How do we get the most happiness bang for the buck? It might not be in ways we thought. Madison Ave paints the American picture of happiness with the broad brush strokes of fine clothes, new cars, and big houses. But reality tells a much different story. In their book Happy Money: The Science of Smarter Spending, authors Elizabeth Dunn and Michael Norton utilize a growing body of research to reveal how we can spend money to create more satisfaction in our lives.
So what’s their prescription?
Focus on experiences rather than things
A new car or yearly family vacations – which one would bring you more happiness? Surprisingly, material possessions fail to provide a happiness that lasts. We quickly become bored with even the most lavish purchases. Contrast this with experiences. While the thrill of material possessions wanes, experiences appreciate with time. We tend to value great memories years after the particular event has passed.
Furthermore, the authors assert that experiences allow us to bond with other people. Ultimately, it is this human connection that greatly adds to our long term happiness.
So, it might not make the best sense to purchase a new car every few years, but instead, drive an older vehicle that allows you to afford more experiences in your life. The family vacations, quick weekend get-aways, concerts, and nights on the town are likely to add more to your happiness in the long run.
Give to others
In a particular research study, participants were given either a $5 or $20 bill to spend by the end of the day. Half of the people were directed to spend the money on themselves while the other half were directed to spend the money on someone else. Upon follow-up it was discovered that the people who spent money on others reported being happier during the day than those who had spent the money on themselves. More importantly, the amount of money they spent on others had no bearing on their happiness.
As Dunn and Norton further explain:
“… in 120 out of 136 countries, people who donated to charity in the past month reported greater satisfaction with life. This relationship emerged in poor and rich countries alike, and held up even after controlling for individuals’ income. Across the 136 countries studied in the Gallup World Poll, donating to charity had a similar relationship to happiness as doubling household income.”
Across the globe, giving even small amounts to others can vastly increase our own happiness.
Make it a treat
It’s just human nature. The more we indulge in something, the less we appreciate it. Imagine going out to enjoy your favorite meal every night. The first night might be a heavenly treat. The second night, you might still enjoy the experience but not as much as during the first evening. By the tenth night of eating the same thing you may well derive little happiness from your favorite meal.
As Dunn and Norton explain, “This is the sad reality of the human experience: in general, the more we’re exposed to something, the more its impact diminishes.”
Spacing out our indulgences allows us to enjoy them all the more. Instead of consuming a latte every day, make it a weekly treat. Go to the movies once a month instead of attending every weekend. Eat at your favorite restaurant four times a year instead of monthly. You’ll increase your happiness and save money in the process.
BMWK, what strategies do you use to get the most happiness from your spending?