Can Money Really Make You Happier?

A few years ago, I made one of the best and most important decisions of my life, choosing to leave my corporate executive position to create a new career as a Positive Psychology Coach. Now I get to spend every day doing work that I love and enjoying the lifestyle benefits of working for myself. Not coincidentally, many of my clients are also considering career changes, as are many of the students to whom I teach courses on how to be an effective and successful coach.

Sometimes my clients and students are considering a career change in part to earn more money. Others are aiming to move into work they find more meaningful, and looking for strategies to do that without impacting their lifestyles.

In both cases, I find that people are very curious about the connection between money and happiness. I think it’s a very healthy curiosity. We can all benefit from understanding what the research has to say about this important topic. So here is a short version of the story of money and happiness.

Earning enough money is an important factor in most people’s happiness. Poverty takes a real toll on physical and emotional health and well-being, so getting out of poverty generally makes people a lot happier. After that, earning more money has a much smaller impact on happiness, but still a positive one, up to the point at which people can live what we generally think of as a middle-class lifestyle.

But chasing more and more money doesn’t bring more and more happiness. It’s clear that, for most people, being poor diminishes their happiness and being middle class increases it. But what about being rich? Being wealthy has only a very small impact on the degree to which people report feeling happy on a daily basis, and can actually diminish some of the everyday joys of life.

And motivation matters. Regardless of their income level, people who are motivated primarily by financial gain tend to rate themselves as less happy as those who are motivated by more intrinsic factors. People who pursue work that they find meaningful tend to gain genuine happiness from that work—and from the financial success that can come with it.

Here are some of the reasons why chasing financial gain can be counterproductive to our happiness—and some strategies for shaping our professional and financial lives in happiness-enhancing ways.

Time: Very high earners generally spend a great deal of their time working and thinking about working, and relatively less of their time doing things they enjoy with people they love. This is a costly trade-off in terms of happiness.

Happiness-Enhancing Strategy #1: Keep your priorities in order. The most important thing we can do to increase our happiness is to strengthen our relationships and spend time with our loved ones. Earning a living demands compromises, but be clear about your priorities, set real limits, and don’t trade away what you can never get back.

Financial Stress: People at almost every income level—even people who earn high incomes—report feeling financial stress. And most people think their financial stress would go away if they could earn about 20 percent more than they do. But our estimates of how much money it would take to reduce our financial stress climb right up with our income, keeping financial happiness out of reach. Why? Because we tend to increase our spending and our debt right along with our earnings, so all that extra income winds up going toward a bigger house or more stuff and never has a chance to help reduce our financial stress.

Happiness-Enhancing Strategy #2: If you want to be happier with regards to money, then your number-one financial priority ought to be reducing your financial stress. That may or may not take earning more, but it almost certainly involves spending less, paying down debt, and adding to your savings. Easing that chronic strain will make you a lot happier than having more stuff ever could.

Comparison: We tend to measure our own financial success in comparison to other people’s, mostly those who earn somewhat more than we do. So when our incomes rise, so do our frames of reference for comparison. Instead of comparing ourselves to the family with the new car, we start comparing ourselves to the family with the new house, and we still feel dissatisfied.

Happiness-Enhancing Strategy #3: Forget about keeping up. Social comparison really gets in the way of happiness. Even comparing ourselves to those with less than we have has been shown to be destructive to our happiness. We are best off working to shed the habit of comparison, focusing on the things we love about our own lives, and taking action to help people who could benefit from what we have to offer.

This post originally appeared on the Wholebeing Institute blog.