This paper presents an empirical analysis of the link between income and subjective satisfaction with one's financial situation. It is hypothesized that a household's financial situation has a direct effect on financial satisfaction as well as indirect effects mediated by evaluation of its financial situation, which is based on the comparison with the others and one's own past, aspiration level and consumption level. Structural equation modeling of data was used to test the causal model. The data come from the survey conducted in both Tokyo and Osaka metropolitan area of Japan (n=529). Married samples of both young age bracket 20-39 and middle age bracket 40-59 were used. The results reveal that relative evaluation of its financial situation is the most important for financial satisfaction among the young. On the other hand, among middle ager, financial situation in absolute term is the most important. The present survey results also show that there are more people who often compare their own financial situation with their friends among the young than other age bracket. Income disparity among the young has widened in late 1990s but satisfaction disparity has not widened so much, because relative income has more effect on satisfaction. Even if income disparity in absolute term had widened, the young would not be less satisfied if their friends as reference group had been in the same situation.
