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Can Money Buy Happiness?

Steve Pomeranz, Can Money Buy Happiness

Can Money Buy Happiness?

Elizabeth Dunn is an Associate Professor in the Department of Psychology at the University of British Columbia in Vancouver, Canada. Michael Norton is a Marketing Professor at the Harvard Business School. And the two of them have co-authored a book titled “Happy Money: The New Science of Smarter Spending.” The book’s main premise is that happiness depends more on how you spend your money than how much you have, and it’s been nicely summarized by Andrew Blackman in an article titled Can money buy happiness? that was published in the Wall Street Journal.

The Connection Between Money And Happiness

In the book, Dunn and Norton describe an experiment where they gave the same amount of money to people in two groups, and told the first group to spend it on themselves and told the second group to spend it on others… and… surprise, surprise… the second group – that was asked to give money away – was way happier than the first group that was told to spend money on themselves.

wealth alone doesn’t guarantee a good life. What matters more than a big paycheck is how you spend it

The book’s results, at first glance, seem obvious: That people with higher incomes are, broadly speaking, happier than those who struggle to get by. But dig a little deeper and the findings get a lot more useful… that wealth alone doesn’t guarantee a good life. What matters more than a big paycheck is how you spend it.

Another key finding – when people do spend money on themselves – they are a lot happier when they use it for experiences than for material goods. Researchers found that life experiences give us more lasting pleasure than material things… and yet people, do the opposite – they deny themselves experiences and prioritize buying material goods, thinking experiences are fleeting and material goods last longer.

Experiencing More Provides Longer Lasting Happiness

But when people looked back at their purchases, they realized that experiences actually provided more happiness and more lasting value, while material purchases provided a brief thrill and were then taken for granted.

Experiences are often shared with other people and meet more of our underlying psychological needs, giving us a greater sense of social connection. For example, if you’ve climbed the Himalayas – that’s something you’ll always remember and talk about, long after all your favorite gadgets have gone to the landfill.

We also tend not to compare our experiences with other people. Keeping up with the Joneses is much more prominent for material things than for experiential things.

Another recent research paper called “Waiting for Merlot” shows that we also get more pleasure out of anticipating experiences than anticipating material things. People waiting for an event are generally excited whereas people waiting for material things seem more impatient.

Count Your Blessings

Another trick to living happier lives is to consciously foster appreciation and gratitude for what you have. Literally count your blessings and don’t take things for granted.

Move your material possessions around. For example, if you keep a painting hanging at the same spot on the same wall, you’ll stop noticing it after a while. So swap it with a painting from another room, and you’ll see each of them with fresh eyes, and appreciate them more.

Want to get more happiness from the things you own?  Lend something you own to someone else for a while, for their enjoyment .  You’ll find that you appreciate and enjoy that thing a lot more when you get it back.

A lot of us think we’ll give to charity one day, when we’re richer, but there are benefits to giving even when people are struggling to meet their own basic needs. What matters more than the dollar amount you give is seeing that your money makes a difference in other people’s lives, even if the amount you gave was quite small. So step up and donate your money and your time and you’ll be the richer for it, spiritually.

It’s important to consider how “what you’re buying” will affect “how you spend your time”. For example, the happiness from having a big house in the suburbs is often undermined by the daily frustration of a long commute. You may be better off buying a place close to work so you can use that final hour of daylight to kick a ball around with your kids.

You can also use money to buy yourself time by outsourcing tasks you dislike. Technology today has made it so much easier and less expensive to outsource all manner of tasks to freelancers and virtual assistants.   Take advantage of that and do something experiential with the time you buy.

Also, and I think this is important, don’t always link your time to money because you’ll avoid spending time on things you are not financially compensated for, like playing with your child or volunteering.

Researchers agree that spending more than you can afford is a route to misery. So before you go out and spend all your money on a dream vacation, make sure you’ve taken care of the basics, paid off your debts, and built a safety net so you have enough money to shield yourself from the worst of life’s troubles. Then go off and take that dream vacation!

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I've been an investment strategist and adviser for over 35 years, leading with a mission of unbiased advice to educate and protect listeners on my weekly radio show on NPR affiliates nationwide. I have been named a “Top 100 Wealth Advisor” by Worth Magazine and “Top Advisor” by Reuters.