6 Ways Money Really Can Buy Happiness

by Lynn Truong on 31 October 2011 7 comments
Photo: eflon

A study in the Journal of Consumer Psychology (PDF) looked into the age-old question, "Can money buy happiness?" Their answer was a resounding yes. In fact, they concluded that "If money doesn't make you happy, then you probably aren't spending it right."

Their assertion is that the vast majority of us are making incorrect predictions about how money will make us happy, so we spend it in ways that we think will make us happy, but they don't. However, if we follow certain principles of spending, money indeed will make us very happy. (See also: Does Money Really Buy Happiness?)

1. Buy Experiences Instead of Things

Researchers found that people reported greater happiness when reflecting on an experience purchase rather than a material purchase. The reason is because we adapt to things very quickly. Buying a new and shiny toy brings us some happiness at the moment, but after a day or two, it becomes an everyday item that we use. In contrast, an experience takes us out of our everyday and leaves a lasting impression. Imagine a safari adventure or surfing in Hawaii for the first time. You will remember it more fondly when looking back than you would a purchase of a thing, no matter how shiny it was.

2. Spend Money on Other People

We are profoundly social, and the quality of our relationships is a strong indicator of our happiness. People who spent more in "prosocial spending" (gifts for others or charity donations) were happier, even after controlling for income levels. Subjects felt happier when they reflected on a time when they had spent money on others versus a time they had spent on themselves. Using MRI scans, researchers showed that giving money away (even when being forced to do so) led to activation in brain areas associated with receiving rewards.

3. Buy a Few Small Things Rather Than One Big Thing

We adapt so well to the stuff we buy that making even a big material purchase does not have long-lasting effects. But that also means that the difference in happiness between a big purchase and a small one is minimal, and we could have multiple pleasures at the cost of one. We don't need a lot of money to buy the one big thing when we can afford smaller, more frequent mini-things. The amount of money spent on the purchase affects us less than just the enjoyment of having something new.

4. Don't Buy Warranties for Emotional Protection

The researchers are coming from the point of view that consumers buy warranties as a safeguard again emotional loss. People tend to predict that they won't cope very well in a bad event (even though they're wrong — we're more resilient than we think). "The prospect of loss is highly aversive to people, who expect the pain of losing $5 to exceed the pleasure of gaining $5. This is not true." Even though the warranties offered by retailers and manufacturers are generally known to be bad deals for consumers, they're still purchased by people who believe that the warranties will make them happier if something does happen to their items, and they're able to avoid the loss. In reality, even if something does happen, it really doesn't make the person happier or less sad than if she didn't have the warranty at all.

5. Delay Consumption

People generally feel happiness when they anticipate an event. The person who buys a cupcake and eats it right away experiences less joy than the person who takes it home with anticipation to eat the cupcake at a later time. The difference is the extra happiness she gets during the ride home. Even though we are so used to instant gratification and desire it, we still very much enjoy looking forward to something in the future. We think it'll make us happier to get the satisfaction right now, but in reality we're perfectly happy while eagerly awaiting something.

6. Focus on the Day-to-Day Impact

Many people have big dreams, like buying a McMansion or a boat so they can sail off for months at a time. We imagine having a cottage in the woods where we can get away every weekend or retiring at 35. When we daydream about fulfilling these goals, we see a big — but fuzzy — picture. We forget that a very large house requires more time to keep clean or that we get seasick. We don't think about bringing home mosquito bites and bed bugs from the cottage or that retiring at 35 is actually pretty boring. Remember to think about the day-to-day impact of what you want to purchase. In this case, it really is about the details and not the big picture.

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Guest's picture

This article really hits the nail on the head. Money is supposed to be used as a tool to navigate life, and it can be used to increase your happiness (provided you have enough). But you need to spend mindfully, which I feel like most people don't really understand. I want to spend my money, my time and my energy on things that will improve my life and level of contentment.

Guest's picture
PKamp3

Awesome - and not just on a "people who make more than $xxx" are happier sort of level. I guess that money can buy you more happiness than just filling a swimming pool with dollars and gold, Scrooge McDuck style. Thanks for the study!

Guest's picture
Neo

I am all for #1 and #5. I think it is crucial to focus on experiences rather than buying "stuff". However, I rather save up and buy something that is high quality and will last a long time as opposed to buying a bunch of little things.

Guest's picture

The idea of buying an experience is so powerful. I wish I had advice like this when I was younger.

Meg Favreau's picture

Agreed! I value the traveling I've done so much more than any Thing I've ever bought (well, I do appreciate the camera that allows me to take pictures of those trips).

Guest's picture
Guest

An even better way to be happy is to help and or spend money towards the companion animal crisis in this Country!! Most people don't know that around four million loving kitty, dogs and more precious souls are sitting in very terrible condition in animal controls and shelters, Nation wide!! Many of them are killed everyday, some are being killed in GAS chambers! If people do research about this, they will see many facts, videos and more about this crisis! The gas chamber is an awful, painful way for them to die! None of them should be killed anyway! None of this is their faults. People need to dig more into their time and wallets to help some of the most precious life's, gifts that we have on this planet They have no choices at all. People have millions of choices. Many of us have way more than what we need. Think about the actual pain and horror that these precious souls go through everyday It's very real and it takes more compassionate and caring people to help them and to help make the changes that need to happen asap. Please share this vital information, please do some research to help these earth angels. A word of advice- If you can ever help an actual animal rescue make sure they are a legitmate rescue and that they have no problems showing you where monetary donations are going. I have seen many people online ask for money to save animals, but they got upset when others asked for proof of vet bills, transportation bills, that need or needed to be paid and or receipts. But please do give your time and anything else you an spare, because there are crooks everywhere, but this beyond terrible and awful crisis that these precious lives live, is very real too. Thank You.

Nathan Winograd's page- He is trying hard to help build a No Kill Nation. He will teach us things that we never knew as well.

http://www.nathanwinograd.com/

http://www.thenokillnation.org/

A page with so much information about the furbabies and gas chambers and how any one of us can help! The page admins can also direct you if you need help.

https://www.facebook.com/#!/pages/Take-Action-Help-Ban-Animal-Gas-Chambers/131864610227124

The website that tells more about gas chambers and how they are used to kill loving, innocent and deserving lives in this very Country, the USA ;(

http://take-actionbananimalgaschambers.webs.com/

Please share all of the above with your networks, please! These kitties, dogs and other precious lives do not deserve this. Remember, many of us have what we need, and we must help the forgotten ones too. Thank You.

Guest's picture
Guest

MONEY CAN'T BUY HAPPINESS !!!