Happy Money – The Science of Smarter Spending by Elizabeth Dunn & Michael Norton
If you think money can’t buy happiness, you’re not spending it right. Two rising stars in behavioral science explain how money can buy happiness, if you follow five core principles of smarter spending.
Happy Money offers a tour of new research on the science of spending. When it comes to spending that money, most people just follow their intuitions. But scientific research shows that those intuitions are often wrong.
Along the way, the authors describe new research that reveals that luxury cars often provide no more pleasure than economy models, that commercials can actually enhance the enjoyment of watching television, and that residents of many cities frequently miss out on inexpensive pleasures in their hometowns. By the end of this book, you will ask yourself one simple question whenever you reach for your wallets: Am I getting the biggest happiness bang for my buck?
1) Buy Experiences
Understanding why experiences provide more happiness than material goods can also help us to 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.
- 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.
An experiment has shown that for people whose watches are always running a few minutes fast, a bit of unpleasantness in an experience may even be desirable, if it contributes a compelling line to their experiential CV. Collecting memorable experiences seems to hold particular appeal for individuals who care about using their time productively. Memories do hold emotional values.
Seneca puts it, “Things that were hard to bear are sweet to remember.”
Just shifting your focus can alter whether a purchase feels like an experience (eg., music CD).
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.
Just thinking about money can produce some of the same detrimental effects as having a lot of it. For a while.
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 kind of mental backflip that can make people more inclined toward happy choices.
The same fifteen minutes can makes 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 use 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 myself how a purchase will affect my time, my dominant mind-set should shift, pushing me toward 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.
The future is bright. Everything looks perfect from far away.
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 is delaying consumption most beneficial in getting the biggest happiness bang for my bucks?
- When the delay provides an opportunity to seek out enticing details that will promote 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 and paying later. But while paying later solves one problem, it creates another later.
The pieces of plastic provide anaesthesia against the immediate pain of paying and as a result we pay more/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.
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: Find a charity where your contribution makes a difference.
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.
However, be aware 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.