Happy Money: The Science of Smarter Spending By Elizabeth Dunn and Michael Norton
How many times have we heard that money can’t buy happiness? In their book, Happy Money, Elizabeth Dunn and Michael Norton aim to flip this saying on its head. Backed by psychological experiments and research, they demonstrate that there are a number of ways to improve your happiness through your spending habits.
Most personal finance books show ways for readers to better earn, save, or invest their money. Happy Money offers five ways to better spend your money, all of which can provide a boost to your happiness. Here are five ways offered by the authors:
1. Buy experiences.
Which are you more likely to remember 10 years down the road, a trip you took hiking the Andes mountains with friends or family, or expensive boots and coat you bought yourself? This one is pretty self-explanatory.
The authors note that the anticipation before you go on your trip, coupled with the actual experience and subsequent fond memories, make it a far greater purchase in terms of happiness than any material good. This principle extends beyond long vacations. It includes anything that brings you together with other people, makes a memorable story, or lines up to your sense of who you are or want to be.
On a personal note, I have found much satisfaction from my purchases of Spartan race tickets. While expensive, they have provided a great sense of challenge, camaraderie, and accomplishment that have lasted long after that final mile, proving to be well worth the ticket price.
2. Make it a treat.
Perhaps you’ve found a farmer’s market near you. When you first started going, this experience was a treat for you, but each subsequent trip brings you less happiness. If that new habit you’ve formed no longer feels special, then it’s no longer a treat. Look to make this experience a treat once more by lengthening the duration between each visit. Soon enough, you’ll look forward to going back to the market.
This principle can be applied to that fancy coffee drink you now get each day before work, or that trip to the movies you’ve been taking twice a week. We can see how companies take advantage of this principle, such as Starbucks and McDonald’s, offering seasonal products such as the Pumpkin Spiced Latte or the McRib for a limited time.
3. Buy time.
Everyone knows the most valuable resource of all is time. It seems that the happiest people take most advantage of this, choosing to make purchases that maximize their time.
The authors note the frequent habit of purchasing a $75 cheaper airline ticket with 2 layovers instead of a direct flight to your destination. Are those savings really worth the extra eight hours you’ll spend in airports?
This principle should be applied when one considers their time commuting, housework, and yard work. Would it be more advantageous for your free time and happiness to outsource some of this work or find ways to reduce your commute?
4. Pay now, consume later.
It’s often our anticipation of an event or purchase we make that brings us the most happiness. The experience or purchase captures our attention because we’re not exactly sure how it will turn out, so we daydream about it. When we pay for an experience upfront and delay gratification by waiting for the purchase or experience, we can enhance our enjoyment.
On the flip side, taking on debt to purchase a new mattress or car can rather drastically diminish our happiness with the purchase. Which means each purchase should be made within one’s financial ability. But treating yourself and your significant other to Broadway tickets months in advance can leave quite a lasting impact on your happiness.
5. Invest in others.
Can you recall a time where you invested your time or money to helping out someone in need or someone less fortunate? Chances are you can vividly recall those occasions, and they probably made you feel pretty good about yourself.
When we don’t feel forced into making donations, and make them of our own accord, it can give us a more positive view of ourselves and our ability to impact others. The next time you purchase $6 worth of lottery tickets, consider how much more of an impact that money could have on someone less fortunate, and how much it can improve your own happiness.
I found parallels to Vicki Robin’s Your Money or Your Life book, specifically in regards to changing our relationship with money and how we choose to spend it. I loved the connections between psychology and finance. I appreciated how succinctly the authors summarized each of their five principles and was backed by their research. It’s a quick, fun read, with humor sprinkled throughout. If you’re a frequent sufferer of buyer’s remorse or don’t get a great return on the things you buy, you’ll want to consider these principles before making a purchase.
Star Rating: 2/3 stars.
Do you have a particular purchase that stands out in your mind? How do you envision incorporating these principles into your spending habits? Feel free to share below!