How important is money to your wellbeing?

Money and Life
(Financial Planning Association of Australia)

Having more money should make us happier right? According to a number of different research reports, feeling good about life comes from a feeling of control over your finances, rather than how much money you have. Get tips on how to change your ways to boost financial wellbeing.

The wellbeing formula for Australians

After spending 15 years exploring what contributes most to the happiness of our population, Australian Unity published their What Makes Us Happy? report in 2015. Data from their annual surveys about different factors and lifestyle choices that can influence wellbeing have explored everything from how much sleep we get to where we live. The report compiles all these findings to arrive at a general formula for positive wellbeing outcomes.

The ‘Golden triangle of happiness’ is supported by three essential pillars for life satisfaction and wellbeing: Relationships, Financial Control and A Sense of Purpose. According to the report, if we have these things, happiness is the natural result, regardless of other circumstantial factors such as age, income and health status.

How much is enough?

Looking more closely at what the report has to say about the financial control part of the formula, it seems that having more can lead to greater happiness. The rise in happiness from even a modest rise in income is certainly significant for people with less to start with. When your annual household income is between $15 – $30,000, an extra $18,750 in your budget can be expected to bump you up one point on the wellbeing index. But what price is an extra point if you’re already enjoying a household income of $150 – $200,000? If you’re in this bracket, your income will need to rise $147,000 to take you just one step up on the wellbeing index. That’s an increase of close to 100% in your household budget.

So being a whole lot better off financially, doesn’t always bring an equivalent boost to wellbeing. As the report suggests “the power of money to affect wellbeing lies in its capacity to alleviate stress and create an environment for happiness. Accordingly, people can achieve normal levels of wellbeing even with low income, so long as they feel in control of how they spend it.

What makes us feel well financially?

In their 2018 survey of Financial Wellbeing in Australian adults, ANZ and their research partners at RMIT University and University of Bristol, have placed their focus firmly on this concept of how being in control of our finances can bring benefits. The team set out to come up with a financial wellbeing score for survey respondents, based on three aspects of personal money management:

  • Ability to meet financial commitments such as bills and loan payments.
  • Feeling comfortable with the current and future financial situation and whether they have the money necessary to enjoy life.
  • Resilience for the future and ability to cope with a significant unexpected expense or fall in income.

Taking into account indicators for all these components,