Does money buy happiness? Research shows the answer is yes! But, it depends on how you spend it. And there are multiple ways to spend to increase happiness. Here are 10 ways to spend money to buy happiness.
- Buy Time
Time is indeed more precious than money. Research has found that when people spend money on time-saving services like a house cleaner, gardener, or take-out and grocery delivery, they can feel happier than spending on material goods. How much happier? “People who spent money to buy time reported being almost one full point higher on our 10-point ladder than people who did not,” study author Elizabeth Dunn explains. People who feel time-crunched are stressed, and research suggests that they are less active and less able to be around friends and family — both proven ways to increase happiness.
- Save Adequately for Your Future
Saving is a form of spending. People who have a written retirement or financial independence plan are more likely to save and make better financial decisions adequately. Furthermore, people with a plan are more confident, and experience less worry and stress. Find out how much you need for financial independence if you are saving enough, whether or not you’ll run out of money in the future, and how to get on track, plus guidance for better decision-making.
- Invest in Experiences
When it comes to discretionary spending, you have a lot of choices for how to spend your money. There are two broad categories of spending. First, you can buy things or experiences. If you want to buy happiness, invest in experiences. Over the past 15-plus years, abundant psychological research has concluded that buying experiences improves our well-being far more than buying stuff. A new car, sweater, or bike simply isn’t going to make you feel as good as going on a hike, concert, vacation, or almost any other experience. Part of the reason that experiences are better at returning happiness is that experiences enable you to anticipate an event and, more importantly, leave you with memories to draw on for the rest of your life.
- Spend for Connection, Buy Experiences You Can Share with Others
Throw a party! Meet up for lunch! Travel across the country to reunite with college buddies! Take your kids or grandkids on a cruise. Of course, these things cost money (and may have to wait until after the pandemic), but they connect you to other people. And, money spent on strengthening social bonds is well spent if happiness is your goal.
However, suppose you can’t make the experience social. In that case, additional research suggests that talking about what you did — telling stories, showing pictures, and sharing how it made you feel — can also increase your happiness return on investment.
- Treat Others
A 2008 study gave participants $20 to spend on themselves and $20 on someone else. Guess which expenditure delivered greater happiness? Yep. Spending on someone else. Even with a minor amount of money, treating others can provide happiness. (Did you hear about the recent “pay it forward” chain at a Minnesota Dairy Queen? A succession of 900 strangers bought the meals for the car behind them! Dairy Queen manager Tina Jensen told the Washington Post, “This was a feel-good moment at a time when we needed to hear some happy stories.”)
- Spend Especially on Those You Are Close To
A 2011 study suggests that — for happiness — it is essential that you spend money on people you are close to and care about. Study participants who recalled spending a modest amount of money on someone close to them reported feeling more positive emotion than those who remembered spending on a mere acquaintance.
- Give, but Strive to See the Impact of Your Charitable Giving
Charitable giving is a solid recommendation for how to spend money for happiness. However, research suggests that if you know exactly how your money will be spent and, ideally, can see the spending in action, you will feel happier than just giving them money to an organization without knowing or seeing the impact.
- If Buying a Thing, Put It in Context of How You’ll Experience It
Not all material purchases deliver less happiness than experiences. Studies have shown that if you can think about how you experience things, you are more likely to experience happiness (or, at least, less regret) from a purchase. So, if you buy a new car, think about how exciting road trips you’ll take, how you can see better out the windows and will better enjoy the view, or how the stereo system will enable you to jam out your favorite tunes.
- Express Yourself Through Spending
Whether on possessions or experiences, spending reflecting your personality or identity can make you happy. A 2016 study found that people with a better match between their personality and the personality of their purchases reported more satisfaction with life. So, if you love to travel, spending money on travel (an experience) or even a travel gadget (possession) will give you joy. Likewise, if you consider yourself a technology geek, then the new iPhone (a possession) might indeed give you happiness. Follow-up research focused on the differences between spending by introverts and extroverts. Your personality type will define the type of spending that makes you happy. For example, introverts found happiness spending $10 in a quiet bookstore, whereas extroverts loved spending on a drink in a crowded bar — but not vice versa.
- Spend Within Your Lifetime Means
Even if you are spending on experiences or people you love, you are bound to be stressed and unhappy if you spend beyond your means. And, overspending is not just a matter of your monthly finances. It may be useful for you to think about your finances not as a monthly inflow and outflow but rather as a big pool that you fill up or drain over your entire life. Think about the lifetime value of your financial decisions rather than simply how it impacts you today. You have a finite amount of time to create a finite amount of money. That money is used to fund your entire life. Spending more now means that you have less to spend later. Saving more now means spending less in the near term, but more in the future. Creating and maintaining a detailed retirement plan is a great way to visualize and manage your total pool of resources over your entire lifetime.
- Buy Time