London School of Economics found good mental health also gave people much more satisfaction than a pay rise.
The study suggested that doubling someone's pay cheque would only increase their happiness by 0.2 points on a scale of 0-10.
Conversely, unemployment reduces happiness by 0.7 points on average.
The research found that our mental health has the biggest impact on our happiness. Suffering with conditions such as depression and anxiety reduces our life satisfaction by at least 0.7 points.
In order to boost happiness, one might want to start a romantic relationship. Those with partners are 0.6 points happier than those who are single, the study suggest.
Report co-author Richard Layard said: "'The evidence shows that the things that matter most for our happiness and for our misery are our social relationships and our mental and physical health. This demands a new role for the state - not 'wealth creation' but 'wellbeing creation'.
Speaking to Premier, Corin Pilling from Livability - a national Christian disability and community engagement charity said: "The survey shows that the quality of relationships improve our lot in life.
"It's really nice to have new things but it fades. We've started to realise that there's a lot more to who we are as human beings. We were made for meaning and meaningful relationships."
Listen to Aaron James speak to Corin Pilling about the survey here: