Want to be rich? Don't get too happy

New research shows income rises with happiness, but bliss can be bad for the bank account.

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By Jean Chatzky, Money Magazine editor-at-large

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Editor-at-large Jean Chatzky appears regularly on NBC's Today. Contact her at money_life@moneymail.com.
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(Money Magazine) -- Checked out the bestseller lists lately? In February you would have spotted motivational expert Marci Shimoff's "Happy for No Reason," which claims to teach you "how to experience sustained happiness for the rest of your life." In March came "The Geography of Bliss" by journalist Eric Weiner, a travelogue of places on Earth where people are the happiest. Both of these follow on the heels of "Stumbling on Happiness" by Harvard psychologist Dan Gilbert, which has been translated into 20 languages.

Clearly, for a lot of people, finding happiness is the ultimate goal. But should it be? New research suggests maybe not - at least if wealth and success are also at the top of your list.

University of Illinois psychology professor Ed Diener and others have established that while money won't buy happiness, happy people tend to earn more than sad people. A few years ago, however, investing legend John Templeton wrote Diener a letter that had the professor scratching his head. "Is life satisfaction always great?" Templeton asked. "Maybe a little bit of dissatisfaction is okay."

"I started wondering," Diener recalls, "do you have to be happier and happier? How happy is happy enough?"

Thus, a new study was born. Diener and his colleagues used data from the World Values Survey, which measures the happiness of respondents on a scale of 1 to 10 (with 10 the happiest). They found that income did indeed increase along with happiness but not at the very top. The 10s earned significantly less than the 8s and the 9s. The latter were also more likely to have gone to college, have engaged in the political process and have saved money.

Don't worry, spend money

Why is it better to be happy but not euphoric? Diener's take is that happy - but not too happy - people are strivers. They're interested in making the sorts of changes necessary to get ahead in life, including engaging in competition (not always a happy pursuit), obtaining more education and changing their behavior when what they're doing now isn't working. The 10s, on the other hand, are too complacent to adjust enough.

Diener isn't the only dog on this trail. When Duke University finance scholars undertook an examination of optimists using the Federal Reserve's Survey of Consumer Finances, they also found that people who saw the glass as filled to the brim (classified as those who overestimated their own life spans by 20 years or more) behaved in ways that weren't good for their future.

"When you compare moderate optimists with extreme ones, one of the biggest areas of difference is in self-control," says David Robinson, a lead researcher on the Duke study. The extreme optimists overspent. They accumulated debt. They didn't save. They were more likely to be day-traders. On the other hand, moderate optimists, recognizing the possibility of a run of bad luck, saved more than extreme optimists did.

The idea that you can be too happy applies in other areas of life besides finance. Academic success, for example, went up as happiness increased, Diener found. But it peaked at people classified as "happy" and then fell back for the "very happy."

There are some circumstances in which the very happy have an edge. They're more likely to be successful as volunteers, and they're better at dating and at maintaining close friendships. All keys to life satisfaction, but not necessarily wealth boosters. Eventually the boss notices that his cherished staffers spend all their time socializing rather than getting work done.

So what are the takeaways from this research? To be sure, it's better to be generally happy than sad when it comes to your finances. But sheer bliss isn't all it's cracked up to be. To keep yourself a bit more balanced, try these two courses of action.

Surround yourself with the right people. "If you're looking to get happier, hang out with the optimists and avoid pessimists," says Frederick G. Crane, executive professor of entrepreneurship and innovation at Northeastern University. If you're too happy, pessimists are the order of the day for you.

Challenge yourself. Even if you're not constantly floating on a cloud, super-happiness can make you complacent, says Diener. As long as your approach to life and its tribulations is working, after all, why should you try anything new? The problem with such thinking is that when your way of doing things falls short, you may not realize it.

The solution: Alter your typical tack to problem solving. In my case, for years the only way I knew to get more work done was to put in longer hours. I had to learn to delegate. Once I did, I gained others' perspective, not to mention my own time. So push yourself in a new direction. You'll be richer for it.

Arielle Mcgowen contributed to this article.

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