Can money buy happiness?
In a recently released paper titled, If Money Doesn’t Make You Happy Then You Probably Aren’t Spending It Right, Harvard researcher Daniel Gilbert describes 8 ways money can make you happier.
Can Money Buy Happiness: 8 Scientifically Proven Ways It Can
# 1) “buy more experiences and fewer material goods”
The main reason experiences bring more happiness is we adapt to things so quickly.
The new car we’ve been waiting so long for provides a short boost of happiness. But things go back to normal and that car is a way to get around.
Compare this to a vacation with good friends. A vacation where you’re deepening relationships, trying new things, and creating memories. These memories stay with you for a long time, providing a more sustainable boost of happiness.
What type of experiences make for maximum happiness?
You don’t have to spend thousands of dollars on a vacation. Gilbert recommends experiences that allow your mind to engage. As Gilbert says, “A wandering mind is an unhappy mind.”
2) “use their money to benefit others rather than themselves”
The quality of our relationships is critical to our happiness. Anything we do to improve our relationships tends to improve happiness.
While there are ways to improve relationships without spending, money can benefit relationships. A meaningful gift you provide a friend deepens your relationship. A donation to charity you’re connected to deepens your relationships with those involved.
3) “buy many small pleasures rather than fewer large ones”
Eating two bowls of ice cream in one-sitting doesn’t make us twice as happy as one bowl of ice cream. To maximize happiness, we’re best having one bowl of ice cream on two different days.
This same principle applies to all pleasures in life.
Since we adapt quickly, it’s best to buy a lot of inexpensive pleasures rather than one large one.
In theory, spending $1,000 on 10 vacations would increase happiness more than spending $10,000 on one vacation.
When we’re trying something new, there’s often this burst of happiness that comes along with it. Trying many new, inexpensive things allows us to capitalize on this burst.
Related Reading: 100 Ways To Relax and De-Stress For Under $10
4) “eschew extended warranties and other forms of overpriced insurance”
This advice seems like some general advice one would read in an article on ways to save money. Not something you’d find in a short list of ways to increase happiness.
But there’s a bigger factor at play here.
Research has shown that we’re good at adapting to negative events. Once a negative event does occur, we get back to our normal level of happiness rather quickly.
The bad news is that we don’t tend to act with this knowledge. Instead, we overestimate how much potential negative events have on our happiness.
This helps explain why we buy cell phone insurance. It’s easy to imagine all the horrors in life that come without having a cell phone for 24 hours. But thinking rationally, happiness was around before cell phones. Even if you had to go with a phone for a few weeks (while you saved up for a new one), you’d be able to survive,
My philosophy is to insure yourself from risks you can’t protect against yourself. I have a high-deductible home insurance policy because if my home burnt down, it would cause severe financial distress. Yet, I don’t carry cell phone insurance, warranties on appliances, or identity protection.
5) “ delay consumption”
We live in a world of consume now, then pay later.
So, why would “paying now, consuming later” provide a boost in happiness?
Think about the last time you booked a vacation. How did you feel immediately after?
Pretty good right?
This anticipation provides a sustainable boost of happiness. Not only do you get to go on a vacation. You get weeks/months of excitement beforehand. Some research has concluded that the anticipation can provide more happiness then the actual event.
We are shifting towards faster and faster consumption. We can now buy things instantly and have them delivered almost as fast. Not only does this encourage bad short-term behavior, it completely eliminates the anticipation.
6) “think about what you’re not thinking about”
There’s an old saying that goes, “the two best days of being a boat owner are “the day you buy it” and “the day you sell it.
It turns out, there’s some truth to the statement.
When we’re imagining what it’s like being a boat owner (or other large purchases we expect to have a large impact on our happiness) in the future–we tend to think about the abstract things…watching a child tube for the first time, evening joy rides with friends, etc..
What we don’t think about is the work that goes into having a boat. The maintenance, the frustration that comes with it breaking, the storage fees, etc…
This is what Gilbert means when he says, “think about what you’re not thinking about.”
What’s important is to view purchases as to how they’ll affect your day-to-day life.
As Gilbert puts it when describing the decision to buy a vacation home:
“Thus, in thinking about how to spend our money, it is worthwhile to consider how purchases will affect the ways in which we spend our time. For example, consider the choice between a small, well-kept cottage and a larger ―fixer upper‖ that have similar prices. The bigger home may seem like a better deal, but if the fixer upper requires trading Saturday afternoons with friends for Saturday afternoons with plumbers, it may not be such a good deal after all.”
7) “beware of comparison shopping”
You’re probably familiar with the show House Hunters. If you’ve watched one episode, you’ve seen how comparison shopping can be more harmful than helpful.
It’s hard not to yell through your TV when someone goes over budget on a house.
What was their reasoning for going over budget?
They decided they can’t live without double sinks in the master bathroom of course.
It turns out when we look at a lot of different options, we overestimate the importance of those options. But i the long-run, those small differences have no impact to our happiness.
As Gilbert writes,
“From this perspective, comparison shopping may focus consumers’ attention on differences between available options, leading them to overestimate the hedonic impact of selecting a more versus less desirable option. To the extent that the process of comparison shopping focuses attention on hedonically irrelevant attributes, comparison shopping may even lead people to choose a less desirable option over a more desirable option.
8) “pay close attention to the happiness of others”
The best way to predict how much we’ll enjoy something is to see how much someone else enjoyed it.
For example, the best way to choose a movie isn’t by viewing the trailer. Instead, it’s to see what others have rated it.
One study asked women to predict how much they would enjoy a speed date with a particular man. Some of the women were shown the man’s photograph and autobiography, while others were shown only a rating of how much a previous women had enjoyed a speed date with the same man a few minutes earlier. Although the vast majority of the participants expected that those who were shown the photograph and autobiography would make more accurate predictions than those who were shown the rating, precisely the opposite was the case. Indeed, relative to seeing the photograph and autobiography, seeing the rating reduced inaccuracy by about 50%.
As Gilbert puts it, “follow the herd instead of your head.”