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Many of us hold on to the erroneous belief that more money would make us happy. Research shows that there is a correlation between money and happiness up to a certain level of income. Poverty, with all of its profound stressors, is clearly a cause for unhappiness. However, studies show that there is no significant correlation between money and happiness above a household income of $50,000 per year. Moreover, the significant economic gains experienced by Americans in the past few decades have not been accompanied by a rise in life satisfaction and are actually associated with increases in distrust and depression.

After an initial period of elation, even lottery winners are not significantly happier. One study showed that they report experiencing less pleasure in ordinary activities than accident victims. In some cases, winning the lottery has been shown to result in the development of severe depression. While most people cling to the idea that their problems would be resolved if they only had more money, this is simply not true. In fact, we feel poor only when we are comparing ourselves to those around us, and people who are focused on material gains at the expense of personal relationships are some of the more unhappy people around.

So if more money won’t do it, what does make us happy? Here are some research-based tips to help you increase your life satisfaction:

1. Make relationships a top priority. Human beings are social creatures and much of our happiness depends on the quality of our relationships with our family and friends. As such, it is important to invest time and energy in your relationships. Resist the temptation to isolate in times of stress. Take some time for yourself, but don’t spend all of your free time alone. Isolation can lead to loneliness and depression.

2. Get in the “flow” of life. Take a break from ruminating about your past and worrying about your future. Make an effort to spend time living in the moment. Become fully immersed in whatever you are doing. When you get into the flow of life, you forget yourself and bring your focus, energy, and talents to bear to achieve your goals.

3. Limit your time spent in “passive” activities. Recent research shows that unhappy people watch more TV than happier people. They are also more prone to gain weight and experience relationship problems. Get outside and get active. Research shows that regular rigorous exercise can often be just as effective in treating depression as antidepressant medication.

4. Make an effort to help someone in need. Acts of generosity and altruism, such as volunteering your time for a worthy cause or engaging in community service makes people happier.

5. Spend some time counting your blessings. Share your gratitude daily. People who take time to reflect on the positive aspects of their lives report feeling happier. People who focus on the negative aspects of their lives report less life satisfaction.

In the end, happiness is not something that a new truck, new clothes, or financial success will bring. Just like the Christmas toys that lose their appeal in a few days, materialistic things give only the most fleeting joy. True happiness lies in our connection to ourselves and to others.

It does if you have ever struggled with a substance use disorder, overeating, or any other self-destructive behavior that gets out of control and leads to negative life consequences. Many of us reach a point where we know these behaviors are hurting us, but we just can’t seem to stop. Human beings have an uncanny ability to use almost any substance or behavior to excess in an attempt to avoid uncomfortable feelings, and money is no exception.

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While we are the wealthiest country in the world, a survey by the American Psychological Association found that two-thirds of us identify money as the number one stressor in our lives. This stress comes at a cost that goes way beyond the money. Financial distress is linked to relationship problems, anxiety, depression, low self-esteem, work problems, and health problems.

Unfortunately we engage in some of our most destructive financial behaviors during the holiday season. In the coming weeks, Americans will make one-third of their yearly purchases and spend months trying to pay the bill. A survey of 895 respondents by the Consolidated Credit Counseling Services found that 44% of those surveyed were still paying off their debt from last year’s holiday spending! If we are not careful, we will receive the unwelcome gift of the Holiday Hangover in January when we start opening our credit card bills.

It feels great to give gifts to others. However, if you are spending more than is reasonable for the holidays (e.g. buying things you don’t currently have the money in your bank account to cover, or spending money earmarked for necessities) you are hurting yourself, your children, and your family’s future. If you are feeling compelled to spend more money than you planned on gifts this holiday season, take some time to examine your beliefs around money. I refer to these beliefs as Money Scripts.

Money Scripts are those unconscious and often self-lim¬iting beliefs around money we learn early in life that drive our financial behaviors. For example, many who overspend have Money Scripts like: “Spend it while you got it,” “I will never have enough money no matter what I do, so I might as well have fun now,” “I deserve to spend money, and my family deserves to have nice things whether we can afford it or not,” or “You show your love for others by buying them expensive gifts.” These types of Money Scripts, when left unexamined, can lead to significant overspending during the holiday season and other self-destructive financial behaviors throughout the year.

We come by our distorted beliefs about money honestly. So, begin your holiday shopping by making a list of all your beliefs about giving gifts. Spend some time examining what you have written and where you might have received these messages. Knowing what your Money Scripts are and where they come from can help loosen their grip on your life and enable you to make healthy choices around spending.

If you recognize that you need to change your spending habits, don’t wait until you have grown your debt by several hundreds or thousands of dollars this holiday season. Take an important step in changing your relationship with money by developing a reasonable spending plan for buying gifts this year.

I asked Steve Bucci, syndicated Debt Advisor columnist and author of The Credit Repair Kit for Dummies, his thoughts on what keeps people from addressing their overspending. According to Steve, the biggest barrier for people to tackle their excessive debt is getting past the feeling of being so overwhelmed that they don’t know where to start. He says the first step is to stop buying on credit as you can never pay down debt unless you spend less than you earn.

With that in mind, for this holiday season, determine how much money you can spend before you start shopping. Then, go to the ATM and withdraw that amount. Use cash to make all of your holiday purchases. There is an emotional distancing that comes with a swipe of the credit card that doesn’t exist when we are slapping down some hard cold cash at the checkout counter.

Here are some additional holiday financial survival tips from Consolidated Credit Counseling Services:

1. Make a plan. Make a list of who you will buy for and what you want to buy them. Leave yourself time to shop for the best deals.

2. Don’t take your credit cards with you when you go shopping: People spend up to 30% more when they use credit cards to make purchases.

3. If you have a large extended family, consider drawing names out of a hat so everyone buys just one present.

4. Track your purchases as you are making them to make sure you are staying in budget. If you spend more money than you planned for one person, you will need to spend less on another individual.

5. The best gifts you can give those you care most about are memories. They never get old or break. If money is tight this year, put time into planning some novel, creative holiday experiences (e.g. cook something special together, tell stories, go on a family outing into nature, etc.). I suggest that you and your family members also consider adding 2-3 items on your wish lists this year that don’t cost money.

Regardless of whether or not you are already burdened with excessive debt, set a reasonable spending limit this holiday season to avoid the Holiday Hangover. When the vacation’s over, the toys are broken, and you open your mail in January, you will be happy you did!

I didn’t see it then, but my mother had serious issues with spending. She’d always say we didn’t have any money but then she’d go on these shopping sprees, buying clothes for herself and us and antiques for our house. I’d always pay real close attention, waiting for those sprees, because I knew if I could go along with her, I’d get something too. My father always took a “head in the sand” approach very disconnected from our financial situation, agreeing to things even if they didn’t make sense, just to avoid a fight. Not good messaging, either way.

When your parents aren’t on the same page, when one of them would continually warn me, a child, about our family’s impending financial devastation at every turn, yet spends like crazy, and the other parent acts like everything’s fine no matter what, it’s very confusing. As a result I grew up having no real concept of money. I’ve walked around my entire life thinking“Oh, money’s no big deal, unless you’re running out, and then you panic.” The concept of making money work for you or knowing how to properly handle it… that was beyond me.

YMW POV: Allison’s confusion over money persisted for years and years. As an adult, she pushed herself to work hard to earn the money she needed to be independent of her parents but she spent it as fast as she earned it. Unconsciously, she had come to associate having money with anxiety and impending crisis. So, anytime she managed to put something away, her anxiety would increase until she found a way to get rid of her savings: a resort vacation, new furniture she didn’t need, dinner for twenty at the most expensive restaurants in town. Though she made a decent salary, she was living paycheck to paycheck.

Once the fear was removed and I could experience a positive relationship with money, I was able to relax and enjoy the ride. It’s made all the difference in my life.

But is it possible that high self-esteem can hurt us? Well in terms of financial health, the answer is a resounding yes. Research has shown that men are more confident in their financial knowledge and skills than women. With this higher level of confidence, they are more at ease making investment decisions, such as buying and selling stocks. However, when we tally up the stock market scorecard with our red pen (sorry kids) women outperform men by an entire percentage point. Why? Well it turns out that men make more trades than women, racking up more fees and damaging their overall returns. Apparently, a healthy dose of self-doubt is highly adaptive in the world of finance.

Researchers have found some interesting differences between men and women in how they make sense of successes and failures. When things go bad, men tend to attribute their outcomes to external factors, allowing them to keep their self-esteem intact. “I lost that tennis match because my racket strings were too loose,” or “My stock pick was a good one, it was just that stupid CEO who ruined my return.” At the same time, men also tend to attribute their successes to internal traits, such as their innate intelligence or ability. In contrast, women are more likely to look internally for explanations when things go wrong: “I lost the match because I didn’t practice enough,” or “I probably didn’t research that stock enough.” They also have a tendency to explain successes as being less due to their abilities and more a result of the effort they put into a task.

In terms of learning from our investment mistakes and increasing the likelihood we will not repeat them, self-doubt is much more beneficial than externalizing blame in an effort to keep one’s self-confidence intact. In turn, attributing our successes to our innate abilities can be even more dangerous, as our successes can set us up for a much higher fall, as we are tempted to take higher risks. In his books, Fooled by Randomness and the The Black Swan, Nassim Taleb makes an excellent case for the human tendency to ignore the role of randomness in our accomplishments, and illustrates the dire consequences associated with this critical mistake. The fact is, if you roll the dice enough times you will win. Or if enough people are rolling the dice, someone will win quite often for no other reason than random error (also known as dumb luck).

In our financial decisions, the problem arises when: 1) we conclude that our successes are due to our special skills, instincts, or particular methodology, without considering the role of randomness and luck in our outcomes, or environmental factors such as a general bull market, and 2) if we put exclusive blame for our failures on external factors, which robs us of the opportunity to learn and grow. Without adequate self-doubt and humility, we set ourselves up for failure. In terms of your financial decisions, a lack of confidence will serve you well.

With a shared passion we combined our psychological expertise with Rick’s financial planning background and in 2002 launched the first Healing Money Issues workshop at Onsite Workshops, Inc. The program was featured in Jeff Zaslow’s “Moving On” column in the Wall Street Journal. The program evolved and improved over the years, and our work together resulted in three books on the psychology of money. After participating in this 5-day workshop blending psychotherapy with financial education, clients began reporting dramatic changes. We knew we were on to something.

Being a clinical psychologist, I wanted to conduct a scientific study to see if the program was indeed as effective as we thought it might be. The study was completed in 2007 and published in September 2008 in the American Psychological Association’s peer-reviewed journal Psychological Services. It was one of the first studies ever conducted on the treatment of disordered money behaviors, and revealed that clients experienced significant and lasting improvements in financial health and decreases in money worries, anxiety, and depression after participating in the program. Several weeks later I pitched the study to the New York Times, who wrote a feature on our work with clients, titled “How to Treat a Money Disorder.” At that time, due to the beginning of the economic crisis, the psychological aspects of money was becoming a topic of great interest to the media, financial professionals, mental health professionals, and the public.

The day the New York Times piece came out, my phone began ringing off the hook. I was flooded with media inquires from all the major television networks, radio stations, and newspapers across the globe. The idea of “money disorders” and their treatment resonated with so many people, as America was coming to grips with the consequences of our out-of-control overspending, debt, and financial stress. One of the calls came from ABC’s Good Morning America. As news stories go, they wanted to run something right away in Nashville. Thankfully, Ted was available for the interview and the piece was a big hit. He was interviewed by Juju Chang, who sensed there was more to the story than could be featured in a 2 minute piece.

Shortly thereafter, the producers of “20/20” decided they wanted to film our work with clients. Ted and I had several discussions about whether or not this is something we were willing to do, as the welfare of our clients is our primary concern. After consulting with others in our field, we decided that the potential benefit of exposing the very common but under diagnosed and under treated area of money disorders to the public would be of benefit. After 6 months of working out the details, on April 2009, ABC News “20/20” began filming at Onsite Workshops in Tennessee.

Clients were recruited from the ABC website and through group email invitations and asked if they wanted to be on “20/20”. Despite their agreement to have all aspects of their work in the program filmed, Ted and I held firm on not allowing “20/20” to do any taping of the actual group psychotherapy process. With client safety as our primary concern, and the unpredictability about what may emerge in psychotherapy, we decided that it would be in our clients’ best interest and the effectiveness of the process to not have the therapy filmed. Instead, we gave “20/20” access to the educational components as well as special group meetings in which participants shared their experiences and insights in view of the cameras.

Any fears we had about the story being sensationalized or our being put in difficult situations were quickly resolved as we got to know the piece’s producer Michael Pressman and Associate Producer Christine Murphy Costello. With an eye on capturing a compelling story, they were incredibly respectful of our work and our client’s well-being. At one point a client spontaneously invited the producers and camera crew to watch her therapy work, but they respectfully declined, acknowledging that it wouldn’t feel right to do it. Their professionalism, compassion, and concern for the welfare of our participants far exceeded our expectations.

On the last day of the program, the participants shared their experiences in a very emotional and touching closing. All said they had gained significant insights, had changed some of their fundamental money attitudes, and all left with commitments to make behavioral changes. I had given all the participants several tests before the program and after the program, to see what, if anything had changed. As a group, they showed a 42% reduction in symptoms and severity of anxiety, 36% reduction in depression, 18% improvement in financial health, and 10% reduction in symptoms of compulsive buying. These findings were very similar to those we found in our original study. However, making the changes stick is the most important part. To test for lasting improvements, I sent the assessments to all the participants early this month, and should have them all back and tallied by August. If they are similar to previous groups, we will likely see that the anxiety and depression levels have remained reduced and the financial health and symptoms of compulsive buying have continued to improve dramatically as clients have put their aftercare program into place.

We have not had contact with the participants since April, but “20/20” has. They have followed several of the participants to their homes to see what, if any actual financial changes have taken place since the program. Last week, Ted and I flew to New York City, where we met with Michael Pressman and Juju Chang for some follow-up interviews. Juju interviewed Ted on camera for several hours. It was an engaging interview, and Ted did a great job. It was a pleasure to see Michael again, and Juju was a joy to work with. She was a consummate professional with a clear dedication to making the world a better place. She had very thoughtful and challenging questions.

The “20/20” piece is set to run Friday, July 31st. We really have no idea what the final piece will look like, or what impact it will have. We do know that they have asked to see portions of our new book “Mind Over Money: Overcoming the Money Disorders That Threaten Our Financial Health” due for release December 29 from Broadway Business, a division of Random House.  (Watch the actual aired story here in 2 parts)

My hope is that many people who are suffering in shame and silence with the devastating effects of financial stress and disordered money behaviors will see the piece and realize that they are not crazy and are not alone. I want them to hear that money disorders such as compulsive buying are just as common as depression in our society. I hope they recognize that there is help out there. I also hope that the piece will inspire members of the mental health community to take notice of disordered money behaviors, begin assessing their clients for them, and begin offering counseling and support. If you wonder if your financially healthy, take our free 5 minute test now.

There is a big difference between pain and suffering. Pain is what happens when we are hurt, such as when we stub your toe, or when we are mistreated by someone we trust. Pain is immediate. It is right now. Except in the case of chronic physical pain, it is typically short in duration. Pain lets us know something is wrong and inspires us to take action to protect ourselves. We know how to deal with pain, and for the most part can do so effectively. Suffering is a different matter entirely. Suffering is what happens when we live in the past or future, being attached to what has happened to us and letting it define or limit us, or abandoning our present happiness for an imagined future in which things will be different. In contrast to pain, suffering can last a lifetime.

While there are many roads to getting there, there is only one cure for suffering– the present moment. The good news is that since you are creating or at least maintaining your current suffering, you have the power to change right now. If you embrace the present moment, you will find peace, wholeness, and fulfillment. It has been said that it is impossible to be fully present and unhappy at the same time. You don’t have to join a monastery or sit in the corner staring at the wall to learn to embrace the present moment. Fortunately, there is a practice of enhancing present awareness in daily life designed for people like me, who can have some trouble sitting still. It is called mindfulness. Here are some tips for helping you open your present today by practicing mindfulness:

Get out of your head and come to your senses. Make a commitment to do something different today. Pay attention to your routine. Get into it. Experience it. As you shower, shave, or brush your teeth, do so consciously. Feel the water on your skin. As your mind wanders, bring your attention back to focus on what you are doing, feeling, seeing. When you walk out of the house, take a deep breath. Smell the air. On your way to work, catch yourself anticipating your day and turn your attention to the sights and sounds around you, nature’s beauty, the wind in your hair, the sun on your skin. You get the picture. Come out of your habitual, mindless trance and experience the moment.

Eat mindfully. A Zen Buddhist monk and mindfulness mediation teacher was once asked his advice on how someone could lose weight. He responded, “Eat half as much.” When asked what one should do when they are still hungry, he said “Eat twice as slowly.” This monk knew that when we eat mindlessly, we have a tendency to eat more. Instead of eating unconsciously today, stuffing down a burger on the drive home from work or eating with the television on, take some time to eat mindfully, even if just for a few minutes. Eat slower. Smell your food. Take a bite and put down your fork or chopsticks. Focus on chewing your food twenty times before you swallow. Pay attention to the taste of your meal. Spend time appreciating the food you have.

Movement meditation. Practitioners of such arts as Yoga or Qi Gong use movement to help foster awareness, consciousness, and improve health. However, you can begin a similar practice today with just a few tips. You will engage in some type of movement today- walking to the refrigerator, blinking, breathing. Instead of walking mindlessly to your destination, slow down a bit. Pay attention to the feeling of shifting your weight from one foot to the other, transferring energy from the heel of your foot to your toe as you roll your foot forward. Focus on your breathing for a bit, slowing it down and taking a few deep breaths. Feel the air coming into your lungs and your trunk expanding and contracting.

Perhaps you have heard the old adage that “life happens while you are making other plans.” It is true. Time flies when we aren’t paying attention. Taking time to really experience the present moment opens us up to a sense of wholeness, gratitude and happiness we can never achieve by living in the past or the future. Spend a few minutes today opening up to your present. As you let go of ruminations about the past as well as worry about the future, you will like what you find in the moment. The past and the future are just mental constructions. The present moment is all that we really have, and is ours to create.

Coming of age during a disastrous decade for stocks is shaping a generation of ultraconservative investors, and they’re shunning the equity portfolios of their parents for the hiding places of their great-grandparents.

It’s ironic, to say the least. Americans in Generation Y — definitions vary, but generally those born from 1977 to 1994 — have grown up with X Games and globalization. They spend their time paragliding in the Alps or snowboarding on half-pipes. They fearlessly dine on mystery meat bought from street vendors in Mongolia and run careers off laptops fired up in Internet cafes in Southeast Asia.

But when it’s time to invest, they’re as risk-averse as their Depression-era forefathers. That could prove to be a personal-finance mistake of epic proportions.
“Holding on to the coping behaviors that you learned in a crisis almost always proves to be a disaster in the long run,” said Brad Klontz, a Honolulu psychologist who specializes in money disorders. “It’s like soldiers who learn to distance themselves from what’s going on around them to cope in a war. If you use those same coping techniques when you return, it will destroy everything else in your life.”

It’s overly dramatic to say that investing like a scared rabbit could ruin your life. But it could certainly affect your ability to free yourself of the working world anytime before you draw your last breath.

Nothing ventured, nothing gained

Seasoned investors also say it’s a shame because young investors could potentially amass a fortune by being aggressive in bad times like these. And they’re likely to need a fortune, because of crumbling public and private pension systems that other generations were able to lean on to help support them in their old age.
They’ll need to rely more on what they can create with their 401(k)s and individual retirement accounts than their parents or grandparents have had to.
Yet scared-rabbit investing is almost all that Klontz is seeing, with 20- and 30-somethings putting their retirement money in bank accounts, Treasurys or gold to simply “preserve” their savings.

Other advisers report much the same. Their youthful clients maintain they’re too poor to risk throwing good money after bad. Growth? It’s hard to believe in.
When stock values dropped in half amid the mortgage mess, youthful investors fled to the safety of bank deposits.

80% without even a 401(k)?

Of course, whether this anecdotal evidence relays an accurate picture of an entire generation is difficult to know. Getting reliable, up-to-date data on what different generations of investors are doing with their money is tricky because most official data are released years late, and survey data are notoriously inaccurate, said Dallas Salisbury, the president of the Employee Benefit Research Institute in Washington, D.C.

One reason: Financial jargon is about as familiar to an ordinary American investor as Punjabi. (What’s that, you ask? Exactly.) Ask individuals whether they’re invested in money markets or equities, for example, and you’re likely to get a wrong answer because they don’t know the difference, Salisbury said.
Indeed, when the Transamerica Center for Retirement Studies recently asked members of the cohort it defines as Generation Y — those born from 1979 to 1986, a narrow slice — what they were invested in, the largest group (31%) said they didn’t know.

Of those who thought they knew, 48% were at least half invested in supersafe vehicles such as cash, bonds and money market accounts. Only 22% were mostly invested in stocks, as most advisers would recommend.

Fidelity Investments, which compiles data on participants in its own retirement plans, sees less conservatism among Generation Y but concedes that its data reflect a small subset of the population. Only about half of all workers have access to a 401(k) plan, and only about 40% of the 20-somethings who are offered a 401(k) even participate, said Michael Doshier, the vice president of marketing for Fidelity’s workplace investing group in Boston.

That leaves roughly 80% of Gen Y members investing outside workplace retirement plans, if at all. And, anecdotally at least, they’re saving in bank accounts and similar low-yielding vehicles.

It’s a generation that might as well be stuffing its money under the mattress.

“They’re spooked,” Catherine Collinson, the president of the Transamerica Center, explained of the ultraconservative bent taken by these youthful investors. “It’s not just stock valuations but the number of Ponzi schemes that have come out lately. People are naturally rattled.”

Here’s a reality check:

Yes, if you invest in a Ponzi scheme like the one Bernard Madoff ran, you’re likely to lose everything you invest.
But if you invest in established markets with reputable companies, you can expect to be rewarded for taking measured risk, even if you do have to suffer through some sickening crashes like those in 2000 and 2008.

Despite the recent carnage, investing in stocks or stock mutual funds is not the economic equivalent of risking death by playing in traffic.
It’s more like taking a long journey (in your car) on the freeway rather than trying to make it across country via side streets. Yes, people drive more slowly and carefully on those side streets. But it can take you seemingly forever to get where you want to go.

In financial markets, risk is measured by the variability of returns, and some risk is well-rewarded. Small-company stocks are considered very risky because in their worst year they lost 58% of their value, for example, while they gained almost 143% in their best year. But on average, small-company stocks earned 11.67% annually over the 83 years tracked by the market researchers at Ibbotson Associates in Chicago.

Treasury bills, which provide returns similar to those of bank deposits, are considered stupendously safe because they almost never have a money-losing year and are backed by the federal government (like bank deposits). But the return for taking such little risk is pretty paltry, too: about 3.7% on average.