This paper investigates whether individuals feel worse off when their neighbors earn more, exploring the concept of "lagging behind the Joneses" and its impact on well-being. Using panel data from the National Survey of Families and Households (NSFH), the author matches individual-level data on well-being indicators with local average earnings. The findings suggest that higher earnings of neighbors are associated with lower levels of self-reported happiness, even after controlling for an individual's own income. The robustness of these results is tested through various specifications, including individual fixed effects and state-time fixed effects, ruling out concerns about selection bias and omitted variables. The paper also examines the mechanisms behind this relationship, finding that the negative effect is driven by interpersonal preferences that incorporate relative consumption, rather than other factors like housing market interactions. The results have implications for understanding the dynamics of well-being and policy decisions related to tax and expenditure.This paper investigates whether individuals feel worse off when their neighbors earn more, exploring the concept of "lagging behind the Joneses" and its impact on well-being. Using panel data from the National Survey of Families and Households (NSFH), the author matches individual-level data on well-being indicators with local average earnings. The findings suggest that higher earnings of neighbors are associated with lower levels of self-reported happiness, even after controlling for an individual's own income. The robustness of these results is tested through various specifications, including individual fixed effects and state-time fixed effects, ruling out concerns about selection bias and omitted variables. The paper also examines the mechanisms behind this relationship, finding that the negative effect is driven by interpersonal preferences that incorporate relative consumption, rather than other factors like housing market interactions. The results have implications for understanding the dynamics of well-being and policy decisions related to tax and expenditure.