.0060.0070.0080.00

Physical HealthFinancial Health

Figure 1.2

Figure 1.3

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IV. GENERAL DISCUSSION

This topic and these fields of health are growing areas for researchers. While the two

areas are being investigated individually this is one of the first time the two topics are being

measured congruently for causation. The initial results reveal physical health and financial health

correlated.

Individuals’ self reported physical health and financial health are correlated. This is a

robust finding across all three studies with different samples of millennial consumers and with

multiple measures of physical health and financial health.

When self-control and self-efficacy are measured in the same study, only self-efficacy is a

predictor of both physical health and financial health.

16% of respondents in study 3 were classified as obese and 24% as overweight, based on

their BMI (calculated from their self reported height and weight). The relationship between high

BMI and the propensity to engage in poor financial behaviors (such as maximum utilization of

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credit) presents a compelling case for researchers and policy makers to study and address

physical health and financial health jointly as opposed to separately.

Overall, our findings contribute to theory (e.g consumer decision making, and consumer

psychology) and have significant implications for organizations (e.g. employee benefit programs,

health service firms, financial service firms) and public policy ( e.g. consumer well being, public

health programs).

Our results reveal that financial health and physical health are related, with physical

health being a potential causal factor in this relationship. Strong correlation is present, but cannot

be assumed, as there could be confounding variables. However, the key intervening variables,

self-control and self-efficacy, were measured to minimize and understand the strength of the

potential confounding variables.

Self-efficacy was observed to have little impact on financial outcomes. The study showed

that little variance between financial health and self-efficacy existed. There was evidence that

indicated it interacted with physical health and self-efficacy, which means it cannot be entirely

ruled out as a mediator. Our research shows self-efficacy is not a strong mediator of the

relationship between financial health and physical health.

Self-control was revealed to be a relatively strong mediator between financial health and

physical health. The ANOVA test revealed it to have an interaction with physical health, when

correlation between financial health and physical health was present.

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