Surely you’ve heard (and maybe even embrace) the idea that money can’t buy happiness. After all, happiness is the one thing we dream about that can’t be placed in an Amazon shopping cart or bought from our favorite big box store.
Or can it?
In their book, Happy Money: The Science of Happier Spending, co-authors Dr. Elizabeth Dunn and Dr. Michael Norton argue that money can, in fact, buy happiness…if it’s spent in the right way.
In their research, the professors surveyed more than 6,000 adults in the United States, Canada, Denmark, and the Netherlands about how they spent their money and analyzed the correlation between their spending and self-reported life satisfaction.
Their findings demonstrate that there is a strong relationship between money and happiness, but it’s just not found in a new car, flat screen tv or granite countertops.
I highly recommend picking up this book as a way to increase your wellness and insight around the intersection of money and happiness — as there are some surprising results from the growing body of academic research on the topic.
Here are a few of the most important principles that I took away from the book that you can use to transform your spending into Happy Money:
Choose Experiences over Things
In an article about their research, Dunn and Norton described the difference in happiness for a person buying a fancy $4,000 TV versus devoting the money to eating 100 meals at restaurants with friends and family.
The latter, they argued, provided far more happiness than the material purchase simply as a byproduct of the social interaction experienced while dining with others.
It’s also fun to think back on an experience later as a memory, less so for “things.”
While the idea that exchanging purchases of expensive material goods with meaningful experiences is not a radically new concept, Norton and Dunn argue that we could all benefit from this type of scaling down in our perception of experiences as a way to maximize our happiness.
For example, a two-week long vacation out of the country is certainly an experience, but so is Sunday brunch with a colleague. In both, social interaction is the key driver of happiness — not to mention one is significantly easier on the wallet than the other.
Instant Gratification often leads to Instant Unhappiness
Have you ever bought something that you had been coveting for months, only to realize that you didn’t use it nearly as much as you planned?
I’ve been there too — and it’s not just big-ticket items.
In some cases, this may be a recurring purchase that you started buying for pleasure that you no longer really notice, like subscription box services or convenience items.
If that sounds familiar, consider taking a break or decreasing the frequency of your purchase. Science says that when you come back to it, it will increase appreciation levels and feel more like a treat.
Absence really does make the heart grow fonder.
It turns out this works with spouses too!
Embrace the Pain of Pay Now, Consume Later
One way to increase happiness on vacations, for instance, is to pay in advance and enjoy later.
In fact, the authors explain that “by the time it happens, if it’s already paid for, that can actually make it feel free.”
While I agree in theory, I caution that this could lead to a very slippery slope especially if paying by credit card.
Credit cards can provide the illusion of paying in advance when in reality, the actual purchase is just spread out into monthly payments.
This is why so many people end up carrying credit card debt.
By using a credit card, they’ve decreased the pain of paying so much that they don’t realize how much they’ve truly spent.
So, it stands to reason that if you’re struggling to stick to a budget, you can voluntarily increase the pain of paying by using cash instead of credit cards.
Buy back your time
Here’s a big one that I love. Outsource!!
The idea is simple. As your income increases, you can use money to buy time to spend doing the things you love.
And this may look completely different from person-to-person depending on your goals.
For some, it may mean outsourcing grocery shopping to Instacart so you can spend your Saturday mornings practicing yoga. For others, it could be hiring a housekeeper to keep things tidy on the homefront while you scale your side hustle into a full-fledged business.
No matter what it looks like for you, you’ll be gaining something called “time affluence” — which is a key in increasing happiness.
Live Your Dream Life Instead of Buying Your Dream Home
Satisfaction with housing goes up when you make a change in living space, but general happiness doesn’t.
Put a different way, homeowners are no happier than renters overall.
Sure, homeowners may be happy with their home and take pride in a sense of ownership, but the decision to own versus renting plays a very small role in our overall happiness.
As an example, in the last year, I recently sold my condo and became a renter again when I moved my home base from DC to San Diego.
Along with it, I’ve outsourced a lot more things such as maintenance, cleaning, food deliveries, etc. and I feel a lot less stressed and happy overall. I’ve loved it so much, I keep looking for new ways to outsource things in my personal life as well as my business life.
Then again, it could also be all that beautiful California sunshine.
Invest in Others
Investing in others is a good way to “buy happiness” instead of only spending on yourself. In fact, Dunn and Norton say that their research shows that spending even small amounts of money on others can increase your happiness level.
It’s human nature to derive satisfaction and happiness by giving to others.
For instance, when you choose charities where you are able to see the direct impacts (i.e. you know who you’re helping or exactly where the money is going), you’ll experience more satisfaction and will likely give more.
Dunn notes that you might even experience some health benefits as a result!
Since we are not yet one full month into the new year, with our resolutions (hopefully) still intact, now is the perfect time to take inventory of our financial health and wellness.
There is more than enough information on how to earn more and/or spend less, but very little on the impact of mindful spending with the money that you already have. This book addresses that and much more!
Have you ever thought about what you value most in life and figured out ways to align your spending with those values?
In a free consultation with me, we’ll discuss your hopes, dreams, and some of your habits and history with money. This is a good foundation to start the process of making sure your spending aligns with your goals and values, increasing your overall satisfaction around money.