For years we have been told that money doesn’t lead to happiness. So why is it that so many crave riches?
Recent research suggests that money can deliver enhanced levels of satisfaction – not from having more of it – but by spending it on things that last and yes, even giving it away.
A little while ago researchers tracked thousands of people in Germany who moved from one home into a nicer one. Five years later, they found that the homeowners remained more satisfied with their new houses, but did not report more satisfaction with their lives. It had not made them any happier.
In contrast, people who spent money on experiences – whether trips or fancy dinners or a night of dancing – reported feeling happy when thinking about their purchases.
The Globe & Mail recently reported that a research study entitled The Happy Money study showed that we often radically undervalue our time, for instance by wasting hours on a miserable layover in Atlanta rather than spending the extra $150 to get a direct flight.
Perhaps most interesting, they found that giving money away is more likely to make you happy than spending it on yourself. When random passersby were given a $5 bill and instructed to either spend it on themselves or to spend it on someone else, those who gave it away reported feeling significantly happier that evening.
Spending on others makes you feel good, generous and wealthy.
In Happy Money, authors Elizabeth Dunn and Michael Norton analyze what spending choices maximize happiness. Here are some of their suggestions on how to buy joy.
1. Buy experiences
Studies have shown that paying for trips or special meals creates more happiness than buying objects. Even spending a few dollars to play a video game or hear a song provides more lasting happiness than buying a few trinkets.
2. Make it a treat
Humans adapt to everything, including things that make us happy. Research shows that we vastly underestimate just how quickly our pleasure will fade. Instead of cutting out ice cream completely, by limiting it to special occasions we can “re-virginize” ourselves, renewing our capacity for pleasure.
3. Buy time
While wealth theoretically allows us to outsource some of our most hated tasks, most people tend to overvalue money and undervalue time. Before you make a purchase, think: “How will this change the way I use my time?”
4. Pay now, consume later
Paying up front and delaying your consumption is one way to increase your happiness on any given purchase. Vacations make us most happy because of the anticipation. Studies have shown that even waiting briefly before eating a Hershey’s Kiss makes it taste better.
5. Invest in others
Research shows that spending money on others can make you happier than spending on yourself. This is true for Warren Buffett, who famously decided to give away 99 per cent of his wealth, but studies also show that it’s true for Ugandan women buying life-saving malaria medication for a friend. Earn your money, but to be happiest, it helps to spread it around.
So, how will you buy joy this year?