I recently read Happy Money: The Science of Smarter Spending by Elizabeth Dunn and Michael Norton. This book found the intersection between how-to books on happiness and personal finance. And even better, all of their recommendations are based on solid research.
Some of their suggestions come as no surprise (“buy experiences”) and others provided a fresh take on the discussion. Here’s a summary:
Chapter 1: Buy Experiences
- Looking forward to experiences, such as vacations, gives people a big happiness boost.
- Memories of experiences and the identity capital they add make the money spent worth it.
- Memories can become more positive with time and revisiting them brings continued enjoyment.
- Spending on experiences helps you avoid buyer’s remorse because it’s impossible to compare personal memories.
Chapter 2: Make it a Treat
- Treating yourself will provide greater happiness if it’s done in smaller, less frequent doses. The authors’ example: three thirty-minute massages brings greater happiness than one ninety-minute massage.
- Thinking about money or knowing you have a lot of it actually decreases your ability to enjoy life’s little pleasures.
- List the treats you spend regularly on and see if you can decrease their frequency or change up your routines.
Chapter 3: Buy Time
- Avoid these time drains that actually have negative impacts on happiness: commuting and watching TV.
- Buying things means you have to spend time to maintain them. When you’re thinking of making a purchase, ask yourself if it will improve how you spend your time.
- Spending time on cultivating social and family relationships has a big, positive influence on happiness.
Chapter 4: Pay Now, Consume Later
- Fully paying for something before you consume it provides more pleasure than consuming and then paying later.
- Delaying consumption as far in the future as possible, after the item or experience has been paid for, will increase happiness.
- “The emotional benefits of paying off debt can even dwarf the benefits of building savings” (p. 96). I thought that was so interesting I had to quote it.
Chapter 5: Invest in Others
- The positive relationship between pro-social spending and happiness is universal.
- Donating to charity can increase your happiness as much as doubling your income.
- The amount you give away doesn’t have much of an impact on how much happiness you feel in return; $5 can give you as much of a boost as $20.
- Feeling a connection with the person or cause you’re giving to gives the greatest boost to happiness.
Happy Money reminded me that how much money you have (as long as your basic needs are met) is not as important as how you spend it.
If you want to learn more, another book I’ve enjoyed about spending happiness is All the Money in the World: What the Happiest People Know About Wealth by Laura Vanderkam.