Five Ways to Ensure Your Money is Bringing You Happiness
Money makes us happy, doesn’t it? Well, not necessarily. Money and happiness researcher Elizabeth Dunn says there are five key principles to live by if you want to derive maximum happiness from your money. In her book Happy Money: The Science of Spending, co-authored with Michael Norton, Dunn says there are five keys to money happiness:
- Buy Experiences
- Make it a Treat
- Buy Time
- Pay Now, Consume Later
- Invest in Others
Dunn doesn’t try to convince you to spend less, just to make sure you’re getting the most intrinsic happiness possible from your spending. Let’s delve deeper into each of her five principles.
Tip #1: Buy Experiences
According to Dunn, happiness research shows that material items provide us with less happiness than when we spend money on experiences. Think about the last time you went on vacation – do you remember much about the flight or hotel room? How about the clothes you wore? Chances are, your memories are much more vivid when it comes to the experiences you had on your trip. Maybe you rode horses on the beach with your spouse or took a family cooking class with your kids. These adventures with the people you love will stay with you much longer than material purchases, and they’ll provide you with more joy over the long-term.
Tip #2: Make it a Treat
You can’t be on vacation every week of the year, so how do you make sure you’re making purchases in your normal day-to-day life that will support your happiness? A good step is to think about something you enjoy, then brainstorm how to turn it into a special treat. For example, if you love to drink wine, consider saving up for a fancy wine tasting rather than buying more bottles for your home collection. Although it might seem counterintuitive to stop drinking wine at home so much if it’s something you truly love, the idea is to create the opportunity for one of your favorite things to feel special and exciting again.
Tip #3: Buy Time
Time is, perhaps, our most finite resource. Retain more of it for yourself by spending money in ways that add more minutes and hours to your days. We all spend time cleaning our homes, walking our dogs and ironing the laundry – the question is, do you enjoy those activities? If not, hire someone to do these chores for you and reclaim that time to spend on your passions instead. By outsourcing the mundane tasks you dread, you give yourself the gift of time.
Tip #4: Pay Now, Consume Later
This tip will really challenge you to change your money mindset. If you have a credit card, as most people do, you’re probably accustomed to the buy now-pay later model. Even if you pay your bill in full each month, you’re still spending several weeks owing money for things you already enjoyed. Dunn challenges us to reverse this process. By paying for something up front and delaying consumption, you can actually buy yourself more happiness. Think about it – isn’t one of the best parts of a vacation the pleasure of anticipation beforehand? You can actually squeeze even more happiness out of pleasurable things by paying now and savoring the anticipation of consuming them later.
Tip #5: Invest in Others
Decades worth of scientific research has shown that we often derive more happiness from spending money on others than when we spend it on ourselves, and Dunn concurs. Now, this isn’t meant to say that you should commit to giving away 99 percent of your wealth like Warren Buffet, but helping out a friend or donating to a charity you believe in is a great way to give yourself a boost of happiness. If you don’t think you can spare the money at this phase of your life, don’t worry – volunteering your time can help you level-up your happiness in the same way.
The next time you’re ready to spend money, ask yourself whether your purchase follows any of the five principles above. If it doesn’t, consider putting the brakes on the purchase while you thoughtfully consider how to maximize the joy it could add to your life. Remember, our money doesn’t automatically make us happy. However, if we are intentional about the way we spend, we can increase our overall money happiness and better enjoy the resources we have.