Not Happy? You Might Be Spending Your Money All Wrong

Keith Ramsey

“Wealthy people don’t just have better toys; they have better nutrition and better medical care, more free time and more meaningful labor—more of just about every ingredient in the recipe for a happy life. And yet, they aren’t that much happier than those who have less. If money can buy happiness, then why doesn’t it?” Ask the authors of a 2011 research dialogue in the Journal Of Consumer Psychology.

Their answer? Because we’re spending our money all wrong.

The three authors — leading researchers on money and happiness — put together a list of takeaways from recent studies, condensed below by Rozanne Larsen of Harvard University’s Shorenstein Center.

Eight Ways To Spend Your Money And Get Happy Doing It:

  1. Spend money on “experiences” such as travel, concerts, sporting events, etc., rather than goods; in one study examined, 57% of survey participants reported gaining greatest happiness from experiential purchases compared to 34% from material goods.
  2. Give money to others via charities, personal relations, or political donations, rather than using it solely on oneself; not only do people self-report being happier but “the emotional rewards of prosocial spending are also detectable at the neural level.”
  3. Spend small amounts of money on many small, temporary pleasures rather than less often on larger ones. The authors find that “not only are the small pleasures of daily life an important source of happiness, but unfettered access to peak experiences may actually be counterproductive.”
  4. Don’t spend the money on “extended warranties and other forms of overpriced insurance”; indeed, “research suggests that the warranties may be unnecessary for happiness and the return policies may actually undermine it.” Hedging against future regret or disappointment can deprive one of the “emotional benefit of commitment.”
  5. Switch from the mentality of “consume now, pay later” to “pay now, consume later,” because “research shows that thinking about future events triggers stronger emotions than thinking about the same events in the past.”
  6. Think carefully about the day-to-day consequences, particularly the negative ones, of a purchase before you commit to it: “Over time, psychological distress is predicted better by the hassles and ‘uplifts’ of daily life than by more major life events.”
  7. Avoid buying things because they are comparatively better from a monetary perspective: “… comparison shopping may lead people to seek out products that provide the ‘best deal’” rather than the greatest happiness.
  8. Ask previous consumers their opinions before purchasing: “Research suggests that the best way to predict how much we will enjoy an experience is to see how much someone else enjoyed it.”

“If money doesn’t make you happy, then you probably aren’t spending it right” was written by Elizabeth W. Dunn, Daniel T. Gilbert and Timothy D. Wilson and published in the Journal For Consumer Psychology in April 2011.

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Comments

  • jpc3

    Emily Corwin seems not only to be able to sift the wheat from the chaff of the plethora of economic information reported on today but also to present it in terms meaningful to the average individual. Thanks for passing this on.

    • http://www.chrisamico.com Chris Amico

      I agree. Emily is teh awesome.

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