The psychology of happiness: 13 steps to a better life

happy girl and father

We think we know what will make us happy, but we don't. Many of us believe that money will make us happy, but it won't. Except for the very poor, money cannot buy happiness. Instead of dreaming of vast wealth, we should dream of close friends and healthy bodies and meaningful work.

The Psychology of Happiness

Several years ago, James Montier, a “global equity strategist”, took a break from investing in order to publish a brief overview of existing research into the psychology of happiness [PDF]. Montier learned that happiness comprises three components:

  • About 50% of individual happiness comes from a genetic set point. That is, we're each predisposed to a certain level of happiness. Some of us are just naturally more inclined to be cheery than others.
  • About 10% of our happiness is due to our circumstances. Our age, race, gender, personal history, and, yes, wealth, only make up about one-tenth of our happiness.
  • The remaining 40% of an individual's happiness seems to be derived from intentional activity, from “discrete actions or practices that people can choose to do”.

If we have no control over our genetic “happy point,” and if we have little control over our circumstances, then it makes sense to focus on those things that we can do to make ourselves happy. According to Montier's paper, these activities include sex, exercise, sleep, and close relationships.

What does not bring happiness? Money, and the pursuit of happiness for its own sake. “A vast array of individuals seriously over-rate the importance of money in making themselves, and others, happy,” Montier writes. “Study after study from psychology shows that money doesn't equal happiness.”

The Happiness Paradox

Writing in The Washington Post last June, Shankar Vedantam described recent research into this subject. If the United States is generally wealthier than it was thirty or forty years ago, then why aren't people happier? Economist Richard Easterlin of the University of Southern California believes that part of the problem is the hedonic treadmill: once we reach a certain level of wealth, we want more. We're never satisfied. From Vedantam's article:

Easterlin attributes the phenomenon of happiness levels not keeping pace with economic gains to the fact that people's desires and expectations change along with their material fortunes. Where an American in 1970 may have once dreamed about owning a house, he or she might now dream of owning two. Where people once dreamed of buying a new car, they now dream of buying a luxury model.

“People are wedded to the idea that more money will bring them more happiness,” Easterlin said. “When they think of the effects of more money, they are failing to factor in the fact that when they get more money they are going to want even more money. When they get more money, they are going to want a bigger house. They never have enough money, but what they do is sacrifice their family life and health to get more money.”

The irony is that health and the quality of personal relationships are among the most potent predictors of whether people report they are happy — and they are often the two things people sacrifice in their pursuit of greater wealth.

Why aren't rich people happier? Perhaps it's because many of them are workaholics, because they're more focused on money than on the things that would bring them joy. A brief companion piece to The Washington Post story notes that researchers have found that “being wealthy is often a powerful predictor that people spend less time doing pleasurable things, and more time doing compulsory things and feeling stressed.”

In general, rich people aren't much happier than those of us in the middle class. Yes, money can buy happiness if it elevates you from poverty, but beyond that the benefits are minimal. So why do so many people believe that money will make things better?

Stumbling on Happiness

In 2006, Harvard psychology professor Daniel Gilbert published Stumbling on Happiness, a book about our inability to predict what will really make us happy. Here is is a 22-minute video of a presentation Gilbert made at TED 2004, in which he compresses his ideas into bite-sized chunks.

Gilbert says that because humans can plan for the future, we naturally want to structure our lives in such a way that we are happy, both now and later. But how do we know what will make us happy? We don't. In fact, we're surprisingly bad at predicting what will bring us joy. Gilbert asks:

Which future would you prefer? One in which you win the lottery? Or one in which you become paraplegic? Which would make you happier? […] A year after losing their legs, and a year after winning the lotto, lottery winners and paraplegics are equally happy with their lives.

The problem is impact bias, the tendency to overestimate the “hedonic impact” of future events. Put another way, the things that we think will make us happy usually don't make us as happy as we think they will. Winning the lottery isn't a panacea. Having an affair with your hot new co-worker won't be as thrilling as you imagine. And losing a leg isn't the end of the world.

It turns out that humans are able to synthesize happiness. Many people look outside themselves for fulfillment; they expect to find it in things, or in relationships, or in large bank accounts. But true happiness comes from within. True happiness comes when we learn to be content with what we have.

13 Steps to a Better Life

What does all this mean to you? If money won't bring you happiness, what will? How can you stop making yourself miserable and start learning to love life? According to my research, these are the thirteen actions most likely to encourage happiness:

  1. Don't compare yourself to others. Financially, physically, and socially, comparing yourself to others is a trap. You will always have friends who have more money than you do, who can run faster than you can, who are more successful in their careers. Focus on your own life, on your own goals.
  2. Foster close relationships. People with five or more close friends are more apt to describe themselves as happy than those with fewer.
  3. Have sex. Sex, especially with someone you love, is consistently ranked as a top source of happiness. A long-term loving partnership goes hand-in-hand with this.
  4. Get regular exercise. There's a strong tie between physical health and happiness. Anyone who has experienced a prolonged injury or illness knows just how emotionally devastating it can be. Eat right, exercise, and take care of our body. (And read Get Fit Slowly!)
  5. Obtain adequate sleep. Good sleep is an essential component of good health. When you're not well-rested, your body and your mind do not operate at peak capacity. Your mood suffers. (Read more in my brief guide to better sleep.)
  6. Set and pursue goals. I believe that the road to wealth is paved with goals. More than that, the road to happiness is paved with goals. Continued self-improvement makes life more fulfilling.
  7. Find meaningful work. There are some who argue a job is just a job. I believe that fulfilling work is more than that — it's a vocation. It can take decades to find the work you were meant to do. But when you find it, it can bring added meaning to your life.
  8. Join a group. Those who are members of a group, like a church congregation, experience greater happiness. But the group doesn't have to be religious. Join a book group. Meet others for a Saturday morning bike ride. Sit in at the knitting circle down at the yarn shop.
  9. Don't dwell on the past. I know a guy who beats himself up over mistakes he's made before. Rather than concentrate on the present (or, better yet, on the future), he lets the past eat away at his happiness. Focus on the now.
  10. Embrace routine. Research shows that although we believe we want variety and choice, we're actually happier with limited options. It's not that we want no choice at all, just that we don't want to be overwhelmed. Routines help limit choices. They're comfortable and familiar and, used judiciously, they can make us happy.
  11. Practice moderation. Too much of a good thing is a bad thing. It's okay to indulge yourself on occasion — just don't let it get out of control. Addictions and compulsions can ruin lives.
  12. Be grateful. It's no accident that so many self-help books encourage readers to practice gratitude. When we regularly take time to be thankful for the things we have, we appreciate them more. We're less likely to take them for granted, and less likely to become jealous of others.
  13. Help others. Over and over again, studies have shown that altruism is one of the best ways to boost your happiness. Sure, volunteering at the local homeless shelter helps, but so too does just being nice in daily life.

Remember: True wealth is not about money. True wealth is about relationships, about good health, and about continued self-improvement.

Related >> Is it More Important to be Rich or to be Happy?

More about...Psychology, Health & Fitness

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ChristianPF
ChristianPF
11 years ago

Great post JD – I agree with your point that happiness comes from contentment. I found that in my life a lot of my unhappiness came from my lusting after material things. As I have been growing out of that phase and been a bit more content with what I have I suddenly enjoy life a bit more.

Sam
Sam
11 years ago

I agree that money/being rich does not equal happiness.

But being debt free (except for the mortgage) and having a healthy emergency fund and a spending plan has increased our happiness.

J.D.
J.D.
11 years ago

Great point, Sam, and that’s something I wanted mention (but didn’t have room for). For me, getting rid of my debt made a *huge* difference to my peace of mind. I suspect this is true for many people. I also suspect that after that, the psychological “returns” from wealth diminish…

Atticus
Atticus
11 years ago

Thanks J.D., that was a great post. And the video was excellent.

elisabeth
elisabeth
11 years ago

I’d suggest replacing “have sex” with “make love.” Even totally committed couples may find that here are times in life when for one reason or another sex isn’t possible, but even in those times you can continue to “make love,” that is have affectionate and tender times, the closeness of a love relationship, whether or not you include activities that would be recognized as “sex.”

Soapdish
Soapdish
11 years ago

Money may not be able to buy happiness, but it sure can pay off a lot of unhappiness.

Amber
Amber
11 years ago

I love this post and the video. Thanks for putting this together.

seawallrunner
seawallrunner
11 years ago

thank you JD for an excellent article. I remember the wise words of Rabbi Hyman Schachtel: “Happiness is not getting what you want, but wanting what you have”. Wiser words were seldom spoken.

Shanel Yang
Shanel Yang
11 years ago

It’s amazing how some people come out of the most tragic situations and still find something positive in it, while other can barely handle the slightest disappointments. It must be predisposition to a large part. However, we can train ourself to become more positive with our self thoughts and by choosing more positive environments and people in our lives. Here’s “30 Statements for Great Relationships” at http://shanelyang.com/2008/04/15/30-statements-for-great-relationships/

Pooja Sood
Pooja Sood
11 years ago

very appropriate and precise.

Wesley
Wesley
11 years ago

Great article! I really enjoyed this one. I managed to pay off all debt (including mortgage) a year ago, and you’re right…there’s certainly a diminishing return on material gain past that point, at least for me.

My main priority lately has been to find more meaning/happiness in my work and more contentment at home.

I’ll check out the various article links throughout the day today. This was extremely appropriate for the things I’ve been thinking about lately. Thanks!

Mo Money
Mo Money
11 years ago

This is a good post! Thank you this is a keeper!

AD
AD
11 years ago

I like that you post these kinds of articles. Money isn’t all about which IRA to open or how to budget, after all. I very much believe what was said by Montier. Some people, like my husband, are just naturally happy. It runs in his family. I’ve seen the tiny house near the Mexican border in which they lived for several years–no AC, two rooms for four people. I grew up in a lower-middle class home, where we had a house, two vehicles, no worries about food being on the table, and I even had some fancy designer stuff that… Read more »

guinness416
guinness416
11 years ago

Wow, great post JD. I look forward to digging into the video and other links.

Someone
Someone
11 years ago

Rather than saying the benefits of more money on happiness “are minimal”, I’d say that they are minimal AFTER capping out at a certain point. Being able to make rent every month is a HUGE improvement in happiness over wondering if you are going to be out on the street. Knowing you have adequate medical coverage is a HUGE improvement in happiness over wondering if your world will fall apart if you break your arm. Being able to buy healthy, nutritious food is a HUGE improvement in happiness over wondering where your next meal is coming from. But after the… Read more »

Mark Nelson
Mark Nelson
11 years ago

Being grateful. After reading The Secret I found a gratitude rock that I keep in my pocket.

Sometimes I think that sounds stupid but when I get stressed or someone or something bugs me I grab that rock and think of something that I am grateful for. Changes my outlook instantly.

If I am grateful for someone or something than I feel good.

Michael Miles
Michael Miles
11 years ago

“True happiness comes when we learn to be content with what we have.”

Happiness is a choice. I think it really is that simple.

Jessica
Jessica
11 years ago

Great post today, you have definitely been peaking my interest more than usual lately. Money certainly does not buy happiness, at least not in the long-run. There were a couple of items on your list that I never even considered to be importance in relation to happiness, mainly the embracing routine. I always thought that it was best to always “mix-it-up” and try new things. Perhaps I will have to change my way of thinking on that one. But I don’t think that comparing myself to others is always a bad thing. Sometimes doing a comparison will help to make… Read more »

Tziporah
Tziporah
11 years ago

Thanks, J.D., for this topic. I applaud the wisdom in your words, even though I am someone who doesn’t have much money. On Saturday I promised myself to make the best with what I have and to stop obsessing over the opportunities I could not and can not get access to. When I was just out of college I was disabled for a while and unable to work. It looked like my life was over. My health improved, I took things one step at a time, and while I’ve never made much money, I’ve had many good adventures. Right now… Read more »

Tina Vaziri
Tina Vaziri
11 years ago

I’m a regular reader and this post really moved me today. I sent it on to several other people to read. Just wanted to say thanks and great work!!

Saravanan
Saravanan
11 years ago

I do agree that Money is not that important to be happy but when basic needs are in question then definitely MONEY is!

When I wrote that article, I was only thinking about the sufferings the fellow Indians go through to make a living and I was not bothered about being happy.

But at the end of the day after fulfilling your basic needs, all that matters is “Being Happy”.

Michele
Michele
11 years ago

I think money brings happiness by creating choice. Anyone with enough cash to consciously choose a meaningful life activity is probably happy. It’s the people stuck in a job who are often the most miserable.

No matter what the price tag, I often find that knowing I can choose to do something is just as satisfying as actually doing it.

Dave
Dave
11 years ago

Wonderful post.

Getting rich slowly can/should mean getting rich with the things in life that bring true happiness.

Nice change from money talk.

partgypsy
partgypsy
11 years ago

There are certain things that reliably improve my mood/happiness: going for a walk, hanging out with my best friend (who has a different but somehow complementary outlook to life than mine), making my kids laugh, personal time with hubby, and number one working on a creative project (comics). Money doesn’t really have alot to do with it. However if I’m unhappy I’m more likely to worry and be preoccupied about money or all the things money can change. That’s why I’m glad you have these articles, that even for us readers it’s good to take a break from all the… Read more »

PBJ
PBJ
11 years ago

Good post. Especially like the part about being grateful for what you have. The ‘attitude of gratitude’ is a familiar theme in our family, and I think adds to our overall happiness and contentment significantly.

Roger
Roger
11 years ago

I guess that I’m a little confused by the goals suggestion. What if I set a goal of wanting a really fancy, expensive car. Now, I have to work more to buy the car, but will I actually be happier from buying the car? Also, shouldn’t I be grateful for the car that I already have, if it runs OK?

I guess you have to establish the “right” goals.

J.D.
J.D.
11 years ago

@Roger
I think that the goals that researchers mean are personal goals like “publish a book” or “climb Mt. Hood” or “build a deck”. Some of these will involve spending money, sure, but most of them are about self-improvement and the development of personal values. I have a list of financial goals (and intend to write about them soon, actually), but I never really think of them as part of my regular goals…

Troy
Troy
11 years ago

Regarding money, in choosing between having money or not having debt, I understand why not having debt has a much greater impact on happiness than having money. The value of money is in it’s possibilities and the choices it allows. Once basic needs are met, those choices diminish, so the value of money diminishes. However, debt is an obligation. It is a commitment. Eliminating obligations and commitments by paying off debt is lasting and freeing, like breaking out of handcuffs. Money is like the keys to those handcuffs. When you don’t have the handcuffs, you don’t care as much about… Read more »

Chett
Chett
11 years ago

Jean Chatszky actually reported on this a few years ago citing that there is very little corralation between hapiness and money after the first $50,000. I just finished the book Happier, by Tal Ben Shahar. ( http://talbenshahar.com/index.php?option=com_content&task=view&id=38&Itemid=52 ) He is a professor with the most popular class at Harvard, that deals with happiness. He states that nearly 50% of the students there deal with depression. The book is a great read with some very applicable execises. I dealt with depression and anxiety for nearly two years, and I had no real reasons for being in the state of mind I… Read more »

Kira
Kira
11 years ago

Great post! I always wondered why I seem to be happier on a day-to-day business than most people (so much so that people sometimes remark on it). I didn’t know that my genetic setpoint may be higher than others. Those are great tips for happiness!

KHoward
KHoward
11 years ago

Thanks “Troy” for your analogy of debt being like handcuffs. I work at a financial institution, and it amazes me how many people will continue to borrow and borrow for things that they can’t afford, and then wonder why they can’t make ends meet. It’s hard to help them understand that their “cuffs” are getting tighter and tighter. I also have parents with a huge “entitlement” problem – they think that they deserve everything in the world and that as long as they can afford the monthly payment, they’re ok. This is a great post, one I think everyone could… Read more »

Mark Alan Effinger
Mark Alan Effinger
11 years ago

Oh, how true! I’ve been on both sides of the coin (sic!) and have learned to be happy regardless… That said, because I get enjoyment immense enjoyment from the work we do here at my company, work isn’t work “do what you love and you’ll never work a day in your life” rings true around here). I have found that the best way to experience happiness is to get outside yourself, find a passionate mission, and live it. Rich, poor… it’s no longer about you (me). It’s about us… Great, awesome post. This baby is going viral. Grace & Peace,… Read more »

Sarah
Sarah
11 years ago

Ha, I was going to bring up Tal Ben-Shahar too, but Chett beat me to it. I took Tal’s class through the Harvard Extension School last year, which is open enrollment, meaning anyone can take it. Even though it’s an online class (they video taped the Harvard undergraduate lectures), there are in-person and phone sections to discuss and apply the material to your life. My boyfriend and I took it together, and it’s helped a lot in giving us tools to reframe difficulties. Obviously it’s not as cheap as just the book, but it’s less expensive than therapy! And you… Read more »

The Financial Philosopher
The Financial Philosopher
11 years ago

I suspect James Montier took “time off” of his behavioral finance writing to write on the subject of happiness because the latter is selling more books than the former. Personally, I believe the “happiness” books are mostly useless (with excpetion of “Stumbling on Happiness” by Daniel Gilbert). The rewards of contentment have been known for thousands of years. Montier and the host of psychologists and neuroscientists are simply “proving” with science what Lau-tzu was saying 2500 years ago… “Be Content with what you have; rejoice in the way things are. When you realize there is nothing lacking, the whole world… Read more »

David C.
David C.
11 years ago

Great post. After all these years, I have finally figured out that the only possession that brings me happiness is that clump of grey matter rattling around in my skull.

Sandy
Sandy
11 years ago

Thanks for the post. I was just talking about this with my boyfriend trying to verbalize my philosophy about being content with life and how happiness as we define it today seems too overly focused only on material wealth. I also believe it’s true that beyond providing for the basics where money does really matter (this includes a sense of security), that the marginal degree of happiness that the next object gives you is minimal. If you have a closet of 100 pairs of shoes, that 101st pair will not give you more satisfaction in the long term. I think… Read more »

RetiredAt47
RetiredAt47
11 years ago

Several years ago I read a book “Good Mood” by Julian L. Simon. I don’t remember all the details, but what I came away with a very simple solution – if you can’t be happier with what you have, lower your expectations (of course this is very simplified). He talked a lot about a fraction where happiness is the numerator and expectations are the denominator. Basically to improve your overall happiness ratio, you either increase your numerator or lower your denominator.

Mira
Mira
11 years ago

Money never make anybody happy,
but they make people comfortable.
Comfort make more joy, less stres, and so on.
I thinking that is more happy people betwine
poor people, than anhappy betwen rich people.

Thanks to author for so nice post.

Mira

odd lot
odd lot
11 years ago

Hey JD,
It’s already been said many times in the comments, but thanks for a great post. The economy is brutal right now and it’s making a lot of people pretty unhappy. We’re all feeling pretty beat down with a recession, high inflation, portfolio losses, fear of job loss (or actual job loss if you’re one of the unlucky 5%) and crumbling real estate values.

I’m an optimist by nature, but even I’m feeling the strain lately, we need some good news! This was a fun read today, and the timing couldn’t be better.
Cheers,
Odd Lot @ Money-and-Investing.com

deepali
deepali
11 years ago

I’ve been focusing lately on my goals and on my own personal contentment. I am definitely happier, and I notice I’m also more easily able to adapt and react to things around me. No more flying off the handle. 🙂

It’s funny to read this post today – I posted about some of this last week, and I noticed a few others did too. Something in the water? 🙂

And a big YES to Dan Gilbert’s book. Really made me rethink things!

Sean Clancy
Sean Clancy
11 years ago

While everyone’s done a “happiness” post this is the most concise and relevant piece I’ve read. I felt “stuck” a few years back, read all the books on happiness but still wasn’t happy. Then I came across a book called The Energy of Money by Maria Nemeth, and learned about the difference between happiness and luminousity. I highly recommend her new book, Mastering Life’s Energies to discover how to be more than happy, to be luminously happy. Of the thirteen steps, setting and pursuing goals is the one that helped me create more moments of luminousity. Instead of goals in… Read more »

Sara at On Simplicity
Sara at On Simplicity
11 years ago

I love this! All I could think when I finished was, “God, I wish I’d written this!”

I’m firmly in the “Money can’t buy happiness, but it can give you a damn good running start” camp. Still, I agree with those saying that there’s a limit to how much money contributes to happiness once you’re out of debt and making the rent easily.

After all, when thinking of a wealthy friend, I can’t imagine him being any different regardless of income. Whether that’s a choice or that’s his set 50%–that’s the debate for me.

leigh
leigh
11 years ago

i think at different stages, we need different things to keep us happy. during some earlier rough times, my husband brought home a parrot to keep me company after surgeries. he hit the nail on the head with that one, she was instrumental in my recovery. talking to my husband on the phone while he’s away makes me very happy. a good night’s sleep never feels better than after i’ve been sleep deprived and overworked for a while.

Faculties
Faculties
11 years ago

I also want to mention the book “The Happiness Hypothesis” by Jonathan Haidt. It complements many of the assertions in this entry, backed up by science. The website is http://www.happinesshypothesis.com/.
(I should say I’m not connected to the book or the author in any way; I just found it helpful.)

Lorena
Lorena
11 years ago

“A year after losing their legs, and a year after winning the lotto, lottery winners and paraplegics are equally happy with their lives.” If that doesn’t say it all, I don’t know what does. That supports the 10% of happiness comes from circumstances theory.

I would add, however, that sex within the bonds of marriage is the only way that sex can contribute to true happiness (not just temporary pleasure).

Great post. I will share this one for sure.

Uncommonadvice
Uncommonadvice
11 years ago

To me the whole point of watching the pennies is because I know I am happier when I have money in the bank. Therefore, taking things to the n’th degree, this is one of the best pf posts you’ll ever come across.

Kevin
Kevin
11 years ago

I am conflicted between learning to be happy with what I’ve got and being ambitious. I don’t think these two have to be mutually exclusive, but I have a hard time accepting things as they are now (although I live a comfortable life).

Does anyone else have this problem?

Is it safe to say that everyone reading this blog has great ambitions, yet is ultimately seeking happiness?

Any helpful advice is appreciated. Thanks in advance!

Big Winner
Big Winner
11 years ago

This is one of your best posts! Montier’s work seems to reflect the findings of Sonya Lyubomirsky and Neal Roese – other psychologists who have touched on happiness and wrote some great books.

Writer's Coin
Writer's Coin
11 years ago

Great post! I’m going to do a personal assessment of how I’m doing with each one of these. You have them all spot on.

Aaron
Aaron
11 years ago

Before I register my complaint, I just want to note that I enjoy this site quite a bit. I visit GRS at least once a day. However, I only post comments when something raises my ire. So here it is. I take issue with the Gilbert quote JD uses: “Which future would you prefer? One in which you win the lottery? Or one in which you become paraplegic? Which would make you happier? […] A year after losing their legs, and a year after winning the lotto, lottery winners and paraplegics are equally happy with their lives.” I assure you… Read more »

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