5 Ways That Money Buys Happiness (Sort Of)

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.

money buys happiness

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:

money buys happiness

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?

 

 

20 thoughts on “5 Ways That Money Buys Happiness (Sort Of)

  1. This is an awesome post, Chris. I love the detail that you’ve put into this and largely agree with every one of your points. Well written as always.

    To answer your question, I believe that money CAN buy happiness, but I certainly don’t believe that spending money automatically buys happiness.

    For example, my motorcycle makes me happy. I don’t NEED a motorcycle, but I do want one. It’s fun. It’s fuel efficient. It gets me around. It genuinely brings a smile to my face each and every time that I ride, so in this case, I can say that the money that I spent definitely bought me renewable happiness.

    And maybe that’s the key, here – “renewable” happiness. I think it’s safe to say that we’re all happy with our purchases right after we make them. But are we still happy with them a week after? A month? A year? Perhaps the ability to keep smiling is the key, as that shows true happiness.

    Your point about experiences is so very true. This is why you hear about those rock and sports stars who go broke in a later life because they spend stupid money on STUFF that needs to be paid for even after the checks stop coming in – they have ignored this very simple technique. Expensive stuff tends to keep costing money, but experiences are different. Memories are free. Rich or poor, nobody can take those away from you.

    • That’s a really good point, Steve. There are things we can buy that we’ll continue to enjoy, thus they will bring us happiness and add to our quality of life. It’s the things we stop using and no longer get enjoyment out of. Also your point on experiences – that’s a great way to think of it. Experiences can cost a pretty penny (depending on what they are) in one large lump sum, but don’t have any continued “maintenance” costs or anything like that. Plus the memories last forever. Thanks for reading!

  2. I like to keep the phrase “experiences appreciate, things depreciate” in my mind whenever I think about my consumption. Even the most frustrating travel experiences become fun if enough time passes and the destination provided a lot of good memories.

  3. Totally agree! It’s funny when you’re young you think buying something will make you happier, but as I’ve gotten older, I realize that what I really want are memories, time to spend how I want, and the ability to help other people. They bring the most satisfaction to my life, anyways. I love in the infographic it shows the 5 most giving states and Utah as #1 (which is where I am from).

  4. I think a more true than “money buys happiness” is “lack of money buys unhappiness.” Not having enough creates all kinds of stresses and health impacts that are hard to appreciate for those who’ve never done without or scraped by. So we’re for sure happy to have enough money at our disposal to provide for all of our basic needs with no stress!

    I couldn’t agree more on buying experiences instead of things. It’s our entire money premise, actually. The only things we let ourselves buy these days are things that directly support experiences. 🙂 And yep, virtually every non-experience-related thing we have bought, we’ve later regretted on some level, whereas our memories of our experiences are one of our best assets!

    • That’s a great way of looking at it (lack of money buys unhappiness). Your points make complete sense – lack of money leads to stress and potentially even worse money habits. One way I like to look at past purchases (although it can be depressing) is if I would return it for the price I paid, would I do it? Most likely the answer is yes, which leads me to ask myself why I bought it to begin with. Pretty interesting…

  5. Hi, I just found my way here via Charlee’s Twitter account. Love the site! And a terrific post. I completely agree with the points you made. In my own life, I’ve found that money seems to free me from worry. But does it buy happiness. I’d have to say no.

    Thanks for the good read.

    • Hey Laura! I appreciate you stopping by to read 🙂 Thank you for your kind words. I see where you’re coming from – money can free us from worry but doesn’t actually buy happiness. Two completely different things. Thanks for adding your perspective!

  6. I believe money buys freedom, and freedom makes me incredibly happy. I totally agree with you about experiences. They can be savored, retold, and re-lived through memories. And YES, about delaying gratification! Why is it that we are taught we must delay gratification as children, and yet as adults many of us go crazy buying meaningless things?

    • Ahh you’ve found a loophole! I agree that money CAN buy freedom, if you spend/save it correctly. Many people do not. Great observation though. Delayed gratification is amazing, but it’s tough. Especially when you are living frugally (and have disposable income) or you’re young without any major expenses (again…disposable income). It can lead to some fast, terrible spending habits! Thanks for reading and commenting Mr. Groovy!

  7. Great post Chris!

    I’ll admit, I’m always on the fence with this question. Can money really buy happiness? I think the real answer is – it depends.

    It depends because happiness is an individually driven state of mind. As humans, we have the luxury to decide (consciously, or unconsciously) what makes us happy, or not.

    Someone could spend $100 to buy a pair of jeans and get really happy because of the way it makes him look or feel. But, it’s equally as possible to find someone who doesn’t value jeans the same way. Make him spend the exact same $100 on jeans and it’ll make him quite unhappy because he will feel like he wasted money.

    So, did the $100 actually buy happiness in this example? No, technically it simply facilitated a transaction and the individuals associated their own happiness (or not) to the transaction.

    Having said that, I do believe the vast majority of people could find something to purchase for $100 which would make them happy (if even for a moment).

    For me personally, I associate a large degree of happiness with money because enough of it means freedom to live life on my terms. Likewise, giving back in a monetary sense certainly makes me happy when seeing a positive impact in others and feeling a sense of contribution.

    • Hey Michael! You make a good point. I will say, though, that happiness for the jeans will be finite. Eventually the jeans will wear or they’ll outgrow them – thus eliminating the happiness. Whereas an experience, like a vacation, you will never outgrow and won’t ever “wear out”. You hit the nail on the head when you said “for the moment” – I really think material happiness is temporary. Thank you for reading and commenting – also I just added your blog to my feedly!

  8. Excellent work, Chris. I agree with every one of your points. Experiences are awesome. I wish I could see inside Big Ben! Instead, I’ve signed up to go to the Tower of London Key Ceremony, which is also super traditional and hard to get into (but cost me only One Pound for two tickets!). And I need to be wiser about my time, as always. Thanks for the reminder.

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