When you are poor, not having money is your biggest problem. It makes even the pursuit of happiness appear out of reach. You think if only you had enough money to pay your bills and work towards a better life, you would be happy. At least that’s what I thought during my own years of struggle.
But as I later discovered, climbing out of poverty doesn’t bring you lasting happiness. In fact, not having to worry about paying your bills only makes the absence of happiness more obvious. Little wins that brought you joy begin to appear meaningless as you get tangled up in more ambitious goals.
So does that mean there’s little money can do to make you happy? Are people right when they say money can’t buy you happiness?
Well, science tells us something different. Studies have found that higher incomes (up to $75,000/year) are related to higher degrees of happiness. The truth is it’s not so much what money can do as what we do with our money that affects our happiness.
The Cost of Value-Seeking
Most of us carry a scarcity mindset when it comes to money. It’s just the story we tell ourselves. We believe that money is limited and hard to earn. And so one must hold on to it very tightly.
That makes us obsessed with maximizing the “value” we get from our expenditures.
And as this study found, there is a hidden cost of this value-seeking. It says seeking to make good use of one’s money and prioritizing value encourages people to prefer material items instead of life experiences.
But here’s the thing. The satisfaction or joy we get from material purchases is often short-lived. Thomas Gilovich, a psychology professor at Cornell, says we adapt to things very quickly, and with that, the happiness fades away.
What makes it worse is — even that momentary joy is tainted. Material purchases are very susceptible to visible comparison, which further dampens our excitement. Gilovich says, “Imagine you buy a flat-panel TV. You come to my house, and I have a bigger, clearer picture than yours. You’re bummed out.” We can all relate to that.
Unlike tangible items, experiences do not last long. Which explains why we hesitate to spend on them. But that also means they are not as subject to adaptation. Similar experiences continue to give us joy over and over again.
Then because each experience is unique and personal, it is not as easily and powerfully undermined by comparison. Their personal nature also embed experiences into our identity. There’s more.
While we may enjoy certain experiences in solitude, many have social aspects built into them. So they encourage social behavior and connection with others, which leads to bonding and greater happiness. Think of the times when you did something together with your family or friends — maybe a holiday trip or a movie night.
The best part is pleasant experiences turn into good memories, and those memories tend to get better with time. Often, even if things don’t go exactly as planned, we manage to turn them into good stories and happy memories.
How to apply
Instead of collecting a ton of stuff that you won’t need, pursue activities that bring you joy. They don’t have to be grand or extravagant. Small, inexpensive acts like cooking your favorite dish or fishing with your kid can be just as rewarding.
The key is to make it a consistent habit. Also, at least every once in a while, make it social.
Even when buying stuff, you can opt for things that lead to meaningful and fun activities, like a piano, books, or a treadmill.
Spend on Others
It may come as a surprise but spending money on others makes us happier than keeping it for ourselves.
Research shows charity has a similar impact on happiness levels as a doubling of the household income. Imagine how happy you would feel if your salary was doubled!
And it’s not just about psychological effects. Studies suggest giving also produces positive physiological effects that carry significant long-term health benefits.
There is one catch, though. Giving makes you feel great when it is voluntary and not owing to some compulsion or obligation. So donating under the effect of someone using their persuasion tricks doesn’t count.
Also, giving doesn’t always have to be charity. Spending on gifts or treats for your friends and loved ones are great options too.
How to apply
- Contribute (even if it’s a small amount) to causes that resonate with you. Preferably to those that allow you to be more involved and to see the positive effects of your contributions.
- Make it a habit to give thoughtful presents to those you value. It will not only make you and the recipients happy but also make the relationship stronger. And again, you might want to opt for experiential gifts like tickets to an event they would enjoy or a box of rare and tasty cookies.
Have Some Idle Money
To protect your money from the effects of inflation, it’s wise to invest your savings into assets that grow in value over time.
But at the same time, you must know the amount of money sitting in your bank accounts also makes a significant difference in your quality of life, especially at the lower end of the spectrum.
Research tells us, “having a buffer of money available in checking and savings accounts confers a sense of financial security, which in turn is associated with greater life satisfaction.”
How to apply
It’s best to have about six months’ worth of an emergency fund in a separate savings account. But if you can’t manage that, at least try to have a few thousand dollars (above your immediate expenses) in it.
In a Nutshell
People work hard for their money. And it would be a shame if that money didn’t make them happy.
Here are 3 science-backed tips on how to use your money to be happier.
- Prioritize experiences over material purchases that are not essential. They often lead to happy and lasting memories.
- Spend on treats and presents for your friends and family. And give to charitable causes that you feel strongly about.
- Have some savings in your bank accounts.