Financial Wellness Month: What two decades of research has taught Finance professor

Jason Fink, professor of finance, has been conducting research in his field alongside his wife, Kristin, who is also a JMU professor of finance. “The topics of my research have varied substantially over the last 20 years, but at the core of everything I do is an investigation into financial market risk and return,” he said. 

As Financial Wellness Month comes to end, Fink reflected on his years of research and shares insights on how others can ensure they are financially well throughout the year. 

College of Business: What is your main topic of research and what peaked your interest in this area?

Jason Fink: Over the 20 years I’ve been at JMU, my main topic of research has shifted several times. Recently, my focus has been on personal finance and investment issues. These topics have always been important, but the manner by which retirements are financed has dramatically changed in the United States over the last few decades. Specifically, pensions which pay a fixed amount to retirees (defined-benefit pensions) have been mostly replaced by pensions in which participants contribute a fixed amount and then invest the assets on their own (defined-contribution pensions, such as 401(k)s and 403(b)s). This change has substantially shifted the risk of financing retirement from employers to employees. Concern about these increased risks has led me to want to contribute to the publicly disseminated research available to people thinking about retirement, and the professionals who assist them.  

CoB: How do you begin your research process?

Fink: I do some work with a great private wealth management company here in Harrisonburg. We have extensive discussions about the needs of their clients, and the questions the advisors and portfolio managers have about the state of the market and other investment topics. These conversations have recently been the basis for several of my research ideas. These are questions like “Are commodities a viable asset class to include in client portfolios?” or “What sorts of variables can we use to forecast asset-class returns?” Both of these questions have recently led directly to published papers.

CoB: How and why are these topics relevant?

Fink: The shift of risk from companies to retirees via the pension system has made these topics relevant to almost everyone in American society, whether they realize it or not. There is research that demonstrates that for a typical retirement, it is sustainable for a retiree to pull about 4% from their retirement portfolio in the first year of retirement, and then adjust that amount by inflation each year.  If the retiree pulls more than that, there is a chance they will outlive their money, which is a pretty negative outcome. 

CoB: What does “financial wellness” mean to you?

Fink: That’s a tough one to define, since it likely changes by life stage. For a recent college graduate, earning enough money to pay all their obligations and to start to save for the big expenses in life would signify financial wellness. For those in midlife, that definition likely expands to include providing not just for the obligations of the self, but also for the obligations of those that depend on you, while also saving and investing enough to meet one’s needs for later in life. Retirement age brings perhaps a simpler definition — having enough resources to meet your household’s current and likely future needs. But even these very broad definitions vary from individual to individual. “Personal” finance is properly named.

CoB: What should people be focusing on in terms of their own personal finance?

Fink: The simplest things make the biggest differences. First and foremost, spend less than you earn, and invest the difference. There are nuances beyond this for sure, but this is rule number one. The more you can invest today (and sometimes it is hard to get the financial breathing room to do so), the more resources you will have to address difficulties tomorrow. If you fail to invest today, in the future you’ll never have more resources than you can produce with your labor at that moment.