How To Be Financially Happy (7 Habits of The Happy+Rich)

If you think that financially happy people buy a lot of expensive stuff all the time, then you are wrong.

Most Americans believe that material possessions improve personal happiness and social well-being.

However, contrary to this belief, studies show that materialists have lower social and personal well-being.

Then, what are the secrets of financially happy people?

For starters, happy and rich people do not get out of bed every morning to “buy things,” because they know how exactly money can buy happiness.

How to be financially happy?

In a nutshell, financially happy people stick to a budget, avoid impulsive spending, pay their credit bills on time, save for financial emergencies, and plan their retirement ahead of time. They donate to charitable causes and do not waste their money on extravagances. They value experiences over material belongings.

Now, let’s take a look at how happy people habitually interact with money.

Habits of Financially Happy People

7 Enviable Habits of Financially Happy People

How do you improve your financial well-being while remaining happy? Financially happy people have certain habits that keep them happy as well as wealthy.

Here are the 7 habits of happy and successful people:

1. Happy people know how to manage their money outflow well.

Happy and rich people know how to manage their money outflow in two ways: set a budget and track their spending.

First, they always make a budget and follow it strictly. A budget enables them to plan and monitor the outflow of money in relation to their income, resulting in financial stability.

A budget is simply a spending plan that balances your current and future expenses against your present and projected income. It keeps your spending in check and your savings plan on track.

A budget allows us to identify and work toward our long-term goals. A budget, in fact, encourages us to lay out our goals, save money, keep track of our savings and investments, and turn our goals into reality.

You, too, may create weekly or monthly budgets by following their lead. Creating budgets is so simple, in fact, that even children with pocket money should make it a habit.

The second thing is that they keep a record of their daily spending. This tracking of daily expenses helps them avoid impulsive purchases. When they want to buy something, they check to see if the amount is allowed in their budget.

The average credit card debt per household reached $5,525, according to the State of Credit report 2021. A budget can help people avoid overspending and debt buildup.

• It is simple: if you handle your money outflow better today, you will be financially happier tomorrow.

2. Happy people spend their money on life experiences rather than material objects.

Research over the decades has investigated how money affects our well-being when we invest in life experiences, as against material things.

We’re happy when we spend our money on life experiences rather than on material objects.

People who spend money on experiences are happier. Why? Because essentially, we get to re-live our happy moments and share those memories with others.

Financially happy people habitually spend their money to buy life experiences (experiential purchases) rather than buying material items (material purchases).

Being constantly preoccupied with how to make more money is also a counter-productive activity. There is now compelling evidence showing people are happier when they are optimally busier.

Material objects give us less and less joy over time as we get used to them and start to take them for granted (a phenomenon called hedonic adaptation).

Because of hedonic adaptation, neither money nor relationship status nor anything else can provide lasting happiness. But happiness is within our power to create for ourselves.

– Dr. Sonja Lyubomirsky, Professor of Psychology. author of How of Happiness (read the book summary)
3 Things to Buy to be Happier, According to Science

3. Happy people fondly reflect on the positive moments from their past.

Humans, maybe uniquely among other animals, have the ability to travel back and forth in time. They can uniquely use the “specious present” to experience their past life as well as speculate and dream about the future.

• Money can help you find happiness as long you know how to spend it.

Research suggests that people who look back on their past with fond memories are happier than those who dwell on negative memories and regrets.

So, happy people seem to live more in the glories of their past, re-experiencing the blissful moments from their past while dismissing the pains. When happy people reminisce about their past, they tend to focus on the positive memories rather than the unpleasant parts of their past.

• The takeaway is this: the more pleasant experiences you buy when you’re young, the more joys you will have when you recall them when you are old.

4. Happy people make it a habit of “catching” the positive emotions of others.

Some people are more vulnerable to profoundly experiencing the emotions of others.

They are sensitive to what others around them feel and easily “catch” their emotions during their happy and sad times. These people tend to be happier, especially when they make it a habit of being around joyful people.

Research shows that when people smile warmly at happy people, they are more likely to smile back and feel warm on the inside.

So, paying greater attention to the positive emotions of others is an easy way to boost your happiness. You can do this by asking your friends to pool their money and spend it on group vacations.

5. Happy people live in a caring and thriving community.

A person is at their happiest when their three basic psychological needs are met: autonomy, competence, and relatedness.

Thousands of studies show that this psychological need fulfillment has a favorable effect on happiness.

Data from research suggests that living in a supportive community can help you meet your psychological needs.

• Happy people have a sense of belongingness where they live and look forward to returning to their home community after a trip.

6. Happy people have goals to reach for.

Goals are important to have a happy life. They are often part of our personal milestones, like getting married, moving to college, getting a new job, and having children.

Goals give us a purpose, and they keep us focused on what we want to accomplish. They motivate us and make us stay productive.

People manage their money better when they have set clear goals, like paying off a loan, investing for a peaceful retirement, or saving for an emergency fund.

Without financial goals, we just drift along, spending rashly on whatever we feel like in the heat of a moment.

Without money goals, your life might not result in a financially stable one.

Research shows that having several different types of goals in our life, like achievement goals, relationship goals, social goals, and personal growth goals, can improve our overall happiness.

One thing here, remember to carve out a personal definition of success before you set your goals.

• A simple thing to go away with is this: Set the right goals at the right time, from daily to monthly to yearly, to put yourself on the right track to financial happiness and success.

7. Happy people savor what they have.

People who are financially happy find happiness in what they have rather than spending money on things that other people have. They understand that authentic financial happiness can never come from keeping up with the Joneses.

Savoring in positive psychology is defined as the process of increasing positive feelings by remembering and lingering on happy experiences from the past. To savor is to appreciate, intensify, and prolong the pleasant memories of a past event.

Financially happy people do exactly that.

They savor their earlier financial successes, acts of charity and altruism, and occasions when others were generous to them.

They also have the habit of appreciating and valuing what they already have. Finally, their spending is mostly on the necessities, with an occasional indulgence in the exotic.

• A simple idea to boost your savoring power: Practice mindfulness to appreciate the present moment rather than hopping between the past and the future.


How does the financial situation affect happiness?

Money has a sizable impact on happiness. First, we need a basic income to help us survive. Thereafter, happiness rises with rising income, but the effect seems to level off at $75,000/year (Kahneman & Deaton, 2010) or $160,000/year (Twenge & Cooper, 2020).

Many people wonder if happiness comes first or success comes first. Actually, science proves that happiness comes before success.

Of course, you need a minimum income to survive and meet your basic needs. Beyond that, however, financial prosperity does not guarantee long-term happiness.

So, if you want to improve your financial well-being, working on your happiness first should be a part of that plan.

• Find out how being happier can lead you to financial success: Can Money Buy Happiness: What Psychology Says On Happy Money?

What does it mean to be financially happy?

“Financial well-being” is defined as being free of major financial stressors, like money worries, basic needs, and future investing. It allows a person can fulfill their current financial obligations, feel safe about their future finances, and make money-driven decisions to enjoy life, like going on vacations.

Financial well-being means becoming financially stable and minimizing one’s financial stress.

To be financially and mentally well-off today, you have to carefully manage your income and expenses without sacrificing the non-tangible things in your life.

You must learn not to prioritize money-making over spending time with friends, pursuing a hobby, or going on vacations with your family.

Financial stress not only decreases a person’s ability to achieve their life goals, but it can also have many negative health and social consequences.

An American Psychological Association (APA) report that came out in 2015 suggests that 72% of Americans are stressed about money at some point in time.

Acute final stress has been reported to drive people to have suicidal thoughts. Immediately contact your mental health provider if you are having any ideas about self-harm.

Final Words

It seems that most people equate having financial freedom with having financial happiness. But, really, are they not the same thing?

  • Financial freedom is being able to live comfortably without having to take money from your savings or selling something valuable.
  • Financial happiness is understanding that money is just a means to an end, and you spend within your means to protect yourself from the misery of penury. Even if they don’t have as much money as they would like, financially happy people will still keep finances to allow themselves to be happy.

Let’s close this with this famous quote on money and happiness:

If you want to feel rich, just count the things you have that money can’t buy.

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Author Bio: Written and reviewed by Sandip Roy—a medical doctor, psychology writer, and happiness researcher. Founder and Chief Editor of The Happiness Blog. Writes on mental health, happiness, positive psychology, mindfulness, and philosophy (especially Stoicism).

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