How to use money to buy happiness: #LifeHacks Vol.2
“Money is an opportunity for happiness, but it is an opportunity that people routinely squander because the things they think will make them happy often don’t.” — Elizabeth Dunn, Co-Author of “Happy Money: The Science of Happier Spending.”
There are a lot of misconceptions about how money is correlated with happiness. Does a positive correlation exist? Is it constant? Can money make someone happier?
Humans have a very complicated relationship with money and there are a lot of myths about how money can affect our happiness levels. But before we understand how we can use money to our benefit, it’s wiser to deconstruct the common misconceptions about money and money spending.
- Above a certain yearly income, money does not make us happier.
Fact 1: Household income in the US has gone up the last 30 years, while life satisfaction has decreased.
Fact 2: Having a higher income only increases happiness levels up to a certain point. In other words, it increases happiness up the point where basic needs, such as food, healthcare, safety and shelter are met. Additionally, at this income level one has free time outside of work, and some extra cash to spend on things they want (dinner with friends, vacation etc.)
This income was hypothesized by Princeton University to be ~$75,000 per year. Additions to that income play no role in the reported happiness.
2. However lovely the phrase “the things that bring happiness, simply aren’t for sale,” it is nevertheless almost completely wrong.
But Elizabeth Dunn, a renowned professor at the British Columbia University, said:
“Money allows people to live longer and healthier lives, to buffer themselves against worry and harm, to have leisure time to spend with friends and family, and to control the nature of their daily activities — all of which are sources of happiness (Smith, Langa, Kabeto, & Ubel, 2005). Wealthy people don’t just have better toys; they have better nutrition and better medical care, more free time and more meaningful labor — more of just about every ingredient in the recipe for a happy life. And yet, they aren’t that much happier than those who have less. If money can buy happiness, then why doesn’t it? Because people don’t spend it right.” (Dunn, 2011: 118)
As Dunn states, money can indeed buy happiness only if you spend it the right way.
Spending money on others > spending money on yourself
Being generous makes us happy. This hypothesis has been validated so many times that it’s practically impossible to ignore that it is becoming a hard fact.
In an interesting research by the University of British Columbia, participants were given either $5 or $20. Half of them were instructed to spend it on themselves and the other half to give it away.
The group that was assigned to spend the money on other people (donating, giving a present etc.) had an increase in self-reported happiness levels before and after the task. What’s even more interesting is that the amount did not matter — whether $5 or $20. The important factor is that they spent it on others, rather than themselves. One does not have to spent their whole heritage in order to increase his/her well-being and happiness levels; even small sums have an equally big impact.
Characterized by Harvard Business Professor Michael Norton as “pro-social” spending, it creates a win-win situation! Not only do you improve your well-being, but by donating, you are also helping other people in need. Even the smallest donations can have a strong impact on a person’s life. Donating cultivates your empathy, it increases your happiness levels while at the same time helping other people live better lives. You are making the world a better place.
If you would like to donate somewhere but don’t know where to start, check out the websites here or here.
Investing money in experiences > investing money in material items
However nice that new coat, laptop or bag may be, it’s highly doubtful that buying it will make you feel more alive and happy for a prolonged period of time. Brand new material possessions can make us happier, but only for a short period of time. After that, the new item becomes familiar and the happiness fades away. Bottom line is: we adapt too quickly.
Instead, research has shown that “experiential” purchases (going out to a museum, brunch with friends, cooking class with your partner etc.) can bring long-term happiness. That is because when it comes to experiential purchases, we anticipate and remember them for a longer period of time.
In fact, a survey that sampled Cornell students suggested that 83% of them mentally revisited their experiential purchases more frequently than their material purchases (Van Boven & Gilovich, 2003). This is because our identities are formed more by our experiences than by our material possessions.
It’s the difference between yet another shirt that will eventually lose meaning and end up collecting dust in our closet (come on, how many pieces of clothing are doing just that, right now?) and a night full of meaningful and interesting conversations, good food, drinks, and laughter with friends or family.
Not only will this time be invested in your relationships, but it will also create a wonderful future memory, one that you will look back to in the future with a big smile on your face.
Money spent on shared experiences is money well spent. Don’t forget that personal relationships are one of the most important pillars for a happier life!!
Written by N.L.
So, next time you are about to spend some money, ask yourself this question:
Will this purchase make me or others happier long-term?
…If the answer is yes, treat yo’self!
Spend wisely by applying these lifehacks today.
If you enjoyed our article, please clap & share on social media to spread the word and join our cause to make the world a happier place…
In case, you need a more structured and detailed guidance on how you can lead a sustainably happier life, join our next Workout for Happiness here.
