Drought is a global threat to public health. Increasingly, the impact of drought on mental health and wellbeing is being recognized. This paper investigates the relationship between drought and well-being to determine which drought indices most effectively capture well-being outcomes. A thorough understanding of the relationship between drought and well-being must consider the (i) three aspects of drought (duration, frequency, and magnitude); (ii) different types of drought (meteorological, agricultural, etc.); and (iii) the individual context of specific locations, communities, and sectors. For this reason, we used a variety of drought types, drought indices, and time windows to identify the thresholds for wet and dry epochs that enhance and suppress impacts to well-being. Four postcodes in New South Wales (NSW), Australia, are used as case studies in the analysis to highlight the spatial variability in the relationship between drought and well-being. The results demonstrate that the relationship between drought indices and well-being outcomes differs temporally, spatially, and according to drought type. This paper objectively tests the relationship between commonly used drought indices and wellbeing outcomes to establish whether current methods of quantifying drought effectively capture well-being outcomes. For funding, community programs, and interventions to result in successful adaptation, it is essential to critically choose which drought index, time window, and well-being outcome to use in empirical studies. The uncertainties associated with these relationships must be accounted for, and it must also be realized that results will differ on the basis of these decisions.