I recently just finished Happy Money: The Science of Smarter Spending by Elizabeth Dunn & Michael Norton. I recommend picking it up at your local library. Buying it won’t increase your happiness, but here’s it is on Amazon (affiliate) if you are inclined.
We’ve all heard the saying “Money Can’t Buy Happiness” and based on Happy Money, it actually can as long as you spend it in 5 key areas.
There are all kinds of research out there that shows that buying stuffing doesn’t necessarily result in happiness. You’ve seen the videos and posts on Facebook that tell you about this. Basically, experiences just stay with you. The memories made out of experiences provide exponential happiness especially as you relive it in your stories.
The problem with buying things for happiness is that no matter what you buy, there is always a better thing available. You end up constantly comparing your newfound object to something better, something newer, something shinier. In the end, comparison steals your joy.
For me, this took some time for me to understand, but eventually, I was able to move towards spending money on experiences such as traveling instead of buying another pair of shoes or handbag. The benefits of an experience may be more abstract, but it's one that you can review and refine over again in your mind. Last year, we hiked the Inca Trail to Machu Picchu. It was an experience I will never forget, but it also proved that I was capable of hiking in high elevation and sleeping in the freezing cold under the brightest stars.
Make It a Treat
Dunn and Norton found that making something a treat also creates more happiness. In our ever instant gratification society, waiting for something is actually a good thing.
“Abundance is the enemy of appreciation.”
They cited an example of someone who purchases a luxury vehicle. The first time the owner drives their brand new car, they may smile more and appreciate the fine leather seats, the latest technology, the new car smell, but as the days progress and the same vehicle is used to navigate across crawling city traffic or across muddy streets, the vehicle begins to lose its appeal quickly. It becomes just another mode of transportation and car owners no longer notice the fine amenities their vehicles provide as they stress about external factors like being late or needing to get all of their errands done. If you want to appreciate your luxury car, take a long scenic joy ride.
This concept can be applied to so many other things. We all love our habits and our routines. By breaking our routine here and there, we will learn to appreciate something new in the way that we are going about our daily lives. Perhaps, it’s as simple as taking a new route home or trying a new restaurant, by breaking our day-to-day, we can learn to appreciate our old ways more.
Time is a huge factor in smarter spending for higher happiness returns. Each purchase you make today alters how you spend your time tomorrow. Think about it. What are things that undermine your time: a nice new TV, a bigger house farther from your office, a brand new car. So instead of buying things, buy time instead. How does one do this? By asking yourself each time you make a purchase, how will this affect the use of my time in the future? For example, buying a Roomba, while slightly costly at a few hundred dollars, will save you a few minutes of house cleaning each day. Instead of buying a bigger house farther from the office, a smaller one that cuts your commute in half might be more favorable gaining you a few more minutes each day to spend with your family.
Many of us wish we had more time in the day. Perhaps, it’s time to look our daily schedules and see how we can buy ourselves time. For me, instead of heading to the grocery store and spending time there, I opted to get food delivery service each week. Think of ways you can outsource the demands of your daily life. What can you cut out and pay someone else to do so that you can have more time? Consequently, once you do gain more time, be careful about what you fill it with because it may put you in a cycle that does not return any happiness.
Don’t also forget the "The Bad Happiness Tradeoff." While working long hours to earn more money to provide your children with a fancier home and shinier toys may seem like the right strategy, think about what you children really need. It’s probably your presence and your attention that will make them happier, not the new toys.
Pay Now, Consume Later
The future is always bright. You’ll derive more happiness if you pay for something now and consume later. Dunn and Norton stated that the dreaming and planning phase of how your purchase will be can provide more happiness than actually having your purchase today. “Delay can enhance the pleasure of consumption not only by providing an opportunity to develop positive expectations, but also enhancing what we call the “drool factor"…but people don’t always recognize the benefits of delay.”
“Because pleasure consumption is purest without the experience of paying for it, anything we can do to separate payment from consumption can enhance the pleasure of purchase.” Unfortunately, this one of the top reasons credit cards became successful. It separated payment and consumption. A credit card minimized the pain and detachment of having to shell out cash for an object. This made it easier to buy anything you want without money. This “consume now, pay later” attitude does not increase happiness. In fact, it causes the opposite as there is no delay in gratification, it increases debt and eats up more of your time as you work more to pay for these purchases.
Instead of consuming now, paying later, consider paying now, consuming later. While it may seem painful to consume something way later in the future, you’ll learn to appreciate and gain more joy from it. Consider this the next time you are buying something. Knowing that you won’t get the object until some distant future may lead to you no longer needing it or it may lead you to appreciating it more once it arrives. This is true of any trip planned in advance. Knowing that you’ve already paid for your flight and hotels, you’ll be more apt to enjoy the experience.
Invest in Others
The last principle to increase your own happiness is to actually spend it on someone else. What can you do for someone else with your money? There’s no doubt that earning a little more money could improve your family’s life, but what happens when you have all that you need? The best way to increase your own happiness is to then figure out how to share your wealth with others. Think Buffet and Gates.
Dunn and Norton cited how happy babies get when they are sharing something. Just yesterday, I was holding a friend’s one year old and she kept trying to give her string cheese away. Each time she would do it, she would smile and giggle and each time someone refused, she would try again. I think sharing is innate in all of us. This is also part of the reason why many of us do love to give gifts. The problem sometimes is that gift giving became more of a competition and it stopped being from the heart.
If you have all that you need and want to increase you happiness quotient, consider donating money to a cause close to you or a cause where you can see its impact. The emotion you’ll feel helping someone else out instead of buying something for yourself will be much greater.
So there you go, money CAN bring you happiness, but only if you spend it in the right way. Buy Experiences, Make It A Treat, Buy Time, Pay Now, Consume Later and Invest in Others.