A summary of the book ‘Happy Money: The Science of Happier Spending’ with takeaway lessons
If you think “Money can’t buy happiness,” you are spending your money in the wrong places.
Gaining more money does not automatically make you happier. Don’t believe me? There is a long list of lottery winners who will tell you the same thing. In fact, earning more money may make you less happy if it means longer commutes, extended work hours, or work that bores you.
That’s the bad news. The good news is that you can buy happiness, you just need to know where to shop. Fortunately, Dr. Elizabeth Dunn and Dr. Michael Norton have written a handy guide to purchasing happiness in their 2014 book Happy Money: The Science of Happier Spending (affiliate link).
The authors outline five keys to spending your money in ways that have been shown by science to make you happier. One of those methods is to create more time for the essential things in life. In keeping with that thought, I will save you time by summarizing the key takeaways in just a few minutes.
Buy Experiences, not Things
We think that buying things is the better way to spend our money because, well, we have something to show for it. But that just isn’t so. The joy we get from the novelty of a new purchase slips quickly — especially when a more unique or better product comes along. In the end, what you are left with is not happiness but clutter.
Experiences, on the other hand, only get better with time. When people travel, they report feeling better than in their daily lives. When people recall those trips later, they remember feeling even better than they did while on the trip. That is the power of experiences; unlike things, our happiness from experiences gets better over time.
Dunn and Norton have four characteristics that make for the best experiences;
- The experience should bring you together with other people.
- The experience makes memorable stories you will enjoy retelling for years to come.
- The experience is tightly linked to your sense of who you are or want to be.
- The experience provides a unique opportunity, eluding easy comparison with other available options.
What doesn’t add to experience?
One notable criterion not found on the list is the length of the experience. It turns out how long an experience last has little impact on how fondly we remember it. This is good news because it means we don’t need to take an extended trip around the world to have a great experience. Instead, we can accomplish the same with a quick outing to a local destination — at a fraction of the cost.
Mark Twain told us that, “Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do.” Research seems to agree with him. In a study quoted by the authors, 83% of people reported their biggest regret was inaction. They most regretted the things they did not do. In contrast, the opposite proved true for material purchases where the biggest regret was buying something.
What to do
When you are contemplating a new purchase, think about the passage of time. Twenty years from now, how will this purchase impact your life? Will you be happier you took the family on vacation or that you purchased a new car. Odds are, you won’t have the car in two decades, but you will have the memories of the experience and the bonding with your family for the rest of your life.
Make it a Treat
“Familiarity breeds contempt,” an adage tells us. Whether or not that is true, familiarity certainly leads to apathy, according to research. One ironic twist of having money is that it makes us less appreciative of our things. Knowing you can have something anytime you want makes people appreciate it less and even take advantage of it less often. In other words, rich people may have it all, but they don’t appreciate it, and they don’t use it.
“If abundance is the enemy of appreciation, scarcity may be our best ally.”
— Happy Money
When pleasurable activities are always available, we may never get around to taking advantage of them. We think that we are too busy today, but it will be available tomorrow. By doing so, we cheat ourselves out of an inexpensive source of happiness.
Limit your opportunities, increase your happiness
Introducing a limited window of opportunity to engage in a pleasurable activity will encourage you to take advantage of it. Skiing is a good example. Since the sport is only available for a limited part of the year, I look forward to it in the offseason and chase the powder as often as possible when the conditions are right. Knowing the season is limited encourages me to get out while I can.You can self-impose limitations on activities to increase your enjoyment and to encourage yourself to engage with them. For example, if you get bored going out with your friends every night, try limiting outings to once a week. That will allow you to look forward to doing it when the time comes.Also, taking a break from an everyday activity can allow you to participate in a novel activity. That will make the novel activity a treat while also imposing a limit on the other activity, making it new and exciting when you return.
Buy Time
On average, Americans today have four more hours of leisure time per week than they did in the 1960s. Yet, people feel more rushed today than ever before. With people who earn more money feeling more rushed. As the authors explain it, “When people see time as money, they find it difficult to reap joy from the unpaid pleasures of daily life.” In other words, as time become worth more money, people see it as more scarce.
That’s unfortunate because unpaid pleasure can be some of the greatest joys of life. This is why people who feel they have time affluence are happier than people with money affluence. The authors tell us time affluent people “…are more likely to exercise, do volunteer work, and participate in other activities that are linked to increased happiness.”
How to buy time
So how can you buy more time? Here are four significant areas that can make the most difference.
Commuting.
A one-hour commute each day has a happiness penalty equivalent to not having a job. This is a significant blow to many Americans who endure long commutes to buy a better home in the suburbs. Research shows that workers with long commutes are no more satisfied with their homes and are less satisfied with their jobs. An effect that carries over to other family members as spouses also reported lower happiness when their significant other has a long commute.
TV
The average American spends the equivalent of two months a year watching television. Yet, research shows that people who watch television for thirty minutes or less per day are more satisfied with their lives. In my house, we only have one TV and no cable. Given that we live in the Colorado mountains, we have no broadcast service. We do not abstain from using our one TV; we just do so when we chose to watch a movie as a family, making it a treat and an opportunity for bonding.
Hanging out with friends and family
Research tells us that we experience our most positive moods during the parts of the day we spend with family and friends. Yet, working long hours to pay for purchases, maintaining expensive houses, and long commutes can cut into the best part of our day.
Volunteering
Here is the ironic lesson: we feel that we have more for ourselves by giving our time to others. It is the flip side of the problem of equating our time with money. In the case of volunteering, we equate our time with being effective. And being effective with the use of our time gives us the feeling of time affluence.
Ask yourself this
Next time you are thinking about making a purchase, ask yourself not how it will affect your money but how it will affect your time. Will building a pool cost more time in cleaning and upkeep than you gain in time relaxing beside it? An excellent way to evaluate a potential purchase is to think about how it will affect next Tuesday. What will you be doing differently on Tuesday because of this purchase? Will it be something time liberating, so you can spend time with the people that make you happy? By asking yourself how an investment will affect your time, you can shift your mindset to make happier choices.
“By focusing less on money and more on time, it’s easier to use both resources in happier ways.”
— Happy Money
Pay Now, Consume Later
Who doesn’t like getting things for free? It is a great feeling. It makes us happy and puts a smile on our faces. Well, you can trick yourself into experiencing that feeling when you pay now for things you will enjoy later.
When we separate paying for something from getting the thing we paid for, it enhances our enjoyment. A big part of that is the anticipation of the good thing to come. Another advantage is avoiding the “tyranny of sunk cost,” where we evaluate everything based on its cost.
I tend to plan my trips, but a few years ago, my wife and I agreed to visit Italy with two other couples on a professionally arranged tour. It turned out I enjoyed the experience more because I did not have to pay for hotel rooms, meals, transportation, ect as we went. Instead, I just got to sit back and enjoy. This proved especially true one evening as we were enjoying a fantastic dinner in a former monastery. I have no idea what that meal must have cost, and since I did not know, I could sit back and enjoy it without doing a cost-benefit analysis in my mind.
Another advantage to paying in advance is that we generally make better decisions. People who order groceries for delivery tend to make healthier food choices (more produce and less processed food) than people who go into the store. The lack of immediacy in the buying process means people tend to think rationally about what they buy and avoid impulse purchases. This probably explains why pizza delivery places brag about how quick their delivery is.
How to do it
Think about ways to stretch the interval between when you pay for something and when you consume it. From pre-ordering groceries to prepaying for travel, it can increase your anticipation and enjoyment while helping you make more deliberate decisions.
Invest in Others
We have looked at ways to spend money on yourself to increase your happiness, but another way to make yourself happier is to spend money on others. As the authors write, “Spending money on others can increase your happiness even more than spending your cash on yourself, but you have to be willing to make yourself a little poorer to reap these benefits.”
It seems ironic, but you need to feel a little pain to boost happiness from giving. This does not mean you need to take a vow of poverty and move to Calcutta. It does mean you need to invest enough to be meaningful. You don’t need to write a big check. The opposite may be more effective. Opening your wallet to pull out a few dollars gives you more of a feeling of having done something for someone else and more of a boost in happiness.
When it comes to investing in others, keep these three things in mind.
Make It a Choice. If you feel obliged to give, it can steal all the joy. We have all been in the situation where a coworker’s daughter is selling Girl Scout cookies, and we all feel obligated to sign up for a few boxes. As delicious as those Thin Mints may be, they never taste as good as the box you bought from a roadside stand you could have just as easily walked ignored.
Investing in others should be a choice. Do what feels right to you and not what others think you should do. And remind yourself and others that it was your choice. People who are reminded of their decision to help report more satisfaction.
Make a Connection. You will get the most out of your choice to help if it allows you to connect with others. Those others can be the people you help, but they can also be the other people you work with to help. As the authors put it, “You’re likely to get the biggest happiness bang for your prosocial buck if you invest in others in ways that help you connect with people, especially people you care about.”
Make an Impact. You don’t need to solve all of society’s ills to make a difference. You can make a difference in lots of small ways. The important thing is that you do something meaningful, and you feel the impact your efforts make on others.
Lesson from expereince
I knew an accountant who was bored with his work. He started working with a shelter for abused women. The organization was long on caring and short on financial savvy. Using his skills, he rescued the shelter from bankruptcy, but he still did not enjoy what he was doing. He started meeting with individual women in the facility and helping them with basic skills like balancing a checkbook and getting out of debt. When he could see the difference he made in one life, he felt the impact he was making, which energized him to want to do more.
Focus on the impact you want to make. Then work from there to figure out what you can do to make that happen.
Conclusion
The principles of Happy Money are not mutually exclusive. For the best results, you want to combine buying experiences, making it a treat, purchasing time, paying now while consuming later, and investing in others. Look for ways to cut back on spending while not sacrificing happiness so you can buy more time for the people who bring you the most joy. And think in terms of time and not money when you are deciding on that next big purchase.
I will let the authors have the last word,
“It may be time to consider how to use your money not just to get more money, but to get more happiness.”
— Happy Money
Originally Publish in Books Are Our Superpower
