Contrary to popular belief, money can make you happy!
A report in the Journal of Consumer Psychology looked into the age-old question of whether money can buy you happiness and found that the answer was a very loud yes.
In fact, the study concluded that if money doesn’t make you happy, then you’re probably not spending it right.
The study also found that one of the keys to how money can make you happy is to understand the importance of spending it on things that make you happy instead of things that don’t.
1. Buy more small things
Human psychology means that we adapt so well to the stuff we buy that even making a big material purchase does not have long-lasting effects.
But that also means that the difference in happiness between a big purchase and a small one is minimal, and we could have multiple pleasures for the cost of one.
We don’t need lots of money to buy the “one big thing” when we can afford smaller, more frequent mini-things.
Fact is: the amount of money spent on the purchase affects us less than just the enjoyment of having something new.
2. Experience is more valuable
Researchers found that people reported greater happiness when reflecting on an experience purchase rather than a material purchase.
The reason is, as I’ve outlined above, because we adapt to things very quickly.
Buying a new and shiny toy brings us some happiness at the moment, but after a day or two, it becomes an everyday item that we use.
In contrast, an experience takes us out of our everyday and leaves a lasting impression on us, including sometimes on our psyche.
Imagine a trip to New York or skiing in New Zealand for the first time?
You will remember it more fondly when looking back than you would a purchase of a thing, no matter how shiny it was in the beginning.
3. Spending it on other people
Human beings are profoundly social so the quality of our relationships is a strong indicator of our happiness.
People who spent more money on “prosocial spending” (gifts for others or charity donations) were happier, even after accounting for income levels.
These people felt happier when they reflected on a time when they had spent money on others versus a time they had spent it on themselves.
Using MRI scans, researchers even showed that giving money away (even when being forced to do so) led to activation in brain areas associated with receiving rewards.
People generally feel happiness when they anticipate an event.
The person who buys a cupcake and eats it right away experiences less joy than the person who takes it home with anticipation to eat the cupcake at a later time.
The difference is the extra happiness the person gets during the ride home because they’re delaying gratification.
Even though we are so used to instant gratification and desire it, we still very much enjoy looking forward to something in the future.
We think it’ll make us happier to get the satisfaction right now, but in reality we’re perfectly happy while eagerly awaiting something.
5. One day at a time
Many people have big dreams, like buying a big house or a boat so they can sail off for months at a time.
We imagine having a cottage in the woods where we can get away every weekend or retiring at 35.
When we daydream about fulfilling these goals, we see a big, but often fuzzy, picture.
We forget that a very large house requires more time to keep clean or that we get seasick.
We don’t think about bringing home mosquito bites and bed bugs from the cottage or that retiring at 35 is actually pretty boring because you’re probably less than halfway through your life.
That’s why it’s important to remember about the day-to-day impact of what you want to purchase.
In this case, it really is about the details and not the big picture at all.
So to some extent it’s true – money can buy you happiness, but this study shows that chances are you’re not getting the most bang for your bucks.
Subscribe & don’t miss a single episode of Michael Yardney’s podcast
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
Need help listening to Michael Yardney’s podcast from your phone or tablet?
We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.
Prefer to subscribe via email?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.