In this article: Five financial habits that can make you happier

How much money do you really need to be happy?

Don't stress out. While researching her new book, MoneySmart columnist Jean Chatzky discovered who's content and what you can learn from their financial habits.

More than a year ago, when I sat down to decide what my latest book should cover, I thought I would write about the mounting consumer debt that has so many Americans in its vise-like grip. Instead, I ended up writing a book about the correlation between money and happiness. How did that happen? It actually was a confluence of several things -- some of them disturbing and some of them hopeful, as it turns out.

First, there was a March 2001 story out of England: Economists and researchers Andrew Oswald and Jonathan Gardner at the University of Warwick had spent eight years studying 9,000 randomly chosen people who had responded to an annual happiness survey by the British government. From this larger pool, Oswald and Gardner focused on a smaller group of lottery winners and people who had inherited a large sum within the previous year. Looking at their responses, the researchers eventually came to their conclusion: Yes, money can buy happiness. The only hitch: It would take a lot of it -- roughly a $1.5 million windfall -- to turn an unhappy person into a very happy one. Because the average American household income hovers around $42,000 a year, it's clear that this level of "happiness" is way out of the reach for most everyone.

Next, I looked at the financial landscape: The markets were heading for their second down year, ripping through the paper profits of people who, before the turn of the century, had felt wealthy for the first time in their lives. And debt was headed up, up, up. Credit-card debt in 2001 skyrocketed, topping $8,234 per household -- nearly triple the figure a decade earlier. The average household juggled (and still juggles) an amazing 16 credit cards; pull out your wallets and start counting if you don't believe the CardWeb.com research. And to staunch some of this plastic debt, people started draining equity from their homes with home-equity loans to the point that we own less of our roosts than at any other time on record.

What a mess. I found the English research, coupled with the dismal economic scenario, extremely disheartening. Talk about a mixed message: Sure, we now know what it takes to make you happy. But sorry, you'll never be able to have it. Clearly something was missing. It wasn't until I started thinking about my own upbringing that I thought I might know what it was.

I grew up in Wisconsin, the daughter of academics. We lived in a modest house on a street filled with kids. Thinking back, there were lots of signs that money wasn't plentiful during most of my adolescence. For entertainment, my parents and their friends had potlucks and bridge nights, alternating houses. We owned two cars -- first, a Ford wagon, and then, after it died, an Oldsmobile Delta 88. And when we traveled the 900 miles every year to visit my grandparents in Philadelphia, we got up at 4 in the morning and drove.

Our family of five might not have dined out frequently, held season tickets to the local sports franchise or theme park, owned one car per licensed driver or vacationed several times a year -- things many middle-class households today take for granted -- but I certainly don't recall a lack of money leading to any unhappiness.

Instead, my parents prioritized to pay for the things they thought were most important. They alternated paying the bills so neither would get overstressed. And my brothers and I were expected to contribute. If we wanted something that wasn't in the budget, we saved our allowances or baby-sat. When we traveled to Disney World, we fully expected to bring our own money for mouse ears.

It seemed to me that if something was sabotaging the happiness of Americans, it wasn't a lack of money, but the way in which money was being managed. I figured that if I was able to pinpoint the money-management habits of people who say they are happy with their financial lives, then I could begin to write a new prescription that, if adopted, could make a significant difference in the financial happiness -- and perhaps the overall happiness -- of Americans.

So I created an eight-page questionnaire, with the help of some "Money" magazine colleagues and the polling agency RoperASW, which was taken by 1,500 randomly selected Americans. The results were even more intriguing than I had hoped. Sure, money plays a part in happiness; you need a certain amount to live comfortably today (and my research puts that at about $50,000 a year -- good news, because many people are already there, or close). But beyond that, more money doesn't buy more happiness. At least not the sort of money that's in any realm of possibility.

But better money habits absolutely can make a person happier. And from the research results, I was able to isolate a number of good behaviors that respondents said had led to their financial well-being (see tips). I believe adopting even a few can make a significant difference in your overall contentment.

That's a notion even English researcher Oswald doesn't find all that surprising. "The ability to shape your own life, to control it, is very important. It's highly associated with psychological well-being," he said when I told him the results of my survey.

Want proof? Imagine two families. The first earns $50,000 a year -- not a huge amount, but they've adopted at least four of the habits I mention (in my book, there are even more from which to choose). They pay their bills as they come in. They're generous with their time and their money. On the other hand, the second family earns upward of $75,000 a year, but they have some bad habits. They pay their bills once a month, and they don't give to charity. So who's happier: the family that earns $50,000 or the one that earns 50% more?

Neither. Roughly six times out of 10, families like the first will say they're financially happy and families like the second will say the same thing. What makes the first family as happy as the second? Good habits. People who manage their money in productive ways are content; they don't let their money manage them. Good habits make that first family just as happy as if they earned half again more.

Thus, my conclusion became the book's title: "You Don't Have to Be Rich" -- a notion I find comforting given today's economic realities. In other words, it's not how much you make that matters. It's how you handle it.

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Contributing Editor Jean Chatzky's new book -- You Don't Have to Be Rich: Comfort, Happiness and Financial Security on Your Own Terms -- is in stores next week. Look for her on NBC's "Today" show Sept. 29 through Oct. 3 discussing more findings from her research on money and happiness. (Portfolio/Penguin, $23.95)