“If you think money can’t buy happiness, you’re not spending it right.”–Michael Norton, Harvard Business School
While there is no guarantee that earning money, having money, or even a large windfall will make you happier, research has shown that how we USE the money we have can make a big difference in our happiness! So no, you don’t necessarily need $1 million to be happy. You don’t even have to be swimming in nice new things to be happy. There’s something deeper at play when it comes to happiness and money. Money can buy happiness. Spoiler alert: it has to do with the things that make you feel good anyway.
Ready to find your happiness? Follow these guidelines to spend your way to contentment.
5 Ways Money CAN Buy Happiness
1. Purchase More Experiences, Less Stuff
Research from Dr. Thomas Gilovich of Cornell University reveals that spenders experience more long-term happiness and satisfaction when they buy experiences rather than possessions. A new watch or necklace increases happiness for a short while, yet soon it becomes a routine part of the buyer’s environment, contributing little to happiness and perhaps even inducing buyer’s remorse. And sometimes that good feeling you get from making a purchase only lasts until you open the package, trapping you in a cycle of spending with very little substantial emotional benefit. So while money can buy happiness, happiness isn’t in things like some people believe.
It’s a bit counterintuitive. According to the “The Journal of Positive Psychology,” most people tend to predict that material purchases will make us happier than spending the same money on experiences, but in fact, the opposite is usually true. As Professor Gilovich explains in a Wall Street Journal article:
“People often make a rational calculation: I have a limited amount of money, and I can either go there, or I can have this. If I go there, it’ll be great, but it’ll be done in no time. If I buy this thing, at least I’ll always have it. That is factually true, but not psychologically true. We adapt to our material goods.”
It’s this process of “hedonic adaptation” that makes it so hard to buy happiness through material purchases. The new dress or gadget provides a brief thrill, but we soon come to take it for granted.
On the other hand, experiences are better at satisfying more of our underlying psychological needs, says Gilovich. Dinner and a concert with friends, a backpacking expedition with your kids, or a Mediterranean cruise with your significant other creates valuable memories shared with others. The connections we share through experiences are more likely to produce meaning and satisfaction than things we can buy. Our experiences also form a bigger part of our sense of identity. We’re more likely to bond with someone who also hiked the Appalachian trail than someone who purchased the same car.
“What we find is that there’s this huge mis-forecast,” says Professor Ryan Howell of San Francisco State University in WSJ.com. “People think that experiences are only going to provide temporary happiness, but they actually provide both more happiness and more lasting value.”
People are also less likely to negatively compare experiences than things, according to Gilovich’s research. If your neighbor buys a better, faster computer for less, you might be irritated. But if you both take a Hawaiian vacation and he stays in a nicer hotel, you’ll be bothered less by the comparison as you’ll have your own unique, enjoyable memories.
2. Buy Time
You’ve heard that “time is money,” and spending money to create more time is another expenditure that usually raises happiness. If a job promotion guarantees a higher income yet a much longer commute, it might not be a good deal, according to behavioral analysts. And as reported in the Huffington Post, a team of researchers from The University of British Columbia found that people were slightly more likely to value their time over money in a series of studies involving more than 4600 participants.
In the studies, people were asked to prioritize time vs. money, evaluating situations such as working longer hours for more pay or spending more money for an apartment that allowed for a shorter commute. By a slim margin, most people were found to value time over money. Notably, those who prioritized time over money were apt to be happier. And while no difference was found between genders, older people more likely they were to value time than younger participants. Apparently, the more wisdom we have (and the less time we perceive ourselves to have), the more apt we are to prioritize time over money. And the more time you have, the more experiences you can enjoy!
Lead researcher Ashley Whillans noted in Science Daily that spending money to save time, such as outsourcing things we don’t enjoy, can have a measurably positive effect on our happiness. Outsource so you can focus your time on what you enjoy most, delegate business tasks you don’t enjoy, or hire a landscaper and spend your weekends doing something you enjoy more than yard work!
3. Spend on Others
Studies by the Chicago Booth School of Business and the University of British Columbia found that people experienced more happiness when they spent money on others. The emotional rewards of social spending–such as donating money to a food bank–were even tracked on MRI scans in a University of Oregon study, according to a WebMD article.
In the entertaining TED Talk by Michael Norton, co-author of Happy Money: The Science of Happier Spending with Elizabeth Dunn, Norton describes research ranging from students in British Columbia, adults in Uganda, North American employees, members of Australian sports teams, and a worldwide study on charitable donations. With his extensive research on happiness, he confirms that spending on others does, indeed, buy happiness.
4. Spend to Make a Difference
Spending on others makes people consistently happier than spending on themselves. And when you send your nephew $20 in a birthday card or mail a check to a charity, you’ll be even happier if you can witness the impact it makes, according to Success.com. When your nephew shows you what he bought or writes you a thank you note, or when you can see the difference your donation made, your satisfaction increases.
Similarly, when you invest or spend money on yourself, satisfaction increases when you use your money in accordance with your values. G. Benjamin Bingham, author of Making Money Matter notes that if environmental and humanitarian responsibility are important to you, you may find satisfaction in buying organic and fair-trade coffee, even though it costs more. “Buying organic and fair-trade is more expensive, but it may save you money in health care costs… And it will help create a more sustainable future for your grandchildren,” he says.
Investing is another way we can impact the world. You’ll find greater satisfaction investing with companies you respect. Bingham advices, “Invest in a future that you would love.”
5. Save Your Way to Happiness!
According to a survey of 1025 adults conducted by Ally Bank, those with savings accounts were 31% more likely to rank themselves as “extremely happy” or “very happy” than those without savings accounts. And the more money people save, the happier they are! Survey respondents with $100k or more in savings are twice as likely (57% vs. 29%) to rate themselves as “extremely or very happy.”
Here’s the breakdown of how many people identified themselves as extremely or very happy according to the amount they have in savings:
Why does saving money make people happy? According to the those surveyed, saving helps them:
- Face the unknown (92%),
- Feel proud (89%),
- Feel independent (84%), and
- Realize life goals (78%).
One issue for many savers is that they try to achieve their targets by restricting. This can lead to feelings of unhappiness, due to restriction, or even shame if it’s difficult to stick to a budget. Instead, try turning your unconscious savings into unconscious spending through an app + account system like Currence. Currence helps you save first by filtering your income through a Reservoir account.
You feel good because your Reservoir goes up each month with virtually no effort on your part, and you still have whatever income you want to spend in your checking account each month. And because you pull savings out first, you’re free to spend down your checking. It’s a guilt-free approach that helps people feel more satisfied with their saving AND spending. It’s like paying yourself!
How Money Can Buy Happiness!
Looking at the lessons above, we can conclude that when money is first saved and then spent on others to treat them to enjoyable experiences involving spending time together doing something that aligns with your values… well, it doesn’t get any better than that!
Perhaps it is no wonder that “vacations with a purpose” and “voluntourism” (volunteer experiences involving travel) are becoming a popular way for those with time and money to spend their precious resources. And it’s not just for those in their golden years! Opportunities to travel and volunteer are also extremely impactful for students, giving them a broader worldview and valuable learning experiences.
When still in high school, Kaylea Butler (our own Kim D. H. Butler’s daughter) published a book about her volunteer experiences in Africa. She was profoundly inspired by working alongside Susan Rammekwa, a woman who had used her life savings to start an after-school program for orphaned and vulnerable children. The proceeds for Every Day is a Miracle: Lessons from Susan Rammekwa benefit The Simunye Project.
According to an article on volunteer opportunities abroad in The Washington Times, some organizations worth looking into include:
- Crystal Cruises, which offers volunteer shore adventures on many itineraries at no cost to guests and crew.
- Earthwatch, an environmental science organization, which offers varied projects including archaeological excavations near Hadrian’s Wall and scientific research at the Great Barrier Reef.
- Global Volunteers provides essential services, such as childcare, gardening, tutoring, healthcare and teaching in many countries through short-term volunteers and in-place program facilitators.
- Projects Abroad sends travelers to volunteer or intern abroad in fields such as education, environmental conservation, healthcare, journalism, law and human rights, international development, and business.
- Globe Aware focuses on short term, one-week volunteer vacations especially for working people with limited vacation time who want to volunteer abroad.
- REI Adventures works with non-profit Conservation Volunteers, sending travelers to North and South America destinations to help expedition leaders and local park rangers to maintain trails, restore wildlife habitats, and collect native plant seeds, among other important tasks.
- Volunteers for Peace offers opportunities all over the world for volunteers to develop leadership skills and global connections.
- WWOOF connects travellers to organic farms across the world, offering room & board in exchange for help on the farm.
Can We Help You Be Happier?
If you’d like to start saving more (perhaps for a volunteer opportunity abroad for yourself or someone you love), we’d love to help. Contact us today to find out-
- A better way to save. Use Currence to change the order of operations in your cash flow, and turn unconscious spending into unconscious savings.
- A better way to grow your money. Learn how life insurance can beat bank rates substantially, over time, without putting your money at risk.
If you’re not happy with your current cash flow systems, we can help you forge new pathways! If you’re still learning, be sure to sign up for our Prosperity Action Pack to get our eBook, “Your Guide to Activating Prosperity.”