Can money make you happy?
Well, yes and no.
It's not about how much you have, but what you do with it.
It turns out there's no, or little, correlation between happiness and income. But if you are making informed decisions about your finances, then you're much more likely to be both happy and healthy.
That's according to the 2015 RaboDirect's Financial Health Barometer, an annual survey of 2000 people aged between age 18 and 65 released last week. Respondents were financial decision makers for their households, with results weighted by gender, age and location, according to figures from the Australian Bureau of Statistics.
The trend is becoming more pronounced. Nearly one in two respondents agreed they were "informed" about their finances. In the informed category, 55 per cent said they were in "excellent health", up from 51 per cent in 2012. Also, 55 per cent said they were "completely happy with life", up from 54 per cent.
Meanwhile, only 27 per cent of folk in the uninformed category said they were in excellent health, down from 35 per cent in 2012. Just 28 per cent were completely happy with life, down from 39 per cent in 2012.
Of course, the question is whether being in financial control makes you happy and healthy, or whether being happy and healthy makes it easier to be in financial control. It's probably a virtuous circle, where success in one part of life makes it easier to cope with other challenges.
The correlation is pretty interesting. You may or may not be able to earn more money, but nearly all of us have the power to get more informed about our finances. Just knowing that we're making the best possible decisions for our circumstances should have a marked effect on our outlook.
But how to get informed?
The series of scandals in the financial planning industry have had their toll. In 2014, 40 per cent of people said they trusted financial advice, but in 2015 this figure fell to 29 per cent.
Trust is higher for those who currently use a financial adviser, at 75 per cent. Which makes me wonder what the 25 per cent of people who use financial advice but don't trust it are doing.
Glenn Wealands, head of research and analytics at Rabobank, says Generation Y (born 1981 to 1994) has found another way to become informed about their finances. They're less likely to see a financial adviser than older generations, but they're better at using online information to learn about personal finance.
As a result they are more likely to make voluntary super contributions and to have a long-term financial plan. I was surprised by Rabobank's finding that 32 per cent of Gen Y respondents made voluntary super contributions in 2015, compared with 24 per cent of Generation X (born 1967-1980) and 27 per cent of Baby Boomers (1950-1966).
The proportion of older people who had a long-term financial plan fell from 2014 to 2015, to 37 per cent of Boomers and 38 per cent of Gen X. But Gen Y were actually more likely to have a long-term financial plan, up from 45 per cent to 48 per cent.
Unfortunately our national happiness quotient could be due for a hit, as confidence and optimism is falling.
The number of people who self-selected into the informed category was 57 per cent in 2014, but down to 49 per cent last year. The decline was worst for Baby Boomers. In 2014 61 per cent of Boomers agreed or strongly agreed they were informed, but last year it was only 50 per cent.
All age groups have also become more pessimistic, with Baby Boomers feeling the gloomiest of all. Only 25 per cent of this age group thought they'd be better off in 12 months' time, compared with 41 per cent in 2013.
Only 35 per cent of Gen X thought they would be better off next year, down from 46 per cent in 2013.
The Gen Y cohort had the sunniest outlook, but even so, only 49 per cent of the youngsters thought they would be better off in 12 months time. In 2013 and 2014, it was 54 per cent.
Wealands' take is that people are feeling nervous about the robustness of the economic recovery, and Baby Boomers in particular are worried about their retirement savings not growing as quickly as they want and need.
A year ago, the cut in the official cash rate to 2 per cent was fresh in everyone's minds, and the ASX All Ordinaries Index was hovering near 6000 points.
Perhaps this week's cut in the cash rate to 1.75 per cent will change the national mood.
