Numerous studies have shown that money makes happy up to an inflection point of between 40,000 to 70,000 USD per year.  I guess that is quite obvious since with that amount of money one’s basic needs can be met (depending on where you live).

I, however, go a bit against common wisdom that money cannot buy happiness, even after that inflection point.

You don’t believe me?  Then you’re not spending your money right.

The behavioral scientists Elizabeth Dunn & Michael Norton show us in their book “Happy Money” how it is done.  Just follow five core principles of smarter spending.

When it comes to spending money, most people just follow their intuitions.  But scientific research shows that those intuitions are often wrong.

1) Buy Experiences

The best things in life aren’t things.

Understanding why experiences provide more happiness than material goods can also help us choose the most satisfying kinds of experiences that ideally meet the following criteria:

  • The experience brings you together with other people, fostering a sense of social connection.
  • The experience makes a memorable story that you’ll enjoy retelling for years to come because of its emotional values.
  • The experience is tightly linked to your sense of who you are or want to be.
  • The experience provides a unique opportunity, eluding easy comparison with other available options.

What should you do with materialistic purchases?  You could try shifting your focus to alter whether a purchase feels like an experience (eg., a DVD).

Money can buy happiness through experiences

2) Make It A Treat

The single greatest thing you can do to change your life today would be to start being grateful for what you have.

For example, food: Try next time to eat your food with your non-dominant hand.  By that you free yourself from mindless consumption.

3) Buy Time

Buying time isn’t always easy and the strategies below are designed to overcome barriers to applying this principle.  Meaning; to rethink many everyday expenditures and to transform decisions about money into decisions about time—a sort of mental backflip that can make us more inclined towards happy choices.

The same fifteen minutes can make us feel either time rich or time poor, depending on how we spend them.

Most people would benefit from using their money to change the amount of time they spend on three key activities; commuting, watching television, and hanging out with friends and family.

People experience the most positive moods of the day while spending time with family and friends.

Before making a major purchase, think about Tuesday.  Take the time to consider what you’ll be doing from morning to night this coming Tuesday.  How will the purchase affect you on Tuesday?  This simple exercise—thinking about time used on a specific day—helps us make less biased predictions about how much any one thing will influence our happiness.

Thinking about time—rather than money—spurs people to engage in activities that promote well-being.  And people who thought about time felt happier compared to those who thought about money.

By consistently asking yourself how a purchase will affect your time, your dominant mind-set should shift, pushing you towards happier choices.

Faced with a decision between multiple products that differ in their features and price tags, ask yourself whether the differences in features will alter how you spend your time.  If the answer is no, go cheap.

4) Pay Now, Consume Later

Delayed gratification is tough and the best indicator of future success.  See Marshmallow Experiment.

Uncertainty itself is neither sweet nor sour; rather it intensifies the flavour that’s already there.  Because uncertainty can magnify both positive and negative emotions, delaying consumption is a safer strategy for purchases that inspire purely positive feelings, purchases that are “delightful” rather than “complicated”:

  • When the delay provides an opportunity to seek out enticing details, promoting positive expectations about the consumption experience, as well as excitement in the interim.
  • When anticipating the purchase makes you drool, increasing the pleasure of eventual consumption.
  • When the consumption experience itself will be fairly fleeting and short-lived.  Think spaceflights.  In these cases, delay provides a valuable opportunity to draw out the pleasure beyond the experience itself.

Because the pleasure of consumption is purest without the experience of paying for it, anything we can do to separate payment from consumption can enhance the pleasure of the purchase.  Many people solve this riddle by consuming immediately (= feeling pleasure) and paying later.  But while paying later solves one problem, it creates another – often painful – problem later.

The thin slabs of plastic provide anaesthesia against the immediate pain of paying and as a result, we pay/spend more than if we would use cash.

When researchers asked people to estimate their credit card expenses before opening their monthly bill, every single individual underestimated the size of their bill—by an average of almost 30 percent.

In the end, what we owe is a bigger predictor of our happiness than what we make!

On the other hand, purchases that have been paid for long ago feel free, thereby liberating people to spend their time in happier ways.  For example, that wonderful cruise you fully paid for months ago and can now enjoy—with all its perks and free-flow of food and drinks.

5) Invest in Others

The tendency to derive joy from investing in others might just be a fundamental component of human nature.

When does giving promote the most happiness?

  • Make it a choice: People reminded of choice, provided higher-quality assistance.
  • Make a connection: Especially with people you care about.
  • Make an impact that you can observe.

People who report donating money to charity feel wealthier than those who do not.

Conclusion: It may be time to consider how to use your money, not just to get more money, but to get more happiness.

Ask yourself one simple question whenever you reach for your wallet: Am I getting the biggest happiness bang for my buck?

However, be aware that research suggests that chasing happiness can be counterproductive.  People who were told to try to make themselves feel as happy as possible while they listened to some pretty good music, reported feeling less happy than those who hadn’t been given any instructions.


  1. Saved as a favorite, I love your site!

  2. Wow, this post iss pleasant,my sister is analyzing these things, therefore I
    am goinbg to let know her.

  3. You are so interesting! I don’t believe I’ve read
    a single thing like this before. So good to find someone with a few unique
    thoughts on this subject. Seriously.. thank you for starting this up.
    This web sjte is one thing that is required on the web, someone with a little originality!

  4. First of all I would like to say superb blog!
    I had a quick question which I’d like to ask if
    you do not mind. I was curious to know how you center yourself and
    clear your mind before writing. I have had a difficult time clearing my thoughts in getting my ideas out.

    I truly do take pleasure in writing however it just seems like the first 10 to 15 minutes tend to be lost simply just trying
    to figure out how to begin. Any recommendations or tips?

    Many thanks!

  5. Hmm it appears like your blog ate my first comment (it was extremely long) so
    I guess I’ll just sum it up what I wrote and say, I’m thoroughly enjoying your blog.

    I as well am an aspiring blog writer but I’m still new
    to everything. Do you have any tips and hints for newbie blog writers?

    I’d definitely appreciate it.

    • Sorry, will try to train my blog not to eat comments in future. 😉

      Thank you for your feedback.

      I am actually also quite new to writing a blog. My site is up and running only for a few weeks. I do find WordPress quite helpful. The PlugIns help and their help-forum so far has provided me the answers I was looking for. Of course I do learn on the fly how to keep the site clean from spam and other dirt.

Leave a Reply

Your email address will not be published. Required fields are marked *