A Deep Dive into the Factors Influencing Financial Success: A Machine Learning Approach

TL;DR

This study uses machine learning to analyze longitudinal survey data, identifying key socioeconomic factors that influence individual financial success, with implications for policy and personal financial planning.

Contribution

It demonstrates the effectiveness of machine learning algorithms in predicting financial success and highlights the importance of specific socioeconomic factors using longitudinal data.

Findings

Highest education level, occupation, and gender are top determinants.

Yearly working hours, age, and work tenure are secondary factors.

Other socioeconomic factors have tertiary influence.

Abstract

This paper explores various socioeconomic factors that contribute to individual financial success using machine learning algorithms and approaches. Financial success, a critical aspect of all individual's well-being, is a complex concept influenced by various factors. This study aims to understand the determinants of financial success. It examines the survey data from the National Longitudinal Survey of Youth 1997 by the Bureau of Labor Statistics (1), consisting of a sample of 8,984 individuals's longitudinal data over years. The dataset comprises income variables and a large set of socioeconomic variables of individuals. An in-depth analysis shows the effectiveness of machine learning algorithms in financial success research, highlights the potential of leveraging longitudinal data to enhance prediction accuracy, and provides valuable insights into how various socioeconomic factors influence financial success. The findings highlight the significant influence of highest education degree, occupation and gender as the top three determinants of individual income among socioeconomic factors examined. Yearly working hours, age and work tenure follow as three secondary influencing factors, and all other factors including parental household income, industry, parents' highest grade and others are identified as tertiary factors. These insights allow researchers to better understand the complex nature of financial success, and are also crucial for fostering financial success among individuals and advancing broader societal well-being by providing insights for policymakers during decision-making process.