Happy Money: The Science of Smarter Spending

“[R]ather than suggest that you stop trying to get more money, our goal is to help you use the money you have to get more happiness.”

– Elizabeth Dunn and Michael Norton, Happy Money

In my post a couple of weeks ago, How Money Can Buy Happiness, I linked to a TED Talk by Michael Norton, co-author of Happy Money: The Science of Smarter Spending. Since then, I was able to check Happy Money out at my library.

The authors seem to find themselves more amusing than I do, but Happy Money is a quick read, and I enjoyed learning what research has to say about how we can use money to create happiness.

“Research shows that experiences provide more happiness than material goods in part because experiences are more likely to make us feel connected to others.”

– Elizabeth Dunn and Michael Norton, Happy Money

Experiences that bring us closer to other people or make good stories are likely to bring us greater happiness. The same is true for experiences that are tightly linked to our sense of who we are – or want to be – and those that provide unusual opportunities.

The authors point out the difficulty of separating things from experiences and advise us to think of our stuff as experiences when possible. That is, you may be happier thinking of your music collection as an opportunity for an experience rather than as something you own.

“Abundance, it turns out, is the enemy of appreciation.”

– Elizabeth Dunn and Michael Norton, Happy Money

It probably doesn’t surprise you to learn that making something a treat makes you appreciate it more. If you have a latte every day, you probably won’t enjoy it nearly as much as if you have one each Saturday (or if you have to wait several months for the pumpkin spice latte to come back to Starbucks).

Interestingly, this applies to big purchases too. For instance, someone who drives a sports car every day is unlikely to enjoy the experience as much someone who drives it only on weekends.

“Purchases that reduce or eliminate the worst minutes of our day can provide a big happiness bang for our buck.”

– Elizabeth Dunn and Michael Norton, Happy Money

Hate housework? Mowing the lawn? Cooking? Using money to pay someone else to do some or all of the chores you can’t stand is an obvious way to buy happiness.

To get the biggest bang for your buck, use the time you free up to volunteer. People who volunteer actually feel they have more free time than those who don’t – even when objectively, the volunteers have less free time.

“Delay can enhance the pleasure of consumption not only by providing an opportunity to develop positive expectations, but also by enhancing what we call the “drool factor.”

– Elizabeth Dunn and Michael Norton, Happy Money

Planning ahead allows for pleasant anticipation, but paying ahead is even better. By separating payment from the experience, you’re free to enjoy your experience without financial concerns.

You might think paying later serves the same purpose, but buying on credit decreases, rather than increases, happiness levels.

“[T]he proclivity to derive joy from investing in others might just be a fundamental component of human nature.”

– Elizabeth Dunn and Michael Norton, Happy Money

Spending on others, whether those you know, or those you don’t know (as when you donate to a charity or pay for a stranger’s coffee order) is another way to buy happiness.

For an extra bonus, spend the money on an experience for you and a friend or family member. Taking a friend out to lunch (your treat), for example, offers you the opportunity to buy happiness by investing in your friend as well as by engaging in an experience for yourself that increases social connection.

Which of the ways you spend your money bring you the most happiness?