Can money buy happiness?
We’re often told that money can’t buy happiness. Whether you agree or disagree with this, there is no doubt that money can sometimes be useful in smoothing out some of life’s bumps and challenges. And the lack of money can sometimes lead to unhappiness and hardship.
Academic research has show that, up to a certain amount, money can make a positive difference to our quality of life. A study back in 2010 put this “happiness number” at $75,000 per year, and any money earned above this amount does not increase our happiness.
Other research has shown that having more money may increase your happiness for a short time, but it doesn’t last. For example, lottery winners often experience an increase in their happiness right after their win, but then they quickly return to the same level of happiness they had before their jackpot.
It seems that we overestimate how much pleasure we’ll get from having more of anything, because we underestimate how quickly we adapt our baseline to the “new normal”.
Although money allows us to buy many things, it can also impact our ability to enjoy them. A 2010 study found that many wealthier people were generally less able to savor positive experiences in their life. According to the researchers, wealthy people can afford to buy the best, and this undermines their enjoyment of their purchases. Wealthier people do not need to save for a new purchase or an experience, so their feelings of anticipation and accomplishment are diminished.
Based on the research above, it does seem that you can't purchase happiness. However, other research suggests that money can indeed buy you happiness, but you must spend it in the right way and on the right things!
Here are 6 ways to spend money more effectively:
1. Spend money to buy time
Everyone is always so busy and we all feel that we don’t have enough time. Research shows that we get more happiness and life satisfaction if we spend money to save us time rather than buying a material thing.
So, spending money on a house cleaner, for example, can bring you a lot of enjoyment because you will have more time to spend doing things you enjoy more.
2. Spend money on others
Abraham Lincoln once said, “I do good to feel good”. In this case it would be “I spend good to feel good” because spending our money on others makes us happier.
To maximize your enjoyment from the money you spend, keep these points in mind:
- If you spend your money on people closer to you – your family or close friends – your happiness is greater than if you spent it on acquaintances or strangers.
- If you understand how the money will make a difference to that person, or group of people, then your happiness will be greater. For example, if you donate to a charity you will be happier if you know how your money will be spent. This means that a donation to buy malaria nets for communities in sub-Saharan Africa will probably give you greater joy than just donating generally for the fight against malaria.
Another benefit of spending money on others is that it can trigger a positive feedback loop: spending money on others increases your happiness, and this increases the likelihood that you will spend more on others, which in turn increases your happiness and feelings of well-being.
Feeling a bit sad or down today? Then try buying a little something for someone else: a cup of coffee or a small gift. It doesn’t need to be big, but it can make a huge difference to your level of happiness.
3. Spend money on experiences
When we purchase an experience, like a vacation, we usually have to wait for it. The time we spend waiting for experiences is a time of excitement, something that makes us happy. In contrast, if we need to spend time waiting for a material purchase, then this is usually less pleasant, and we associate it with impatience.
And, while the experience itself can bring us joy, another benefit of buying experiences is that we also get more enjoyment by remembering them after they have happened.
Experiences also bring more happiness because it is more difficult to compare them. It can be disheartening to buy something new - a new car or house - and realize that it’s not as good as the one that cousin Mikey just bought. But experiences are usually more unique than material purchases so it is harder to make a direct comparison. As a result you are more likely to just enjoy the experience and not worry about "keeping up with the Joneses"!
4. Spend money on many small pleasures
Wherever possible, try to purchase multiple smaller items in place of one large item. Small, frequent pleasures will give you more happiness because we don’t adapt so quickly to them. For example, a brand-new car is great for a while, but day after day, it remains a car so you soon get used to it and the happiness of owing it fades over time. But meeting friends for dinner is never the same twice so is more enjoyable due to the novelty.
5. Spend money now, use it later
With the prevalence of credit cards we usually consume or use something before we pay for it. This means we often end up in debt or with little savings and regret it. But if we pay first we are likely to be more careful with our money, choosing to buy things that may bring us more long-term joy, rather than immediate pleasure.
We also benefit from the anticipation of using what we buy. People who spend time anticipating enjoyable experiences are usually happier.
6. Spend money to reduce debt
While feeling good can contribute to your happiness, minimizing how often you feel bad can also improve your level of happiness.
Since negative experiences affect us so much more than positive experiences, reducing them will significantly contribute to increasing our happiness. Being in debt is a great example of this, as it is stressful and can have a significant negative impact on your happiness. With the total US household debt now at $13.21 trillion, that is a lot of stress and unhappiness to go around! By reducing your debt, you reduce stress and negativity, and as a result make room for more positivity and happiness in your life.
Now you know some of the ways to buy more happiness, what will you be spending your money on today?