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Money, Happiness and the Secret to a Rich Life

You don't want to be rich. You want to be happy. The question is, can money buy happiness? Turns out it can--to an extent.

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This story appears in the July 2011 issue of Entrepreneur. Subscribe »

There's a strong correlation between wealth and happiness. Rich nations tend to be happier than poor nations, and rich people tend to be happier than poor people. But money's impact on happiness isn't as great as you might think. If you have clothes to wear, food to eat and a roof over your head, more money has only a marginal effect on your sense of well-being. Other factors are more important.

In a 2005 issue of the Review of General Psychology, Sonja Lyubomirsky, Kennon Sheldon and David Schkade looked at years of research to determine what contributes to long-term happiness. They found that about half of our happiness is biological, determined by a sort of happiness "set point." About 40 percent of happiness comes from the things we choose to do, like exercising, setting goals and building friendships. Only about 10 percent of our happiness is based on circumstances like age, race, gender--and, perhaps surprisingly, financial status.

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