You can be happier with the money you already have if you spend it thriftily

My previous article showed that having money can improve your happiness, and not having enough can undoubtedly make you miserable, but the impact of wealth on satisfaction is not as strong as most people assume. We have even seen that there can be benefits to living with less as long as you can meet your basic needs for food, shelter, health, and security. The question now becomes, is it possible to live our lives and be happy with what we have?

Learn more about the Relationship between Money and Happiness and The Benefits of Living with Less.

This question has only become more acute for many in the face of the economic realities of the COVID pandemic. The good news is that there are several scientifically validated means by which we can learn to extract the maximum happiness from what we have. That means learning to live with thrift.

I don’t know about you, but the word thrift does not evoke images of happiness. But maybe it should. After all, the word “thrift” derives from the word “thrive,” and to thrive in life is something I think we all aspire to do. So how can being thrifty help us to thrive?

Thrift

The goal of thrift is not to become a miser (not fun) but to ensure you maximize your benefit from the money you spend. Not only does thrift ensure you get the most out of your finite wages, but it can have other positive benefits as well. Thrifty behavior can make you feel good by highlighting your better nature, giving you a sense of control over your finances and your life, and even lead to success. As the famous Marshmallow Test has shown that developing the ability to delay gratification (a key to thrift) leads to improved grades, teacher evaluations, and avoiding getting into trouble.

So let’s take a look at how lessons on thrift that would have resonated with Benjamin Franklin can help us make the most of the money we do have.

Don’t Become a Slave to Debt

Research has shown that our happiness suffers a much more significant blow from negative experiences than it gains from positive ones. The temporary thrill of a new purchase wears off quickly while the pain of being in debt carries on. In the end, the pain of debt outweighs the pleasure of your latest acquisition and makes you less rather than more happy. Going into debt and using credit cards to defer paying for items will produce anxiety about making payments, fear of losing income, and the danger of defaulting on loans. The cost to your peace of mind from overspending dramatically outweighs the benefits of buying something you can’t afford.

One prominent example is the modern phenomenon of being house poor. That newer, bigger house in the suburb with the gorgeous backyard certainly looks appealing, but let’s look at the reality. You will rapidly adapt to the added space and comfort. You will not adapt to the cost of paying the mortgage, increased time spent on maintenance, utility cost, and the long commute to work each day. In the end, the pleasure from the new home diminishes quickly while the pain of paying for it goes on for decades. Learning to live with less house means less daily stress and more moment-to-moment pleasure.

Happiness is more than just feeling good. It is also essential to avoid negative feelings when possible, and not going into debt is one significant way to prevent anxiety and unhappiness. Diminishing negative experiences (like credit card debt) brings three to five times greater improvement in happiness than creating new positive experiences (like a new car). Living within your means may not sound exciting but is a lot less stressful and, thus, more enjoyable than living beyond your income.

Lesson one: eliminate debt before spending money on nonessential purchases.

Buy Experiences Rather Than Things

The scientific literature is clear; it is experiences, and not things, that make us happy. When you wanted spending money as a child, your parents may have turned you down by saying, “The best things in life are free.” I hate to be the one to break it to you, but they were right. Spending time outdoors, playing board games with friends and family, reading a good book, and volunteering are all activities shown to improve your mood at little or no cost. But why should that be? Let’s take a deeper look.

You would think buying something would be better than purchasing an experience because you have the item to show. But research tells us that we quickly tire of new items, while the memories of old experiences improve with the remembering. Experiences, unlike things, don’t suffer as much from comparison — which is one of the great thieves of joy — because it is difficult to compare experiences. Not only that, but our experiences give us a sense of accomplishment and a sense of who we are. Given the option, people would rather give up something they bought than an experience that feels like a part of who they are.

Although research has shown the superiority of experiences to buying things, there is one crucial caveat. Material things can make us happy when we use them to create experiences. For example, I sold my sedan to buy a 4-wheel drive truck. I have had many memorable experiences exploring mountain trails and visiting old ghost towns and abandoned mines in the mountains near my home. I love my truck not for the thing it is but for the experiences it has made possible. Experiences that would not have been possible without it.

Lesson Two: Invest in experiences over things.

Spend Your Money on Many Small Pleasures

You will gain more happiness from frequent small purchases than by blowing all your money in one extravagant event. Spreading out your pleasure over time can be a great way to draw out the fun as well as to create anticipation. My family recently discovered this when Disney+ chose to release new episodes of WandaVision weekly rather than dumping the entire season for binge-watching. We found we looked forward to each new installment and made an event out of watching it together as a family.

Another reason that many small pleasures prove better than one big one is known as the First Bite Effect. Think about that first bite of your favorite dessert. That first bite is always the best one. But the more you eat, the less you can savor the taste. And if you push it too far, it can even make yourself sick. The same phenomenon is true with other experiences; your capacity to appreciate them diminishes with each passing minute, hour, and day. That is the bad news; the good news is that you can replenish your enjoyment by taking a break, just like with my family’s enforced separation between WandaVision episodes.

By parceling out your experiences over several small pleasures, you can savor the joy of that first bite more often. Which makes it possible to savor the goodness of life better. One UK researcher found that people who frequently treated themselves to small treats like picnics, fancy coffees, or a good video were more satisfied with their lives. It appears that building on small, low-cost activities can create incremental benefits in happiness akin to walking up a flight of stairs and getting a little happier with each step.

Lesson Three: Invest in frequent, low-cost pleasures rather than rare blowouts.

Rent Happiness Rather Than Buying

You may believe that you will enjoy items more if you own them than if you rent them. However, that is a cognitive bias known as the endowment effect. The reality is that you can enjoy a rented DVD, beachfront bungalow, or even a sports car just as much as the one you buy, and at a fraction of the cost.

You may even enjoy the rented item more because renting does not come with all the hassles of ownership. As a renter, you don’t have to deal with the maintenance cost, repairs, upkeep, insurance, and stress of owning an item. This means you can enjoy it stress-free, which is not an advantage the owner has.

One surprising example is homeownership. Despite it being the “American Dream” to own a home, research has shown that homeowners are less happy than renters. That is because homeowners derive more pain from their homes. Owners spend more time on housework and maintenance, which cuts down on the time they have to enjoy with family and friends.

Lesson Four: If you can’t afford it, and even if you can, rent it.

Recycle Happiness

As human beings, we have an innate desire to seek out novelty. This inherent drive pushes us to look for the next great thing to buy constantly. However, filing our living space with new stuff is a costly and futile behavior. That is the bad news. The good news is that we can recycle happiness from previous purchases by becoming more appreciative of the things we already own.

One way to do this is to find novel uses for old purchases. For example, you can use your home to host a party or volunteer to use your car to drive a friend to the airport, thus turning those items into opportunities to connect with friends and family. Use your old bike to explore a new park or your old exercise equipment to start a new training regiment. Rewatch old DVDs or reread your favorite books.

The trick is to look at the old stuff in your home with new eyes. Imagine you are a person seeing everything you own for the first time and imagine what that person might want to do with all the things you already own.

Another way to recycle happiness is to relive old memories. Flipping through old photo albums is a great way to re-experience all the fun of a past trip without having to deal with airline delays, long lines, bad food, and hassles that go along with travel. So in many ways, relived memories can be better than the initial experience. So dust off those old photo albums for an opportunity to re-experience previous joys. And augment the occasion by sharing the reminiscence with others with whom you shared the adventure for some bonding as well.

Lesson Five: Find new ways to recycle happiness from your old acquisitions and experiences.

Conclusion

The key to thriving is to get the most joy out of what you have. Avoiding the pain of debt by paying off your loans and not buying things you can’t afford may not sound like a load of laughs, but it is a lot more fun than worrying about paying off your loans or risking bankruptcy. Then focus on investing in experiences rather than things. Although things seem the better bet because you have something to show for your dollar, experiences make us happier and for longer. Then focus on frequent small treats rather than one extravagant blowout as regular small pleasures or short vacations have a stair-step effect on your overall happiness. And remember to save money by renting or recycling rather than buying new. Not only will you save money, but you will also get more enjoyment with less stress.

Remember, being thrifty does not mean spending less money; it means spending your money wisely so that you extract the maximum joy from every dollar spent.