I am fascinated by research on the relationship between money and happiness. So I was excited to read the recent book, Happy Money by Elizabeth Dunn & Michael Norton. The authors combed and summarized research on the ways money can buy happiness, and offer the following five principles.
- Buy Experiences
- Make It a Treat
- Buy Time
- Pay Now, Consume Later
- Invest in Others
There is no substitute for reading the book, but I plan to summarize each principle for those who would like a taste. I’ll start with the first principle: Buy Experiences.
The gist of this principle is that you will get more happiness for your dollar by buying experiences instead of stuff. While I was already aware of this general concept, Happy Money provided more color and additional insights such as:
- Moving to a nicer and bigger home will not necessarily make you happier. After some time passes, you may report being happier with your house, but not with your overall life. As the authors point out, “buying a house often isn’t a good investment in our happiness”.
- People who spend more of their income on leisure activities report higher life satisfaction.
- Part of the reason experiences trump stuff is that experiences tend to connect us with other people.
- People more often define themselves by their experiences (e.g. completed triathlon, trip to the Galápagos Islands) than by their material possessions.
- You’ll get the most bang for your experience buck if: 1) the experience provides social connection, 2) gives you a story to tell for years, 3) is tied to your sense of self, and 4) is unique.
- The pleasure we derive from material goods fade over time as we become acclimated to them but experiences tend to get better with time.
This post is for educational purposes only and should not be construed as advice specific to your situation. You should consult a legal, accounting, or investment professional before deciding the appropriate course of action for you.