Your Money and Your Heart

Understanding consumer behavior

Six Research-Backed Tips on Maximizing Your Happiness Now!

How you can become happier by spending your time and money wisely

We have heard the saying money can’t buy happiness, and indeed there is plenty of evidence out there, both anecdotal and scientific, that suggests that simply having a ton of money, all by itself, will not make you happy. In fact a better predictor of happiness than how much money you have is how you spend the money you already have.

There are quite a few of us academics that have done research on how money can be used as a tool for happiness, but now there is finally a book that presents it all in a very applied and  engaging format, and no, I did not have anything to do with writing it. Still—I am happy to recommend it.

HAPPY MONEY: The Science of Smarter Spending by Dunn and Norton is a great read written by two star researchers in the field of happiness. Drawing on fascinating and often surprising new research, Professors Michael Norton (of Harvard Business School) and Elizabeth Dunn (of the University of British Columbia) show that changing the way people spend can significantly increase their happiness. At the heart of their book are five key principles that we can use to increase our happiness every single day. I have added a bonus, also backed up my research, which is why this blog has a total of 6 key principals to happiness. The book is worth aquiring and reading, but in the mean time, here are some of the book’s highlights, plus a tip or two from me, that you can use to increase your happiness both now and in the future!

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It is NOT What You Have, But What You Do With It that Matters Most

Dunn and Norton’s book focuses on helping us maximize the happiness bang we get for our buck. Of course, we all need some degree of wealth. If you are worried about how you will be able to feed and shelter your family, you are unlikely to be oozing with happiness. On the other hand, assuming you have more than enough to survive comfortably, you will likely get more happiness from having deeper connections to others than from having more money to spend. My own research also shows this. The more you have, the more added value you get to giving some of what you have away rather than keeping it for yourself.

Also, research shows that thinking about money in itself is not good for your happiness. In one study, by Vohs, Mead and Good, that is described in Dunn and Norton’s book, individuals who merely saw a photograph of money preferred solitary activities to social ones. They felt more isolated. All this makes people feel LESS happy! This suggests you should perhaps think again before you choose to work on Wall Street or suggest your family play a game of monopoly. (Yes, it happened with fake money too!).

In addition, new research shows that once you reach a certain level, greater wealth often fails to provide as much happiness as many people expect it will. Lottery winners are very happy when they win, but often that happiness dissipates as they adapt to all the stuff it buys them. It can even go down as they realize their old friends just “can’t relate” to them anymore. They also wonder if the people who suddenly seem to adore them really adore them, or just want access to their wealth. That doesn’t sound like a purely happy situation to me.

Much research, including my own, shows that the joy you get from having more money goes down as your wealth increases, but the joy you get from helping others does not. That may be one of the reasons we are seeing many highly affluent Americans focus so much of their energy on GIVING away money rather than making more.

Indeed, ultra wealthy Americans such as Bill Gates, Warren Buffet, Michael Bloomberg, and Oprah Winfrey have hugely focused their recent financial endeavors on philanthropy. It is worth noting that Gates and Buffet aren't just in the top 1%. They are, in fact, the two richest people in America today. The fact that such people are giving away so much of their wealth suggests they are not just smart about making money, but also smart about how to be happy! Please note that Gates, Winfrey and Buffet were the three faces chosen by Forbes to appear this year on the cover for their story on "The Richest People in America." They are not just among the richest, they are also among the most generous people in America, when it comes to how much money they choose to give away to causes they care about. (For more tips on how to spend your donation dollars in a way that maximizes both the positive impact you have and your personal happiness, click here to see my prior blog post on ways to maximize the joy you get from your charitable contributions).

Need more persuading? The book discusses a national survey revealing that Americans thought their satisfaction with life would rise drastically more if they made more money than it actually did. In fact, the research shows that the more people have, the less their happiness rises from making more. One survey cited in their book suggests that after an income of $75,000, little happiness was gained from making more money. Obviously, if you live in an expensive city, have a large family to support, or have someone in your family with special needs, the amount you need to be happy  will be higher because it takes more to pay for basic needs like housing, food, etc. Still, the general point applies—having more money only makes you happier up to a point. After that, the research says you need to work on other aspects of your life to get substantially happier.

Yeah, money is good to have, and we do all tend to think we want more, but it turns out that, unless you are truly worried you won’t be able to pay for the needs of yourself and your family, more money is not going to affect your happiness as much as smartly using what you have to maximize your happiness.

 So What Does Make Us Happier?

5 Key Principals to Being Happier (from the book) and 1 Bonus Happiness Principal from Me!

Dunn and Norton offer five principles to help us all get more happiness out of the money we spend, and I have added a sixth. You may know some of these already, but reminders are also good, so here they are:

1. Buy Experiences. Research shows that overall, material things (e.g., fancy cars, fancy clothes, giant houses) turn out to provide less happiness than experiential purchases (e.g., trips, concerts, comedy shows and theater). Whether you’re spending a little or a lot, experiences seem to pack a bigger happiness punch for most people. Of course, a lousy play or disappointing concert won’t have the same effect as fantastic versions of the same, but sometimes even the bad experiences can make you happier once they are over! I have a personal story (not in the book, just my personal story) that illustrates this well. It involved my hitchhiking back in my 20s in the pouring rain, in the middle of the night, while stranded somewhere in the middle of nowhere in the south of Turkey.

Let me be clear on this, I do not recommend hitchhiking anywhere, ever! However, it is a particularly bad idea in the middle of the night in the rain in a foreign land. Fortunately, I was with a dear friend. Unfortunately, he was Argentinean, I was American, and neither of us spoke a word of Turkish. Still, from a happiness perspective, not being alone helped. There we were in the middle of the night in pouring rain in a foreign land, and we had both seen the movie Midnight Express (about tourists stuck in a terrifying Turkish prison) just a few weeks before our trip!

When we realize we were likely stuck in the middle of nowhere, we laughed at first. How did we get into this mess? The answer was that it was actually all my fault, so that soon stopped being funny to me. At some point my friend exclaimed, “We did not even make it to the beach? What if we die out here?” I would have cried too, but I was too focused on figuring out how to get us out of this insane mess I had gotten us into. Then out of nowhere a truck appeared. And that truck driver took us all the way to lovely Bodrum, which was several hours drive from where we were (otherwise known as nowhere).

Here is what makes that story even more memorable. We were hitchhiking because I refused to stay on the night bus we had been on from Istanbul to Bodrum. This was because I hate cigarette smoke, and everyone on that bus except my friend and myself were smoking on the bus, pretty much nonstop. I could not get people to stop smoking, and when I opened the window, people complained they were cold. I hate smoke, so on a spontaneous crazy whim, in the middle of the night, before it started raining, I said “I can’t take it anymore. I am getting off this bus, now!” and my poor friend, half asleep, followed me off the bus. The bus driver was also surprised, but in my sleepy tired-of-the-smoking state, I insisted he let us off as soon as possible, so he did. Sadly, where he dropped us off was basically somewhere in the middle of nowhere.

We waited about 10 minutes, and not a single car passed us. And then the rain started… sprinkling at first, then pouring. Then gushing. Then at some point we were so soaked none of it mattered. We could not get any wetter. There we were… soaking wet in the middle of night and in the middle of NOWHERE in the South of Turkey because I could not stand the cigarette smoke. Yes, I felt very guilty.

However an hour later, the first vehicle to pass us also stopped for us. Now guess what that truck driver who rescued us and took us to Bodrum did for the entire ride to Bodrum? You guessed it. He smoked cigarettes nonstop. Of course, this time I shut up about it. To this day, I break out laughing when I remember that story. My friend and I had a long fantastic 2 weeks in Turkey after that. We saw amazing beaches, swam in the ocean, met amazing people, ate utterly fantastic food, and more! But my fondest memory of all is that insanely crazy adventure we had hitchhiking in the rain.

My story illustrates what the authors also report. Even an experience that is a little painful or frightening can produce lasting pleasure for years to come in the form of memories of adventures. That said, I still do NOT recommend hitchhiking, especially not in the middle of the night in a foreign land!

2. Make It a Treat. When something wonderful is always available, people are less inclined to appreciate it. Limiting our access to the things we like best may help us to appreciate these things more. I guess this means that indulging in my favorite dark chocolate several times a day is not the way to maximize happiness. (Darn!!!) This also means that I should not mourn that I wish I lived near the ocean, and am not able to swim in it every day. Perhaps if I lived near it, and swam each and every morning, I would not enjoy it as much as I do on the rare occasions when I get to do it now.

3. Buy Time. The authors argue that by permitting us to outsource our most dreaded tasks, from scrubbing toilets to changing litter boxes, money can transform the way we spend our time, freeing us to pursue our passions. In short, hiring someone to help you with the things you like least is not just good for the economy, it is good for your happiness! The authors suggest some things that we likely already intuitively know. You will be happier if you spend less time commuting to work, and more time hanging out with family and friends. That you likely already knew. However, the book backs this up with research!

Dunn and Norton show the wisdom of asking yourself a quick question before buying anything: How will this purchase change the way I use my time? Granted, for some things we need (toilet paper) this protocol does not really apply. Still, the authors report that, overall, when people focus on their time rather than their money, they are more likely to make choices that promote their personal well-being and happiness.

4. Pay Now, Consume Later. Digital technology and credit cards have encouraged us to adopt a “consume now and pay later” shopping mind-set. By putting this powerful principle into reverse – by paying up front and delaying consumption – the authors report that you can buy more happiness, even as you spend less money. Because delaying consumption allows spenders to reap the pleasures of anticipation… thinking about that concert you will attend or vacation you will go on actually provides happiness before these events even occur. (It is fun to anticipate swimming in the ocean—even if my next vacation is months away!) Research shows that waiting, even briefly, for something as simple as a Hershey’s Kiss makes it taste better when we get it. Seriously, dessert is at the end of the meal for a reason! : )

5. Invest in Others! The book also talks about research showing that spending money on others can provide a bigger happiness boost than spending money on yourself. While the wealthy have the least to gain in happiness from making more money, we can all benefit emotionally from giving to others. It turns out that this principle holds in an extraordinary range of people with a wide range of circumstances. The joy of giving has even been observed among children before the age of two.

Investing in others can make those that are giving feel better, both in general and about themselves! It turns out giving can lead to higher self esteem and a stronger sense of community. Do you have a favorite local animal shelter or some other place in need of helping hands? Volunteer! Do you have a favorite organization that is aligned with your values? Donate! (For advice on maximizing the joy you get from your charitable donations click here)  Do you have some favorite people in your life— get them an appreciation gift, or even just take time to let them know how glad you are they are in your life! This stuff works. (In both platonic and romantic contexts! (To read my prior post on how generousity can improve your love life click here).

If you want to learn more about academic research that documents the emotional benefits of giving to charity, a great source is: The Science of Giving: Experimental Approaches to the Study of Charity, by Oppenheimer and Olivola. (Dunn, Norton and colleagues wrote Chapter 1, and I wrote Chapter 2). 

6. NOT IN THE BOOK—BUT ALSO A HAPPINESS BOOSTER--TAKE CARE OF YOURSELF! Happiness principal number 6 is not in the book, but I am adding it here, even though it should be obvious. There is an old saying in Hebrew that I used to hear CONSTANTTLY as a child. “Ha Yikar Zeh Ha Briyut.” Translation: The most important thing is your health. I usually heard this from older aunts, uncles, grand parents and the like. As we get older, we all start to get it. Seriously, it sounds like a duh, but if you take care of your body by eating well, exercising regularly and getting enough sleep, you will be happier. So buying that pricey pint of organic blue berries at the farmer's market, join that gym, invest in a better mattress-- all these can boost your well-being and happiness. Exercise, my favorite, actually brings on happiness endorphins, and improves self-esteem. You can even sign up for a walkathon linked to a cause you care about, and then you get the happiness of giving and the happiness of taking care of yourself at the same time! : )

Of course, you can’t control every aspect of your health. Some stuff just happens to us. However, the better care you take of your health, the more happy you will be. Don't skimp when it comes to your health, it is more important than your financial wealth. Even if it is not in the book, it is a fact! (So, perhaps after reading this article, you can go for a bike ride or add some steam some veggies to your next meal?)

Why You Should Adapt These Principals? 

The authors selected the first five principles not only because each one is supported by rigorous research, but also because most people don’t tend to do these things enough. I added the last one for the same reason. Why don’t most people do these things enough? Because most of us mistakenly believe that we’re already spending money and time in ways that will make us happier. But what feels good and easy now, may not make us happier  in the long term.

Each of the principles above offers a scientifically validated means of increasing happiness. One interesting point about the book is that the authors also talk about “under the skin” measures, demonstrating that everyday spending choices unleash a cascade of measurable biological and emotional effects. The authors suggest that before you spend money, you should ask yourself if you are spending it in the way that will give you the biggest happiness bang for your buck. If not, reconsider that expenditure. I would add, before you decide if you are going to watch that sitcom or go to the gym, ask yourself, “Am I spending my time in a way that will give me the biggest happiness bang?” If not, perhaps put on some sneakers and just record that show for later. Hey, you can always watch it while you stretch out after that long wonderful walk you are about to go on! ; )

References

Dunn, Elizabeth, and Michael Norton. Happy Money: The Science of Smarter Spending. Simon & Schuster, 2013.

 Goode, M., Mead. N., Vohs, K. (June 2008). Merely Activating the Concept of Money Changes Personal and Interpersonal Behavior. Current Directions in Psychological Science, 17(3) 208-213. 
  

Michal Ann Strahilevitz, Ph.D., is a professor of marketing at Golden Gate University.

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