A couple of months ago, I finished the book, Happy Money: The Science of Happier Spending. If you have a look at my bookshelf, you will see the books are focused on finance, evidence-based investment strategies and happiness. Happy Money is a great combination of all three. Elizabeth Dunn and Michael Norton’s book is easy to read and provides practical and well-researched strategies that will help you increase your happiness as it relates to money.
I especially like this book because I’ve already embraced one strategy in my own life. I made these changes years ago based on more specific research I read in this area. I believe it has made a big difference in the happiness levels of my family and me.
The book takes 157 pages to discuss its five strategies. An additional 23 pages of footnotes are included showing how these recommendations are based on solid research.
What are these five strategies?
#1 Buy Experiences - Buying “stuff” (a house, fancy car, and jewelry) provides a temporary happiness boost, but these boosts quickly wear off, and we’re back where we started. People who spend more of their money on “leisure” (travel, movies, and sporting events) report higher satisfaction with their lives. Dunn and Norton explain that the best experiences (1) bring you together with other people, (2) make for a memorable story that can be retold for years, and (3) are linked to a sense of the person you’d like to be.
#2 Make it a Treat – When an incredible thing is readily available, we appreciate it less. (Eating your favorite chocolate truffle every day makes it less enjoyable.) The good news is that limiting access to these things allows us to renew our capacity for pleasure. There is no reason to stop indulging entirely; instead, make it a special event rather than a daily ritual.
#3 Buy Time – We are happier when we spend money on outsourcing the things we dread. Spending money so you are not scrubbing toilets, cleaning gutters, or waiting in traffic has a positive impact. Before whipping out your credit card, the book suggests asking yourself “How will this purchase change the way I use my time?” When we ask this question, we are more likely to choose things that increase our well-being.
#4 Pay Now, Consume Later – In the age of Amazon Prime, where we can consume anything now and pay later, we are doing the exact opposite of what happiness research is telling us. Anticipation is undervalued, and it works both ways: we get bigger benefits anticipating good things (think of that chocolate lava cake that’s coming or next summer’s Rome trip) and we get more stress waiting for the bad things (knowing a big credit card bill is coming on the 15th). Flipping our current spending/consuming process will result in more happiness.
#5 Invest in Others – Spending money on others provides a greater boost in happiness than spending money on ourselves. To maximize the impact of your giving, you should (1) make it a choice (feeling cornered takes the joy out of giving), (2) make a connection (seeing a direct result of your gift is better “happiness wise” than giving to a large charity) and (3) make an impact (giving to large organizations is less satisfying than giving in a more direct way).
These five strategies make perfect sense to me. I’m so glad I embraced the “buy experience” idea five years ago. My family laughs at the gifts I’ve been giving for the last several years as they almost always include a gift certificate for an experience (zip lining, magic show, fancy dinner, etc.). After reading Happy Money, I’ll be adding the other four strategies in my life.
Do you want to be happier about your finances? Give me a call at (949) 441-4410 to see how I can help.