The word "spirit" is archaic, which is why I think it should be replaced with existential terms. It's clearer to speak of body, mind, and consciousness. If that's so, "living in the spirit/consciousness" would mean something like living in your head, in an introverted state of meditation. Otherwise, "living in the spirit" seems to be confused or meaningless. Does it mean living according to God's plan?
Anyway, I question whether happiness should be our ultimate goal in the first place. Happiness in the sense of contentment would be suited to a utopia such as Heaven, in which everything is perfect. In the real world where suffering, injustice, and amorality are the norms, happiness is inexcusable. If someone's happy and content with her life, that means she's not paying attention or her narrow-mindedness is part of the problem.
Far from being happy in a monstrous world, we hyper-aware creatures have an existential obligation to suffer, to confirm that we truly understand what and where we are, and what's going on all around us. Show me a truly happy person and I'll show you a sleep-walker.
I think addressing your comment has inspired me to write an article on this, so thanks for that. ;)