How are Spending and Happiness Related?
By Rukmini Ravishankar
“Don’t chase money, it can’t buy you happiness”
Deaton and Kahneman in 2010 found that money can buy you life evaluation but not “emotional wellbeing”. Simply put, what you do with your money might put things into perspective, but it takes a lot more than a few dollar bills to stay happy.
What does this mean? 💁
Emotional wellbeing is your state of mind as each day passes.
Ask yourself — do you feel happy as you go through your day? What kind of mood are you in each day? And, could how much you make affect this?
Several suicides have been committed by those earning well over $75,000, including Robin Williams, and Chester Bennington.
It’s not how much you make that determines your wellbeing, but what you spend the money on and why. You can spend your money on several things, some of which make you happy and some of which don’t.
What should I spend money on? 💸
The first priority on your list would be your necessities. This might include rent, insurance premiums, bills, groceries etc. Spending money here doesn’t make you happy. But it doesn’t make you unhappy either, given the necessity of these items.
Then there are contingencies — spending money on repairing a broken pipe or changing the locks when there’s been a break-in. You can’t find a way around the problem except by spending. Here, you’re particularly unhappy. You could go in circles, thinking to “If I’d just been more careful”. This makes you anxious and regretful — obvious sources of unhappiness.
Finally, come to the things that aren’t compulsory. You get to decide what you should do with the remaining money. Kristy Shen says that possessions or things give you an initial rush of dopamine — the “happy juice in your brain” — which eventually fades away. Spending on experiences, however — vacations to new and exotic places, a weekly trip to the spa to help you relax, guitar lessons — results in long-lasting feelings of content, positive energy and joy. It doesn’t have to be all for yourself.
Buying your loved-ones gifts, not for any specific occasion can also make you incredibly satisfied. The look on their faces as they see that you have done them an unconditional good deed can be deeply fulfilling.
What matters more than “what” on is how you spend your money.
What are your spending patterns? At what intervals do you spend your money? How often do you make big purchases and how often do you treat yourself with little things? Understanding these factors can help to separate your “self-worth” from your “materialistic-worth”.
How often should I spend money? 👀
The rule of thumb is that you don’t spend more money than you make. The problem of debt is more stress-inducing than anything else. Keeping this in mind, you divide your income into different categories. A certain percentage will go into your basic necessities.
Another percentage, depending on your age and your goals in life should go into investments. Some money should be saved for sudden exigencies. The remainder is your disposable income. This money, you spend till the time you receive your next pay.
Your next major financial goal could be to purchase an expensive item — say, an iPad. If your disposable income perfectly fits into the cost of this item, it might seem like the perfect scenario to just go ahead and buy it off. But don’t.
Spending all of your money on one single thing and on one single shot is a mindless thing to do. It can leave you broke for the rest of the month and very unhappy. Instead, split your money. Save, say half of it, and buy that iPad when you make the remaining money. Spend the other half on smaller treats.
One thing to avoid no matter what is splurge spending. Retail therapy is a term for shopping with the intent to make oneself feel better. While it is a good thing to consider your emotional status and give yourself little breaks, when this happens too often, it leads to splurge spending which wil eventually leave you broke.
When you’re in a particularly bad space of mind, take yourself out to a nice dinner. Buy yourself something special as a reward for being so smart with your money. Spend money on experiences — take yourself out on a road trip over the weekend.
Remember- your mind and mental health is what should matter most. The money you make and the things you spend it on, whether they make you happy or not, certainly impact your mental health. Never equate the amount of money you make to your self-worth. Deciding that someone must be better than you because they make more money is not advisable. No two people have the same life. You don’t know their struggles and they don’t know your little moments of joy.
It is important to consider your mindset. If you feel low and upset, it is okay to spend some money on things that make you feel better. While it is essential to save for the future, don’t forget your present self.
This article is part of the bite-size bundle ‘Behavioural Spending’ on the Finllect app. Find the Finllect app on Appstore today! 💁
