Money CAN Buy Happiness: Here Are 6 Proven Ways – Backed by Research
“Money can’t buy happiness.”
We hear it all the time. But is it actually true? Or is it just a way for financially poor people to console themselves that it’s OK not to be wealthy?
In this article, I hope to clear things up once and for all. We will look at exactly where money fits into the whole happiness equation. We’ll discuss the vital difference between having money and spending money. We’ll then discuss six proven ways of spending money in happiness-supporting ways. And last but not least, I’ll answer the question whether trying to become richer makes sense from a happiness context.
The Science Of Happiness. Where Does Money Fit In?
To better understand how money influences happiness, we first need to understand how happiness works on a basic level. Don’t worry, it’s pretty simple…
Happiness researchers have found out that happiness is influenced by three main variables as shown in the following equation:
Happiness = Your Genes (50%) + Your External Circumstances (10%) + Your Behavior (40%)
In short, your happiness is determined by your genes, your external circumstances (e.g. money, education, age), and your behavior (your thoughts and actions).
Your genes account for a whopping 50 percent of the variance in your happiness. That means half of your happiness is completely fixed and unchangeable. That’s just natural. Some people are born happier than others, just like some are born more intelligent, more compassionate, bigger, smaller, and so on. You may be blessed with genes that make you extraordinarily happy or you may be cursed with genes that make you a somewhat naturally miserable and dissatisfied person.
The good news is that the other half of your happiness is completely under your control. That half is made up of your external circumstances and your behavior.
Your external circumstances (money, housing, car, marriage, education, age, the city you live in, etc.) contribute a surprisingly small amount to your happiness, only 10 percent. Whether you drive a Lamborghini or a battered truck, whether you’re handsome or plain, whether you live in a cold or hot climate, whether you’re young or old – these circumstances don’t make much of a difference in determining your happiness.
Your behavior – your daily actions and thoughts – is what makes all the difference. It makes up 40 percent of your happiness and is 4x more important than your external circumstances and almost as important as your genes. Certain behaviors make you happier and certain behaviors make you unhappier. If you want to improve your happiness, it’s simply a matter of engaging in more happiness-enhancing activities and thought patterns.
That’s how happiness works in a nutshell. Now the question: where exactly does money fit in? It’s not as simple as you may think…
Having Money VS Spending Money
Money influences your happiness in two different ways:
- Having money
- Spending money
The having money part is straightforward. It simply influences the 10 percent bracket of your external circumstances. If you have more money, you have better external circumstances and thus a bit more happiness. This effect is negligible, however, because it only influences 10 percent of happiness and money is only one part of the external circumstances – marriage, age, climate, education and so on also play a role.
The spending money part is much more interesting and impacts happiness far more strongly. You see, spending money influences the entire 50 percent of happiness that is under your control. It influences your external circumstances – depending on how you’re spending your money you may improve or worsen them. And it influences your behavior – you can spend your money on activities that improve or lower your happiness.
Bottom line: As far as your happiness is concerned, it doesn’t matter that much if you have a lot or very little money. It matters far more how you’re actually spending the money you already have.
We will now look at six proven ways to spend your money in happiness-enhancing ways…
1. Spend Your Money On Experiences, Not Goods
What makes you happier? A trip to Disney Land or a new car?
According to the research, the trip will make you a lot happier. Richard Wiseman, a famous psychologist and bestselling author, explains that experiences make us happier than products in his book 59 Seconds:
“In one study, the duo conducted a national survey in which people were asked to think of an object or experience they had bought with the aim of increasing their happiness, and then asked to rate the degree to which the purchase had cheered them p. In another experiment, the researchers randomly divided people into two groups, asked one group to think about an object they had recently bought and the other to describe an experiential purchase (a holiday, for example) and then rate their current mood on two scales, with one ranging from -4 (bad) to +4 (good), and another ranging from -4 (sad) to +4 (happy). The results from both studies clearly indicated that in terms of short- and long-term happiness, buying experiences made people feel better than buying products.”
There are many reasons why buying experiences is superior to buying goods.
One problem with buying products – be it a new car, watch, clothes, or the latest IPhone – is that we fall prey to a phenomenon called ‘hedonic adaptation’. This means that we quickly take things for granted. We feel happier after buying some fancy new product for a few days or weeks, but then we take it for granted and the object loses its happiness-boosting effect.
This happens less quickly with experiences because they can be savored for much longer, which helps us extract more enjoyment and happiness out of them.
Experiences can also be anticipated more and usually involve a social aspect. Both these factors have been shown to contribute to our happiness.
The point is, spend your hard-earned cash on experiences. Take up a Yoga class or hire a personal trainer. Go on holidays with your friends. Take a trip to the Niagara Falls. Visit the local theatre. Go to a convert. Invest in learning a new language. Go paintballing, bungee jumping, mountain climbing, or kite surfing.
It’s like Osho, the great Indian mystic, said: “Live life… don’t just watch it on TV.” No matter how expensive that TV was…
2. Spend Money On Many Small Pleasures, Instead Of A Few Big Ones
Remember the concept of hedonic adaptation we just talked about? It plays a role here again.
According to research, buying many small pleasures makes you happier than buying a few big ones. Sonja Lyubomirsky explains in her book The Myths of Happiness:
“One researcher, for example, interviewed people of all income levels in the United Kingdom and found that those who frequently treated themselves to low-cost indulgences— picnics, extravagant cups of coffee, and treasured DVDs— were more satisfied with their lives. Other scientists have found that no-cost or low-cost activities can yield small boosts to happiness in the short term that cumulate, one step at a time, to produce a large impact on happiness in the long term.”
This is explained perfectly by the phenomenon of hedonic adaptation. When you buy one big thing, you get a fairly large increase in happiness, but after a few days or weeks that increase has evaporated because you’ve adapted and are taking your big purchase for granted. And now you have to wait for a long time until your next big purchase comes.
If you spend your money on small pleasures, each increase in happiness will be smaller than the one from the big purchase. However, the overall increase will be bigger.
So, start surprising yourself with small pleasures on a regular basis. Next time you’re walking past a piece of clothing you like, get it. Next time you’re walking past a coffee shop, treat yourself to a Latté Macchiato and some chocolate cake.
3. Spend Money To Benefit Others, Not Yourself
Should you spend your money on others or yourself? Richard Wiseman gives the surprising answer in his book 59 Seconds:
“Ask people whether they will be happier after spending money on themselves or others, and the vast majority will tick the ‘me’ box. The science shows that exactly the opposite is true – people become much happier about providing for other rather than themselves.”
I believe spending money on others works better because it’s an act of kindness. And kindness has been shown to be one of THE most reliable ways to boost happiness. (Check out strategy #18 in this article for more on that.)
The good news is that you don’t need to spend huge sums of your income on family, friends, or charity. It’s really the little things, the thoughtful gifts that lead to the best results. Bring your tired co-worker a cup of coffee, pay your friends a round of beers, get your wife some flowers, or bring your grandchildren a gift from your travels.
4. Spend Money Now, But Consume Later
Buying something and consuming something are two separate things. And the distinction matters when it comes to your happiness.
You see, when you purchase something and consume it immediately, you eliminate anticipation. And anticipation, it turns out, is in and of itself a strong happiness booster.
The guy who buys a beer and drinks it right away might get X amount of pleasure from it. But the guy who saves the beer until later gets X amount of pleasure from when it’s eventually consumed plus all the additional pleasure of looking forward to drinking the beer.
In fact, research has shown that anticipating an event can actually make people happier than the event itself. Sonja Lyubomirsky explains in The Myths of Happiness:
“For example, a month before embarking on a guided twelve-day tour of several European cities, eager travelers report expecting to enjoy their trip significantly more than they actually do during the twelve days. Identical results are found when students are surveyed about their expectations three days before their Thanksgiving vacation, and when Midwesterners are surveyed three weeks before a bicycle trip across California. Indeed, researchers who studied a thousand Dutch vacationers concluded that by far the greatest amount of happiness extracted from the vacation is derived from the anticipation period, a finding that suggests that we should not only prolong that period but aim to take several small vacations rather than one mega-vacation.”
Whenever possible, see if you can delay your consumption into the future.
Book your holidays 2+ months in advance. Buy yourself some healthy dessert, but only eat it after your workout. Order yourself some books, supplements, clothes, or whatever from Amazon or another online retailer. That’s what I do – I order lots of books and supplements and then eagerly await their arrival. Everyday I’m excited to check the mail and see what I’ve got.
5. Spend Money to Buy Time
Let’s say you took some advice from this article to heart and booked a city trip to Rome. Now you’re there and you’re doing some sightseeing. The next object of desire is a huge tower that is famous for its beautiful view over the city.
As you walk into the tower, you read the visitor instructions:
- Queue up in the right line for the normal escalator. Wait time: 45 minutes. Price $7.
- Queue up in the left line for the speedy escalator. Wait time: 2 minutes. Price $47.
Paying the $47 for the speedy escalator would be an example of buying time. In this example, you would pay $40 for 43 minutes of your time.
The reasoning behind buying time is obvious. Instead of “wasting” time doing something you don’t enjoy (in this case, waiting in line), you buy time so that you don’t need to do the thing you don’t enjoy, but can instead do something you enjoy more.
You basically use your money to exchange some “unhappy” time with “happy” time.
I’m sure there are lots of activities in your life that you don’t particularly enjoy. Maybe it’s lawning the mawn, washing the dishes, cleaning the house, doing the taxes, filling in tedious documents, and so on.
Depending on how much money you have, it may make sense to outsource some of these activities. And then you use the time you won for activities that contribute to your happiness. Instead of cleaning the house for two hours, you may go to the gym and then spend some quality time with your family.
The point is, buying time allows you to replace misery-inducing activities with happiness-enhancing activities.
Further, you might want to spend that additional time on sleep:
A friend of mine just published the most data-driven analysis on how sleep deprivation influences happiness. It shows that sleep deprivation heavily increases the odds of becoming unhappy, which is why we might want to buy some more slumber time.
6. In General, Spend Your Money On Happiness Boosting Activities (Duh!)
We’ve discussed earlier that 40 percent of your happiness comes directly from your behavior – your thoughts and actions. There are behaviors that make you happier and behaviors that make you unhappier.
Considering this, increasing your happiness is really simple: Use your money to engage in more behaviors that improve happiness.
Which behaviors would that be? Well, turns out I’ve just recently published a massive article detailing 26 research-backed strategies that are all proven to increase your happiness. So you can just head over to that article, learn about the happiness-enhancing activities, and start spending your money on those activities.
Here are some ideas to get you thinking:
- Hire a personal trainer. This will give you exercise and a social relationships – two very strong happiness boosters.
- Join a Yoga class. This will give you the following three happiness boosters: exercise, mindfulness, and social relationships.
- Book a trip to Disney World with your family. This will give you social relationships, anticipation, and experience.
- Go on a meditation retreat. This will give you meditation, another powerful happiness booster.
- Get a dog. This will give you physical exercise and a pet (yes, they make you happier, too!).
So, Should You Try to Become Rich?
As you can clearly see, there are lots of practical options of spending your money in happiness-supporting ways. Obviously, money can be very beneficial in helping you become a happier person.
But does that mean you should actively try to become rich? The answer is a definite no: You should NOT try to become rich.
Look, making a lot of money is great. But it should come as a by-product of doing something you love and enjoy. The research has shown over and over again that chasing so-called extrinsic goals (e.g. money, fame, power) makes people miserable, mentally unstable, and less successful.
If you want to be happy, making a lot of cash and becoming rich shouldn’t be your priority. You can be perfectly happy with an average income.
In fact, there’s an argument to be made that the pursuit of money can get in the way of the pursuit of happiness. If you spend too much time working and hustling and worrying about money, chances are you will be spending too little time on the things that truly make you happy – e.g. spending time with your family, exercising, meditating, experiencing flow, nurturing your friendships, and so on.
So yeah, if happiness is your goal, you’re better off focusing on the strategies I describe here.
Happiness isn’t really a function of money. Rather, it’s a function of your behavior. This is the case because money and other external circumstances only account for 10 percent of variance in your happiness whereas your behavior accounts for 40 percent.
You could have all the money in the world and still be unhappy. Or you could earn a minimum wage and still be extraordinarily happy.
Here’s a quick story to illustrate this point…
Imagine two twin brothers, living drastically different lives. The first one is a multimillionaire, lives in a big mansion, is married to a hot Playboy model, drives a Ferrari, and owns an island. He spends most of his days working on a business he doesn’t enjoy, doesn’t have time to exercise regularly, doesn’t meditate, and barely has time for his family. The second brother lives on minimum wage, can’t afford a car, goes to work on his bicycle, and can barely pay the rent of his small apartment. He spends his days doing a job he loves. After work, he takes time to exercise, meet friends, and spend time with his family. He takes time to meditate daily and goes on awesome weekend trips with friends and family.
I don’t need to tell you which one’s happier, do I?
The point is, happiness isn’t a function of money, but a function of behavior. Can money help you become happier? Sure. Is it a requirement for happiness? If you have enough to afford the necessities in life, no.
Thanks for reading. How do you spend your money to become happier? Be specific and let me know in the comments below.
More on the science of happiness:
Thanks for Reading
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