(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”.
This blog is made possible by Fairhaven Wealth, my independent, fixed-fee, advice-only financial advice business.
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.