With the festive season fast upon us, many of us can feel challenged by time and money. It seems then a perfect time to reflect on the science of happy money.
In their book on the subject, academics Elizabeth Dunn and Michael Norton argue that, if you spend your money in the right way, it can make you happy.
1. Buy experiences. Don’t bother with material things. A new Porsche may make you happy for a while, but the joy soon palls. The vast majority of Australians aspire to own their own home. And yet research shows that home ownership and happiness don’t happen to necessarily correlate. Material things – from a beautiful home to a flash car turn out to provide less happiness than experiential purchases.
So spend your money on experiences instead – go on holidays, see a show, listen to live music or dine out with friends. Such experiences will make you happier than owning stuff. Why? Because they are usually enjoyed with others, and so build our social relationships and create shared memories.
2. Make it a treat. Because human beings quickly habituate to the status quo, even enjoyable experiences eventually become boring. So try to dole out your pleasures. Make your morning coffee a special treat rather than a daily routine. Instead of staring at the TV for hours, save your viewing for special shows. Break out of a rut by rewarding yourself and your partner with the occasional date night.
3. Buy time. We love the idea of time affluence – that sense of freedom that comes with feeling that you have the luxury of time. Research shows that this is a potent predictor of people’s satisfaction with their lives.
For most of us, time is too precious to waste shopping. Instead, we benefit where we use time for activities that produce lasting effects on happiness. Enjoy visiting a gallery, get out in the garden, take a leisurely walk, go bushwalking, swimming or cycling with your kids. Maybe even spend time experiencing something completely new.
When you’re considering a purchase, ask yourself this question: how will this purchase change the way I use my time? Just by focusing on this question Dunn and Norton believe you will better identify purchases that improve your well being.
4. Pay now, consume later. In our e-commerce world, it is so easy to consume now and pay later. Not only does this create the risk of increasing debt, it also creates risk to our happiness.
Dunn and Norton suggest reversing the habit – and exchanging “buy now, pay later” for “pay now, consume later”. They argue that pleasure of anticipation provides an extended source of happiness. Research shows that waiting, even briefly, for something as simple as a piece of chocolate, enhances our taste experience when we finally enjoy it. So, imagine the boost to happiness for bigger things. Think about booking and paying for your winter ski holiday in the summer – you then get to dream about the slopes for months before you depart. When you finally get around to going, it will be so long since you paid it will seem as if the holiday were free.
5. Invest in others. If happiness is your goal, then the single best thing you can do with your money is to spend it on someone other than yourself. Research shows that spending money on others provides a bigger happiness boost than spending money on yourself. Investing in others allows you to connect with other people and to make an impact on the world – and it is good for your health as well.
Uniting the five principles is one simple premise. Before you spend your dollars, stop to ask yourself: is this happy money? Am I spending this money in the way that will give me the biggest happiness bang for my buck?