Money can’t buy happiness. Or can it? In their book, “Happy Money, The Science of Happier Spending,” Elizabeth Dunn and Michael Norton take a closer look at the link between spending money and happiness. The authors look at five different ways our spending may impact happiness.
One idea to gain more happiness from our spending is by making the spending a treat. If you love a cappuccino and swing by your favorite coffee shop every morning, the happiness derived is less than if you opt for regular coffee except for the one day a week when you go for your cappuccino. The more frequently you purchase something, the less special it becomes, and the less the purchase adds to your enjoyment — basically, you’ve come to expect the cappuccino and think less of it.
Another way to get more enjoyment from a purchase is by “paying now, consuming later.” This goes counter to the instant gratification we often seek with same-day or immediate delivery of goods. Think of paying and planning for a vacation. The authors find that anticipating all the wonderful things you’ll experience on your vacation generates more happiness than the actual vacation itself. When you look forward to something, you typically don’t focus on the hassles of long lines or the credit card that suddenly didn’t work. Rather, you think about the wonderful weather, the perfect bed and all the exquisite meals.
Happiness also can come from buying time. Increasingly, we feel strapped for time, so, if you can afford it, paying someone to take care of dreaded chores may be money well spent. Think vacuuming, washing windows or raking leaves — whatever you do only because it has to be done. That said, wealthier people who outsource chores do not necessarily feel like they have more time on their hands. Unfortunately, they may focus on time being money, and time not spent generating money makes them restless. The same goes for hourly workers who know exactly how much their time is worth.
The authors recommend that when we consider a purchase, rather than focusing on how much we’ll like the item — e.g., a better TV with sharper image — we should focus on how this purchase will impact our time. “How will this purchase change my Tuesdays?” The point is in part that we quickly get used to our new item and take it for granted; we no longer notice that we’re watching TV with a sharper image. And our Tuesdays are as tight on time as ever.
Another angle is to focus on experiences rather than things. The joy of something new can wear off fast, whereas spending time with friends stays with us. And — good news for those on a budget — experiences are often free: take a hike with a friend and have a meal together at home afterwards. As we get older we typically look back on experiences with more joy than we do at material stuff we’ve owned.
Finally, Dunn and Norton suggest that investing in others gives greater joy than spending on ourselves. You may have noticed how good it feels to help someone with a task or to give them something they really want but were unable to acquire. Giving things, or, even more so, giving time helps us feel connected with the other person, whereas sitting in our homes with wonderful things is great, but not necessarily a way to enhance social connections.
So, maybe money can contribute to happiness if you just spend right.
Jorgen Vik is a certified financial planner and partner with SKV Group LLC.