Household Financial Resilience Index (HFRI): A Quantitative Framework for Measuring Household Financial Resilience

The Household Financial Resilience Index (HFRI) is a transparent quantitative framework designed to measure a household’s capacity to absorb financial shocks while continuing to meet essential financial obligations. The index combines four dimensions of financial resilience: savings strength, debt sustainability, emergency coverage, and expenditure stability. Each dimension is represented through a calibrated mathematical scoring function and combined into a composite score ranging from 0 to 100. The research develops the mathematical framework, calibrates the scoring functions, tests the model using 1,000 simulated households over 12 months, examines sensitivity to alternative weighting structures, and benchmarks the resulting index against an external financial-resilience measure. The study investigates whether a multidimensional and transparent mathematical index can provide a meaningful representation of household financial resilience while identifying the limitations associated with simulated data, researcher-defined calibration and weighting assumptions.