Yes, you can – to a certain extent. But chances are you’re probably not getting the best bang for your buck.
Money makes the world go round. But can it buy you happiness?
As it turns out, the answer is “yes”. Sort of.
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For years, economists have been postulating the idea that happiness comes at the magical price of an estimated US$75,000 a year, beyond which it hits a slippery slope of diminishing returns. But now science is saying something different: that happiness is not a result of how much money you have, but how you use it.
Many of us tend to fall into a misconception when it comes to happiness – we think the more money we earn, the more we can have, and therefore the happier we’ll be.
However, that’s not exactly how things work. According to the sustainable happiness model, any increase in wealth and/or material possessions boosts our happiness only briefly, because we adapt to such changes quickly.
For instance, if you receive a pay raise, it’s easy to get used to having more disposable income and lifestyle inflation, such as getting a new car or moving to a bigger house. Sure, it’s a nice feeling to be able to afford more. But once the initial “high” wears off, so does your happiness.
Instead of getting caught up in the pursuit of material wealth, turn your attention towards lifestyle changes that have a higher psychological payoff. This means spending your money only on things that matter and engaging in activities that will fulfil your basic psychological needs of autonomy, competence and relatedness.
So how exactly should you be spending your money to keep you on cloud nine? Let’s find out.
1. Cash in on experiences
Spend your money on life experiences, not material goods. This may sound ironic since material goods last longer, but studies by researchers have repeatedly found that paying for an experience usually improves your wellbeing more than buying an item (even one that you really like).
In a survey by Harvard University psychology professor Dan Gilbert, 57% of respondents reported greater happiness from an experiential purchase, whereas only 34% said the same about a material purchase.
Why the difference? Because material goods lose their lustre over time (both literally and figuratively). The new dress you were so thrilled about last week, for example, will quickly become just another item in your closet. Furthermore, if you’ve splurged on a big-ticket item, it is likely that you will feel buyer’s remorse after the initial rush fades, let alone derive any sense of long-term satisfaction.
On the other hand, spending on experiences – like vacations or sharing a meal with a friend – creates lasting memories and strengthens relationships. Even though these benefits are intangible, they go a long way towards building character and making you feel more socially connected. And that makes you happier in the long run, because we are all the sum of our experiences, not the sum of our possessions.
2. Invest in others
In the same way that parents derive satisfaction from nurturing their children and couples enjoy showering each other with little gifts, sometimes making someone else smile can do more for you than making yourself smile.
When you spend on others (also known as “pro-social” spending), the benefits are observable in both the brain and the body, says Harvard University researchers. This is supported by social experiments conducted by Michael Norton, which he shared in this TEDxCambridge talk.
[In a nutshell, the experiment goes like this: test subjects were given money and asked to spend a certain amount each day. Some were told to buy things for themselves and others were told to buy things for others. When all was said and done, the latter group reported feeling much happier. The same experiment was run in both Canada and Uganda and produced similar results despite the countries’ disparity in wealth, showing that it’s not the absolute sum spent that matters, but the way it was spent.]
Investing in others doesn’t mean just buying them random trifles and trinkets. Instead, buy things that you know will be useful and meaningful to the person, such as a new pair of reading glasses for an ageing parent or a new book for a bookworm friend. Don’t worry even if finances are tight; you can always volunteer for a charity, which is a great way of investing another valuable currency you have – your time.
3. Shop the right way
You may be thinking, hang on, there’s a “correct” way of shopping? Well, there actually is.
Sometimes, you may feel tempted to buy things just to keep up with your peers or project a certain image. But you really shouldn’t do so, because it isn’t conducive for your wallet or your emotional wellbeing.
Instead, go by the comfort principle and spend your money where you spend your time. For example, if you spend a lot of time in the office, consider getting an ergonomically-friendly chair or a cushion for extra back support. It may not seem like a fun purchase, but it’s one that will benefit you and keep you comfortable in the long run.
Secondly, stick to experiential items as far as you can. Just like spending on life experiences, experiential items bring you happiness over an extended period of time. A good book that you’ll enjoy reading over and over again, a set of painting brushes and canvasses, or even a video game are good examples of these.
Lastly, it’s best to only spend on relatively inexpensive items. Not only does this stave off buyer’s remorse from splurging too much at one shot, it also means you can afford to buy more little treats at more frequent intervals, which will help prolong each surge of happiness. Just be careful not to overdo it!
4. Indulge in sports and music occasionally
Skip this if you don’t enjoy either recreational activity.
For those who do, you might be interested in knowing that sports and music can boost our wellbeing substantially, if recent research is to be believed. According to a study by the UK government, sports participation and art engagement are both associated with higher levels of happiness, at a value of approximately £1,084 and £1,127 per year per person respectively.
Other studies have also shown that viewing art pieces and listening to music, be it live or recorded, boost our emotional health by inducing us to produce more feel-good chemicals like dopamine. So next time, don’t be too quick to turn down a concert invitation in lieu of work – you might find yourself feeling happier for it.
5. Buy your financial security
Stress is the enemy of happiness. Feeling insecure financially not only eats away at your happiness; over time it may even begin to affect your health in a negative way. That’s why it’s important to consistently manage your money wisely, so that you don’t have to live in worry about your debts and loans.
For the sake of your long-term happiness, start by paying off any credit card debts and car or mortgage loans (if you have any), then turn your attention towards saving and investing for your retirement. Not sure where to start? Try out our useful suite of free financial and investment tools here.
Believe it or not, adopting these tips in your day-to-day-life will significantly boost your happiness quotient. The key is to spend money on doing, not to spend money on having.
Back in 2011, multibillionaire Bill Gates reportedly told students at the University of Washington, “I can understand wanting to have a million dollars – it’s freedom. But once you get beyond that, I have to tell you, it’s the same hamburger.”
In other words, if you want to “buy” yourself a more fulfilling life, it’s really not how much money you have that matters, but how you spend it.
Happiness is not something ready-made. It comes from your own actions. So, give these tips a shot today and start investing your money in your happiness!