Money CAN buy you happiness

Happy Money : The Science of Happier Spending by Elizabeth Dunn and Michael Norton
Happy Money : The Science of Happier Spending by Elizabeth Dunn and Michael Norton

Financial Independence bloggers churn out hundreds of posts about money every year. In the main the focus is on how to earn money, save money or invest money. Which all makes sense since the goal is ultimately to have enough money to finance whatever goals the bloggers might have for themselves.

A less common subject, however, is how to SPEND money, a topic which has always struck me as very important. For after all, what is the point of working so hard to have “enough” money if we do not then use it in order to buy happiness?

The  FI community is often very focused on living as frugal a life as possible. This definitely makes sense when viewed from the perspective of not frittering money away in order to save more and reach set financial goals, but it becomes problematic when taken to extremes because in some cases spending money, even on things that are not absolutely essential, can make us happier.

Now I do not know about you, but if I were to be given a choice between being happier or being richer, I would choose to be happier.

Enter the book “Happy Money: The Science of Smarter Spending” by Elizabeth Dunn and Michael Norton, two behavioural science professors who define five core principles of how to spend money in order to maximise happiness, which are:

  1. Buy Experiences
  2. Make it a Treat
  3. Buy Time
  4. Pay Now, Consume Later
  5. Invest in Others

Buy experiences: Climb that mountain. Run that marathon. Live!

The authors show that buying experiences, such as a memorable trip which creates great memories you can then tell stories about at parties, will give you greater and more lasting satisfaction than buying material objects. Such experiences are directly linked to your sense of self, and are well worth the money you spend on them.

Make it a treat: Don’t drink your favourite latte every day.

The more you have of something, the less you enjoy it. So ration yourself and keep the things you enjoy special, not something you do or eat or use everyday. Also linked to this point is the importance of being grateful for all the things we have, including the little ones. So savour that latte and enjoy it to the full.

Buy time: Absolutely dread ironing or mowing the lawn? Pay someone else to do it and in the meantime, go for a run.

The idea is that if there is something you hate doing, you should outsource it and use the time to do something else you enjoy instead. The same applies to spending money in order to save time, such as times you spend a bit more to get flights with shorter layovers. Our time on earth is finite, so it is worth spending money to use what time we have in a more satisfying manner.

Pay now, consume later: Chocolate cake. Rich chocolate cake with decadent chocolate ganache. Can’t wait….

Deferred gratification is not only useful when it comes to saving and investing, but also for maximising the pleasure we get out of our purchases. If you are planning a vacation you often enjoy the planning phase just as much as the vacation itself. You have a great time reading up about the place you are going and imagining all the wonderful things you will see, and things you will do, and food you will eat (chocolate cake again…).

There is also another benefit to paying for something in advance. The gap between paying for it and consuming it leads you to forgetting about the “pain” of shelling out your hard-earned cash. You get to enjoy your purchase without having to think about money at all!

Invest in others: The warm glow you get when you think of others and do something good.

This is perhaps the most important point in the book. One that is to a certain extent counterintuitive. You get more satisfaction spending money on other people or causes, then you do when you spend money on yourself. When people make a choice of their own free will to donate their money (or their time, which as mentioned above is more valuable than money) in a way that helps them connect to others and where they can see that it makes a clear impact, the donation increases their happiness and wellbeing.

In summary Happy Money: The Science of Smarter Spending is an engaging book that highlights five scientifically-validated ways of increasing your happiness. It’s an interesting read that often makes you laugh out loud, and it gives you a different perspective on your purchase decisions.

So save money and aim for FI, but don’t  refrain from spending money judiciously along the way in order to get “the biggest happiness bang for your buck.”

 

Author: Mrs Smelling Freedom

After selling my business my priority is consolidating my family’s financial independence. I blog about Entrepreneurship, Financial Independence and living life to the full!

6 thoughts on “Money CAN buy you happiness”

  1. Seriously, did you really suggest that I have some chocolate cake and don’t eat it straight away? Definitely a step too far😉

    For invest in others, I guess it can be investing time as well. This morning, a friend of mine asked him to help with something, and I spent most of the conversation convincing him I didn’t want paying for it. I have plenty of time and, in tune with the point of the book, helping out makes us feel good – that’s payment enough.

    1. Chocolate cake will be my downfall 🙂

      Helping others is definitely a win-win. They win because of your help, and you win because you feel great. Score!

  2. I think the topic never stops being exciting and I think about it very often too! The author of the book makes really good points and I pretty much agree.
    I also posted this article on firehub.eu and sent you an email 🙂 Please check!

    All the best,

    Mr W

    1. Very true Mr W!
      Money is often seen as a dirty word, but if used properly it can enable us to achieve great things. Study after study have shown how rewarding it is to give. If people understood that then there would be less hoarding, more sharing and a more equitable world.
      Thanks for the share 🙂 I replied to your email.
      Mrs SF

      1. Note that I don’t get any notification that I got a reply/another comment on this blogspost (even though i subscribed for followup comments). It’s probably a technical issue on the blog you might want to look at…

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