Money Can Buy Happiness—If You Spend It Right
If you've ever purchased a shiny new gadget (or handbag, or car) believing it would make you happier, you may have been right. But only for a short while. If you're like most people, that new purchase eventually lost its luster. But are there certain ways we can spend our money that will bring us real happiness? To find out, we chatted with Harvard Business School professor Michael Norton, the co-author, along with psychologist Elizabeth Dunn, of Happy Money: The Science of Smarter Spending.
What are the 3 biggest misconceptions people have about money and happiness?
Michael Norton: First, our research shows that people believe that more income is associated with a lot more happiness: twice as much money, twice as happy. It turns out that while having more money is associated with happiness, the link is much weaker than people believe it to be.
Second, people believe that what’s important for happiness is how much money they have; in Happy Money, we show time and time again that what you do with your money is at least as important as how much of it you have.
Finally, when we survey people to find out how they spend their money, their purchase history is littered with material good after material good, from TVs to cars to houses. Research shows that while buying stuff isn’t bad for happiness, it generally has no effect on increasing our happiness. So, we encourage people to quit buying stuff, and start spending their money in happier ways—from buying experiences to buying themselves better time to investing in other people.
Let's say someone received a surprise bonus, and decided to spend it on a mega experience—an exotic vacation in the Galapagos. Aside from taking pictures with gigantic tortoises, what would be some science-based strategies for maximizing their enjoyment of the trip?
Michael Norton: Taking pictures riding giant tortoises might be more fun—though I’m pretty sure it’s discouraged by the park wardens. Short of that, there are some very simple ways to get more happiness out of every experience you buy. First, make sure you pay for the vacation in full, up front. Nothing ruins a vacation more than feeling the entire time that an enormous bill is awaiting you when you’re done. Paying far enough in advance—with all expenses included – means that when the vacation finally comes, everything feels free. And there’s another advantage to paying far in advance: the months and months of exciting anticipation fantasizing in your narrow cubicle about those sunny beaches. Research shows that one of the biggest vacation-related happiness peaks comes before the vacation even begins.
If you won the lottery, what would you spend it on? (and why?)
Michael Norton: Despite the fact that Happy Money focuses on how to maximize your happiness bang for every buck you spend, there’s another critical action that leads not so much to happiness right now, but happiness down the road: saving. Saving is difficult in part because it does nothing for our happiness today—but wise saving can provide us with enormous happiness down the road. That said, we’d all probably want to spend at least a little of our millions. If so, I’d focus on buying memorable experiences (a trip to space on Virgin Galactic is “only” $200,000), and investing in others, from friends and family to worthy charities.
Want a 4 week plan to spend happier? Maximize your money—and your happiness with the activities, polls, and quizzes in Mike Norton and Elizabeth Dunn's track based on Happy Money.
You May Also Like:
Want to Feel More Positive? Learn to Give Genuine Compliments
8 Reasons Why You Need at Least 8 Hugs a Day
INFOGRAPHIC: The Science of Giving: Why Being Generous Is Good for You