It’s a question that’s been around forever – is it true that money buys happiness?
The short answer is no. But there’s more to it.
The link to increases in pay and increases in happiness is not correlated. Yet we are always striving to increase our income. Why?
If you’re putting that money into savings that’s one thing. But that can’t be completely true for everyone. The median retirement savings for Americans is under $60,000!
This must mean we’re spending. It’s true, we have to spend to live. You need food, clothing, and shelter. But you don’t need a brand new Mercedes.
So how can we increase our happiness with the money we are spending?
Elizabeth Dunn and Michael Norton have a book called Happy Money: The New Science of Smarter Spending. It talks about five principles to use to increase your happiness with the money you’re spending.
Here’s a look at some of the concepts they discuss in their book. Use this as a guide to increase your happiness with spending money.
1. Spend money on experiences, not things
It’s no secret that experiences bring you more satisfaction than things. Many studies have shown this is true.
Things can only take you so far with your happiness. A new car, tablet, or video game system will make you less and less happy as time goes on.
It’s just human nature. When things are new, we get excited. When they’re old, we’re bored of them
I doubt your old cell phone from 2006 brings you excitement anymore. And why would it? There’s newer technology available with features that cater to your current lifestyle.
As people, we change. Our tastes and likes for things become different. This is a major reason why ‘things’ don’t bring us happiness for long.
Research shows you’ll be happier if you spend money on experiences instead of things.
One study shows that money buys happiness to a point. Satisfaction with the material items we buy decreases. But satisfaction with the experiences we spend our money on increases.
There are plenty of reasons why spending money on experiences is better than things. But two I connect with most are the anticipation and the memories.
When I think about buying a material item, like a computer, I don’t feel any sense of anticipation. It also creates no memories for me, unless they’re bad memories. Like when I spilled beer on my laptop (ugh).
With experiences, though, there’s tons of anticipation. Waiting for a vacation builds so much excitement.
The memories from the trip last forever, too. Even if it’s a bad experience, it still creates stories and memories that last a lifetime.
Another thing to consider is that it’s harder to compare experiences with someone else.
Everyone can go buy the new iPhone. It’s not special. But not everyone can take a trip to Turks & Caicos and have incredible stories to tell about it.
2. Buy things you enjoy less often
As people, we appreciate things that are abundant or easily available to us much less. It’s a natural human behavior. People who live in London, for instance, almost never go to visit Big Ben, even though it’s close.
This is a historic landmark that some people travel across the world just to see from a distance. In fact, only residents of the UK can get a tour of the inside.
I guess Londoners figure they can go see Big Ben anytime. He’s not going anywhere.
The same goes for things we can have any time we want – like coffee. For me, drinking a cup of coffee has become part of my morning routine. Because I drink it so often, it no longer brings me as much joy as it could.
The point is, buy things you enjoy less often. Make it special.
I would get more joy out of drinking coffee if I bought one cappuccino a week instead of downing three cups of joe a day.
If you’re going to buy something material, practice the art of wanting. Build some anticipation, even if you have the money to go out and buy it right away.
Once you buy it, remind yourself of how special it is by appreciating the details of what you have.
Finally, break larger things up into smaller chunks. Instead of taking one luxurious vacation, take three smaller vacations. You may appreciate many smaller trips over one larger trip.
3. Don’t waste time trying to save too much money
For those of you that work full-time, what do your Saturdays usually look like? Catching up on cleaning and running errands like grocery shopping, right?
Most of us don’t use our time in ways that make our life happier. Yet spending our money on things that save us time can bring us happiness.
Time is money. And it’s one resource that’s not renewable.
We reach a certain point where it’s no longer worth the time to save the money. This point is different for everyone.
I’ll use myself as an example. I hate cleaning. To me, it’s worth it to spend money on something that will save me time from cleaning, like a Roomba.
This concept can be difficult for frugal people (like myself) to grasp. The whole point is to save money and live below our means.
But you have to consider your happiness. There’s a fine line.
One service that recently became available by me is ordering groceries online. Instead of spending an hour in the grocery store, I can spend 10 minutes online filling a shopping cart.
The store does all my shopping and packs up my groceries. I then spend another 10 minutes going to pick the groceries up. 20 minutes total.
I have to pay a small fee for the service, but to me, the time saved is worth it.
So I encourage you to examine how you’re spending your free time. Where can you free up some time to make yourself a little happier? Even if it costs some money, consider it.
Here are two excellent related reads on the time vs. money concept:
4. Stop using credit cards
The beauty of credit is that we can buy things as soon as we want them. There is no concept of delayed gratification whatsoever.
But this decreases happiness. It can also build up debt.
Even if you pay your credit card in full each month, it can still create a sense of instant gratification. Instead, try using cash.
First establish how you’ll budget, or if you’ll budget. Then set aside a certain amount of cash to use on guilt-free spending. If there are things you want, force yourself to save for them.
The loss of instant gratification will lead to more happiness when you spend the money. It may even cause you to not spend it, since it can take so long to save.
The same goes for experiences. In fact, at least one study suggest that you’ll enjoy an experience more if you wait for it longer.
5. Spend money on others
Don’t you feel great when you give a gift to someone and you see the joy on their face when they open it? I love it.
The cool part is, this is normal. Spending money on other people makes us happier. There’s tons of evidence to prove it, too.
Instead of me describing this, check out this amazing infographic created by happify.com:
Do you think money buys happiness?
I don’t think money buys happiness. Not directly, and not for long. But I do think you can strategically spend money to increase your happiness, you just have to know how to do it.
Remember to delay gratification as much as you can with spending. Also, focus less on buying ‘things’ and more on buying experiences.
Finally, know that it’s okay to spend money on things that will save you money. To some, paying for a cleaning service is worth the cost because it frees up their time to do things they’re passionate about.
How do you spend money (or save money!) to increase your happiness?
Chris is the founder of Money Mozart, a blog about personal finance. He discusses frugality, minimalism, and achieving financial independence by living well below your means. He’s also an avid craft beer lover and an aspiring minimalist.