"If money doesn't make you happy then you probably aren't spending it right"

(This article is an excerpt from my book, WEALTH: Simple Tips for Young Professionals.)

A terrific article about money and happiness is titled “If Money Doesn’t Make You Happy Then You Probably Aren’t Spending It Right”. It is written by three renowned social psychologists – Daniel T Gilbert, Timothy D Wilson, and Elizabeth Dunn. The article was expanded into a book by Dunn and Michael Norton titled Happy Money.

Gilbert, Wilson, and Dunn outline several principles for getting the most happiness out of your money.

In short, they:

  • Suggest spending money in ways that increase your connectedness to others.
  • Point out that you will adapt to purchases and experiences, good and bad, and that you should factor this heavily into your purchasing decisions.
  • Advocate making purchasing decisions that increase anticipation.
  • Advocate for looking at how your purchasing decisions will impact how you use your time.

Specific tips include:

Buy more experiences and fewer material goods

There are a few reasons for this. We adapt to material goods more so than experiences, which often get tied up with our identity. Experiences often involve more anticipation. And experiences are often shared with people, so improve our sense of connection and relatedness to others.

Use money to benefit others

Human beings are social creatures. A lot of research indicates that social relationships are critical for happiness. Gilbert, Wilson, and Dunn state that “almost anything we do to improve our connections with others tends to improve our happiness”.

Buy many small pleasures rather than fewer large ones

Hedonic adaptation is a big reason for this. If you’re going to adapt to things, it’s better to get lots of little hits of positivity than one big one hit.

Variables that help to counteract adaptation include novelty, surprise, uncertainty, and variability.

Pay now, consume later

Delayed gratification gives more pleasure than instant gratification. Looking forward to a purchase or event can itself provide a lot of satisfaction.

Think about what you’re not thinking about

When making a major purchase, think about how it will impact how you spend your time. A large home seems great, until you realise that it demands more time in maintenance and upkeep than a more modest home. Likewise, a holiday home sounds fantastic – it represents a place to get away and spend time with friends and family. But in many ways, you’ll find that you’re multiplying the time you spend on maintenance and upkeep by two.

Sonnie Bailey

Sonnie is the founder and principal of Fairhaven Wealth.

Before founding Fairhaven Wealth, Sonnie worked in the legal and financial services industries for over a decade.

Sonnie first became involved with financial advice as a specialist financial services lawyer. For many years, he was an “adviser of advisers”, reviewing thousands of advice files prepared by hundreds of financial advisers, and providing feedback in relation to the quality and appropriateness of advice; industry best practice; risk management; and regulatory compliance. He has published work in industry publications and spoken at various financial advice conferences.

Sonnie has also worked with banks, investment management firms, insurers, and derivatives providers.

Sonnie has worked as a private client lawyer, focusing on succession, estate planning and trusts. He ran his own legal firm in Australia before relocating to New Zealand. He has also acted in independent trustee and company director positions.

Sonnie is passionate about helping people achieve their goals and manage the risks to which they are exposed.

He has written extensively on his blog, New Zealand Wealth and Risk, which can be found at www.wealthandrisk.nz.

Sonnie is married to his wonderful wife Chrissy, and has two young children, Ben and Anna.