If you’re poor, I think we all would agree that simply having more money would boost your happiness. But not without limit. For example, researchers have concluded that happiness grows with income, but only up to a salary of a surprisingly low $75,000 per year. More income beyond $75k doesn’t necessarily buy much more happiness.
It’s Not How Much Money You Have But What You Do With It
Have you read the book “Happy Money: The Science of Happier Spending“? In it, professors and authors Elizabeth Dunn and Michael Norton discuss the results of fascinating research they and others have done on money, spending, and happiness. Dunn & Norton reduce the implications of this research to five “key principles of happy money”:
- Buy Experiences
- Make It a Treat
- Buy Time
- Pay Now, Consume Later
- Invest in Others
What does each of these principles mean, in practice?
We’ve all experienced “hedonic adaptation“: the initial thrill of first owning something—a gadget, a car, granite countertops—that we’ve long wanted quickly subsides. The Big Paradox of modern day consumerism-run-amok is that buying and owning more and more stuff fails to make us happier. In contrast, investing in experiences that create memories—even experiences that might cause anxiety at the time—is more likely than buying stuff to sustain contentment.
Make It a Treat
I think we all understand instinctively this principle. Eat out four times a week and soon eating out is nothing special. But eat out once or twice a month and the experience is a lot more fun. (And you’ll weigh a lot less! 🙂 ) Choosing the experiences we invest in carefully and spreading them out a bit, so they feel like treats, leads to more happiness than treats so regular they become routine.
Happy Money’s authors suggest contemplating this question before spending money: “How will this purchase change the way I use my time?” After the purchase, will you have more or less time to be with friends and families, to pursue what interests you, and to recreate in ways you enjoy? A purchase that expands your to-do list and absorbs your time can be drag, long-term.
Pay Now, Consume Later
As a respite from the Pacific Northwest’s relentlessly cool, wet, and dark winter weather, Ms. Money Counselor and I reserved and paid months ago for a January 2016 week in a cottage on the southern California coast. Anticipating the vacation and investigating opportunities for fun in the area has been enjoyable on its own and apart from the actual vacation week still to come.* Happy Money’s authors promote paying in advance as a way to leverage the enjoyment of an experience that you’re buying. Conversely, consuming now and paying later—which is what you do when you buy on credit—has the opposite effect.
Invest in Others
Which would make you feel better: giving a close friend or relative an airline ticket for a trip to visit you, or buying the same ticket so that you can make the trip?
Are You Spending Your Money to Boost Your Happiness?
I feel like we do pretty well spending according to Happy Money’s five principles. For me, “buy experiences” has been a lifelong and instinctive piece of my personal doctrine. I’ve also always been resistant to buying stuff that’s going to eat into my time, which is my most treasured ‘possession.’ Ms. Money Counselor in particular surely subscribes to the “make it a treat” principle, and with the exception of our first house, we’ve never bought anything on credit. If we can improve anywhere, I think we could do better investing in others.
How about you?
To learn more about how better to boost your happiness by adjusting how you spend money, click the book image below.
* Unfortunately, the predicted affect on southern California’s weather of this winter’s record-setting El Nino has persuaded us to cancel our trip. Maybe next winter.