Do not upgrade your home, car, or social circle merely to outrank people around you

Nothing. Before increasing your budget, ask whether the extra money buys a feature you want or a higher position in a comparison group. It is difficult to stand still when everyone around you is upgrading.

Two waves of the US National Survey of Families and Households followed the same people. The researcher linked their responses to local average income in Public Use Microdata Areas, estimated from the 5% sample of the 1990 Census. After controlling for personal income and other characteristics, higher neighborhood income was associated with lower self-reported well-being. The association was large, robust across specifications, and highly significant. The author described a rise in neighbors’ income as having an effect on well-being of a similar order to an equivalent fall in one’s own income. Comparing each person with their own earlier responses using individual fixed effects produced a coefficient of similar direction and size, though significance weakened to the 10% level. Adding state-by-survey-wave fixed effects left the result largely unchanged. These checks reduce explanations based on happier people choosing poorer areas or unmeasured state-level factors. The association was stronger among people who socialized with neighbors and was not significant among those whose social contact was with friends outside the neighborhood. Renters and homeowners showed no difference, which did not support housing costs as the main explanation. Well-being tracked the income of neighbors with the same educational attainment, with little response to differently educated neighbors’ incomes. The association operated mainly through satisfaction with material circumstances rather than satisfaction with family life or other domains. If personal and neighborhood incomes rose by the same proportion, well-being still rose.

Grade B reflects a single study using repeated questionnaires in a non-Chinese population, with self-reported well-being rather than money as the outcome. Statistical controls address several alternative explanations, but this was not a randomized experiment. Comparable Chinese data were not available to cite. The source rates the benefit as medium, consistent with the shopping-and-mood entry. Savings could reach tens of thousands of RMB, but there is no defensible numerical estimate of how much happiness those savings produce, so it does not assign a large benefit on that basis. Paying for more space, a quieter neighborhood, or a shorter commute can be worthwhile because those are features you actually use. The questionable reason is simply “my colleagues upgraded, so I cannot look worse.” See prioritizing commute time when choosing a home, shopping to regulate mood, and stepping back from constant upward comparison online.

Luttmer EFP (2005). Neighbors as Negatives: Relative Earnings and Well-Being. The Quarterly Journal of Economics, 120(3), 963–1002. https://doi.org/10.1093/qje/120.3.963; Luttmer EFP (2004). Neighbors as Negatives: Relative Earnings and Well-Being. NBER Working Paper No. 10667; the original author checked the wording and comparisons against this version. https://www.nber.org/papers/w10667.