The agreement is unanimous: money can’t buy you happiness. However, what if there were ways to spend money that could make you happier as a result? According to Elizabeth Dunn and Michael Norton, who co-authored the book “Happy Money: The New Science of Smarter Spending” in 2013, happiness has nothing to do with how much money you have or make, but it has everything to do with how you spend it.
One study showed that Americans typically assume that if their income were to double, they’d be twice as happy. Yet statistics show that this only results in a 9 percent increase in happiness. That’s because your level of income has little influence on how much you smile, laugh, or enjoy yourself on a daily basis. So how can money make people happier?
Spend money on experiences, not on things
Data proves that things won’t make you happy, but experiences do. When asked to consider their latest purchases, 57 percent of Americans felt they’d experienced more happiness after spending money on a holiday, rather than on a piece of jewelery. Only 34 percent felt the other way round.
Think about it, with experiences, you make memories. You’re filled with sights, sounds, and smells that stimulate your senses. Friends and family might also be with you and make the memory more profound. An object doesn’t achieve the same end. When you think about memories you’ve made, you can relive the experience and feel happy, time and time again. So instead of buying expensive things, go to the movies with your family, go on a trip, attend a sporting event, or join a gym.
Do small things more often
The idea isn’t to splash out and spend hundreds or thousands on experiences, even listening to a new song can be an experience! Plus, thinking small isn’t a bad thing at all. According to Dunn and Norton, when something is abundantly or easily available to us, we tend to appreciate it less, so try and turn common things into special treats.
By slightly limiting access to the things that bring you pleasure, you paradoxically increase their impact. Additionally, it’s proven that most people would rather experience a greater number of small pleasures than a smaller number of large pleasures, simply because our brain perceives the small events as more beneficial than a single one.
Outsource “time-sucks” and unpleasant activities
I’m a big fan of this one. What if you could use money to free you from boring tasks that you don’t particularly enjoy to pursue your passions instead? Studies show that people spend most of their free time shopping or doing housework, both of which increase feelings of tension and depression.
Take household chores, for example. Not many people can truly say they love them, but we all know they need to be done! Unfortunately, they do take time away from more enjoyable activities. So if you spend money to outsource at least some of them, you can free up more time to do what you like instead. You could also go a step further and invest money in time-saving goods, like a kitchen appliance.
Save before you buy and don’t fall into debt
This isn’t just to avoid financial strain. The greatest pleasure we gain from a purchase lies in the anticipation of it, so if you save gradually, you can enjoy feeling excited as you wait to get what you want. That’s why holiday makers tend to be happier in the weeks before a trip than on the trip itself.
This is due to what Dunn and Norton call “the wrinkle in time phenomenon.” Because of our uneven perception of past and future, future events provoke more positive emotions than identical past ones. That’s why credit cards make it easy to overspend; you think that paying for an item in the future somehow decreases the misery involved in paying for it altogether (but it’s just a perception, so don’t use credit cards!). For one thing, you won’t be able to enjoy the anticipation of a purchase while saving for it, and you’ll also find yourself on the path to debt and sadness instead. Debt decreases happiness, and that’s a fact.
Spend more money on others
We all have an innate need to give, and satisfying it makes us happy. Other people’s happiness is contagious. When we give a present to someone and see the smile on her face, we too feel happy and more deeply connected to that person. Yet, many of us are wholly focused on accumulating wealth for ourselves, even though we could be happier by giving some of it away.
Think about Bill Gates and Warren Buffett, who’ve both pledged to give most of their wealth to charity. Plus, according to the authors, another benefit of donating your money to others is that it makes you more motivated at work because you know that your salary will make a difference in other people’s lives.
Consider that in 2010, the two biggest spending categories for an average American family were housing and transportation, neither of which contributes much to happiness. Donating to charity, which would produce happiness, was the smallest category. Could you move just $5 a week from one category to another one?
Will you change your financial habits to produce more happiness for yourself in the long-term? Do you believe that spending money differently could make you happier? Leave tips or suggestions in the comments section below!