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