Friendship, not money, makes people happy.

Editor’s note: This article is a reprint. It was originally published on December 29, 2016.

Many people who pursue happiness place their hopes on material possessions, but research shows that the most important things are health and strong relationships, which money can’t buy.

A study on the origins of happiness presented at the London School of Economics and Political Science (LSE) Wellbeing Conference in December 2016 used survey data from four countries to identify key factors that influence people’s life satisfaction.

Good friends, mental and physical well-being are more important than income

Sir Richard Layard, the LSE economist who led the report, said the findings showed governments should focus on creating wellbeing rather than wealth.¹

Focusing on people’s physical, mental health and relationships can reduce depression and anxiety, leading to a 20% reduction in unhappiness, while focusing on eradicating poverty only reduces unhappiness by 5%.²

According to the report, addressing depression and anxiety could also be “self-funding,” paying for itself through increased employment and reduced health care costs.

The report notes that “the strongest predictor of a child’s happy adult life is not their academic achievements, but their emotional health,” and that children should not be evaluated solely on their academic achievements.

The report said: “There is strong evidence that schools have a significant impact on children’s emotional health, and that the schools children attend have as much impact on their emotional wellbeing as they do on their test scores.” Other notable findings include:³

• Income inequality explains only 1% of the variation in happiness levels within communities, but more than 4% of the variation in mental health.
• Having a partner in life plays a bigger role in life satisfaction than education level, which is consistent with previous research that found that marriage is worth more for both men and women earning more than $100,000 a year.⁴
• In countries such as the United States, Germany, the United Kingdom and Australia, average happiness levels have not increased despite enormous improvements in living standards.

“The evidence suggests that the most important factors for happiness and unhappiness are social relationships and mental and physical health,” Layered said.

“In the past, countries dealt with poverty, unemployment, education and physical health in that order. But now, domestic violence, alcoholism, depression and anxiety disorders, alienated youth, test mania, and many other things are equally important. These should be the focus.”⁵

High income doesn’t buy happiness, but low income can reduce well-being

Strong relationships and good health are valuable components of the happiness equation, but low income can sometimes get in the way of both.

Those in poverty, with annual incomes of just $11,770 for a one-person household and $24,250 for a four-person household, bear most of the burden and often struggle with psychological and physical health issues.

For example, a report from the U.S. Centers for Disease Control and Prevention (CDC) found that nearly 9 percent of people living below the federal poverty line experienced significant psychological distress, compared to just 1.2 percent of people living at or above 400 percent of the poverty line.⁶

In turn, people with severe psychological distress were more likely to have chronic obstructive pulmonary disease (COPD), heart disease, and diabetes than those without. In addition, as income increased, the proportion of people with severe psychological distress decreased.

Research shows that poverty worsens the emotional distress caused by negative events, such as divorce, poor health, and being alone, and makes it harder to enjoy positive events, such as weekends.⁷

Still, the trend of higher incomes being associated with better mental health and well-being seems to hold true only up to a point. In terms of emotional well-being, “there is no further improvement after annual incomes exceed $75,000,” the researchers wrote, concluding that “high income may buy life satisfaction, but it does not buy happiness.”⁸

Happiness and the U-Curve

There is also evidence that there may be a real “midlife crisis,” a period of unhappiness that many people experience in their 40s. A study of half a million people found a distinct U-shaped curve in happiness levels.⁹

Happiness levels are high in childhood, but decline after age 18 and hit rock bottom in our 40s. One study found that life satisfaction scores dropped by up to 10% between teens and middle age.¹⁰

Happiness returns little by little after age 50, but for most it comes in the last few years of life or when serious health problems arise.

Studies show that older adults tend to be happier than younger adults because they are better able to regulate their emotions, are less exposed to stress, and have fewer negative emotions (and possibly reduced negative reactions).

Additionally, a study published in the Journal of Consumer Research found that while younger people tend to value special experiences, older people tend to place more value on mundane moments, like having a nice cup of coffee or “having a long, enjoyable conversation with your son.”¹¹

Another theory posits that the U-shaped happiness curve represents “unfulfilled expectations that arise from experiences that are painful in midlife but beneficially given up in old age and with less regret.”¹²

Friendship fights depression

Having a strong social network of good friends is a key indicator of happiness for good reason. Studies have shown that friendships are an important factor in successfully recovering from depression, because good mood and positive outlook actually spread like an epidemic through social groups.¹³

This is one reason why strong social bonds are associated with personal happiness. According to the Centre for Economic Performance (CEP) at LSE, mental illness, particularly depression and chronic anxiety, is “the single biggest cause of misery in developed countries.”¹⁴

One of CEP’s priorities is to reform public policy to promote personal happiness and wellbeing, given that only a third of people struggling with mental illness receive treatments such as cognitive behavioural therapy.

10 Keys to Living Happier

Layered is the founder of Action for Happiness, a movement of people committed to creating happier, more caring societies. In the video above, he explains why we need to stop tying our inner purpose to becoming more and more wealthy and instead focus on achieving happiness and well-being.

Action for Happiness is a commitment by its members to create more happiness in the world around them, and has put together 10 keys to a happier life that, according to the latest research, tend to make lives happier and more fulfilling. They spell it out as “GREAT DREAM.”¹⁵

One of the bonuses of happiness is that it creates a positive feedback loop that leads to physical and mental benefits, such as making it easier to achieve positive emotions. True happiness opens your mind, broadens your perception of the world, and makes you more responsive to the needs of others.

Experiencing positive emotions increases intuition, creativity, and broadens your mindset. A broadened mindset helps you build important personal resources, such as social connections, coping strategies, and environmental knowledge, which helps you thrive and increase your well-being—a win-win situation for everyone involved.