How to buy happiness
How to buy happiness
How to Buy Happiness
Social scientists offer some answers.
“There’s nothing in the world so demoralizing as money,” a character proclaims gloomily in Antigone, but maybe he didn’t know how to use his cash. If we spend it right, research suggests, money can, in fact, buy happiness.
According to one oft-repeated rule of thumb, spending on experiences rather than objects makes us happiest. When asked to reflect on a purchase, people who described experiential ones—travel, say, or concerts—were much happier than those who described material ones. [1] Psychologists believe the “hedonic treadmill”—our tendency to eventually revert to our original level of happiness following a change—operates more swiftly after material purchases than after experiential ones: A new table is easier to get used to than a trip to Chile. They also say we are better at making peace with bad experiences (“It brought us closer together”) than with regrettable objects. [2]
Not all experiences are equally worthwhile, however. In one study, when experiential purchases were categorized as either solitary or social in nature, social expenses brought more happiness. People who spent on solitary experiences valued them no more in hindsight than they valued possessions.[3] It’s not so much that doing things makes us happier than having things—it’s that we like doing things with people. This is particularly true for extroverts: In one study, they got significantly happier after shopping with others, no matter what they bought. [4]
University of Cambridge researchers joined with a bank to analyze the relationship between customers’ spending habits, personality, and happiness. They found that the “Big Five” personality traits—extroversion, openness to experience, conscientiousness, agreeableness, and neuroticism—predicted spending. Outgoing people splurged on restaurants and entertainment, while self-controlled, conscientious types shelled out for fitness and insurance. And those whose spending fit their personality were happier than those who spent against type. In one case, extroverts and introverts received vouchers for either a bar or a bookstore. Extroverts were happier when forced to spend money at the bar, while introverts were happier spending at the bookstore. [5]
But before you go on a spending spree, a caution: More than income, investments, or debt, the amount of cash in one’s checking account correlates with life satisfaction. [6] That doesn’t mean you should be stingy, though: When people were assigned to buy goodies for either a hospitalized child or themselves, those who bought treats for a sick child reported more positive feelings. [7] The effect was the same in a rich country (Canada) as in a poor one (South Africa). Spending on friends and family likewise gives us a boost because—unsurprisingly—it brings us closer to them. [8]
So how do you turn cash into fun? First, figure out whether you’re an extrovert or an introvert. Then, head to a bar, bookstore, or hospital, with a Canadian in tow. There must be a joke in there somewhere.
The Studies:
[1] Van Boven and Gilovich, “To Do or to Have? That Is the Question” (Journal of Personality and Social Psychology, Dec. 2003)
[2] Gilovich et al., “A Wonderful Life” (Journal of Consumer Psychology, Jan. 2015)
[3] Caprariello and Reis, “To Do, to Have, or to Share?” (Journal of Personality and Social Psychology, Feb. 2013)
How to buy happiness
You probably started with the obvious things, like food, water, shelter, warm clothes, and a bed to sleep in. That’s a good start, but keep going. Now you might be thinking of the money you spent to buy gifts for your family members on their birthdays, or perhaps the money you invested in your education. Of course, you wouldn’t last long without food and water, so those were likely meaningful purchases. Similarly, you love and care about your family, so buying them nice things is likely important to you, as well. Keep asking yourself how important each purchase was to you as you make your way down the list.
As you approach the end of the list, however, you might notice something intuitive happens: because each subsequent item is less important to you, you will eventually reach a point where you probably wouldn’t be that much worse off if you hadn’t acquired the remaining items on the list. For example, those boredom-fueled quarantine purchases you made here and there this past April may not mean much to you now. It’s okay though, I’m also guilty of making mindless quarantine purchases.
Neoclassical microeconomic theory agrees with your intuition. Consumer choice theory claims, among many other things, that we make decisions that aim to maximize our total satisfaction (or ‘utility’ in econ-speak) by spending each additional dollar on things that bring us the greatest satisfaction, and that buying the same thing repeatedly gives us lower satisfaction with each subsequent purchase. These two ideas make practical sense: you probably spend most of your money on things that are important to you. But while the first mattress you buy gives you a comfortable place to spend a third of your life, the seventh mattress begins to annoy your roommates as it clutters up the hallways.
For those of us who are financially well off
, an amount you may have spent on at least one thing that wasn’t very meaningful in the grand scheme of things.
The economics behind donating
Even in a purely self-interested sense, giving can be one of the best uses of our money. Effective philanthropy offers serious bang for our buck. I do not make this claim spuriously, as there is evidence to support this idea.
The theory of perfect altruism does not always hold in practice, however. A study
by James Andreoni, an economist who researches altruism, found that the «crowding-out» effect was not observed to be as substantial as the theory claims. This suggests that individuals do indeed derive some personal utility from the act of donating, sometimes referred to as a «warm glow». Interestingly, MRI scans
show that donating causes the brain’s reward centres to activate, according to a study from the University of Oregon.
The important conclusion from this is that there is a self-interested component of charity, one that I argue we should aim to pursue with a non-trivial portion of our spending money.
The warm glow feeling is fundamentally different from the utility we get from spending our money on consumable goods or experiences. You can be confident that each additional dollar you donate is being used to change someone’s life for the better, especially if you donate to evidence-based charities with ample room for funding. As well, the stark wealth differences between developing and developed countries mean your money can likely bring much greater happiness to the recipients
than an equal amount of money would have brought you.
Can money buy happiness?
A question still lingers, however: At what point should we step off the wheel? To study the relationship between wealth and happiness, Daniel Kahneman and Angus Deaton, both Nobel laureate economists from Princeton University, found that
Nor should we forget the real purpose of donating: helping others. Effective donations can lift others out of poverty and allow them to move closer to the basic standard of living that we in high-income countries take for granted. Donations can generate more total happiness in the world than most of the things we in high-income countries buy ourselves.
Conclusion
At risk of allowing the hamster wheel metaphor to overstay its welcome, I will conclude by introducing a more appealing alternative: a wheel that generates happiness via altruism. A study
by researchers from the University of British Columbia and Harvard University found that the well-established correlation between happiness and giving may in fact be causal. In other words, it appears that giving causes us to feel happy, not just that happy people tend to donate more. The researchers wrote that «Happier people give more and giving makes people happier, such that happiness and giving may operate in a positive feedback loop (with happier people giving more, getting happier, and giving even more).»
My purpose in writing this was not to make moral prescriptions to you if you don’t donate a significant portion of your income to effective charities. I recognize that this is a deeply personal decision that requires moral considerations that only you can weigh. But I do hope you will ask whether there is a chance that the feeling you would get from profoundly changing the lives of strangers in need would dwarf the pleasure you would get from buying more things for yourself that aren’t guaranteed to make you happy.
«I recommend that instead of worrying about how much you would have to do in order to live a fully ethical life, you do something that is significantly more than you have been doing so far. Then see how that feels. You may find it more rewarding than you imagined possible.»
Further reading
If you liked this article, you might also want to check out:
Note on Killingsworth 2021 data
which expands on this research on income and happiness.
that covers the key insights from it.
In a nutshell, this study takes advantage of some interesting methodological tools to improve upon Kahneman & Deaton’s study from 2010. The author used a smartphone app to periodically ask a large sample of people how they felt throughout the day with a continuous scale (as opposed to a binary yes/no), whereas the previous study asked people to recall how they felt in the past (do keep in mind that our memory can be finicky).
First, the increases in happiness from increased income are quite negligible: doubling one’s income is associated with only a 0.1 standard deviation increase in happiness (read: a very small increase).
Overall, this study advances the state of the happiness-income literature, but doesn’t necessarily arrive at a drastically different conclusion than its predecessor(s). Those of us who live in high-income countries can still create a whole lot more happiness with our income for others in low-income countries than we can for ourselves (hence why finding effective opportunities to do so is so important).
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How to Buy Happiness: The Purchases Most Likely to Bring You Joy
While true happiness may be something that can only be found in the heart, there are plenty of arguments that say money can actually buy you some happiness here and there. Here are some of the ways experts say it’s possible to write a check and make it out to your happiness.
It’s certainly hard to measure happiness, of course. There’s no point system or way to accurately measure the happiness flowing through your bloodstream, and happiness is an emotion that can mean different things for different people, so keep that in mind as you read on. That said, buying happiness all comes down to how you spend your money. It could be a new album from your favorite artist, a trip to somewhere you’ve longed to travel to, or just a cold beer at the end of a long day. This guide won’t unlock the secret to true happiness in your life—whatever that may entail for you—but it will provide some ideas on how to get the most from your your hard-earned money.
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Cash In on Experiences
Spending on Experiences Instead of Possessions Results in More Satisfaction
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In a survey conducted by Harvard University psychology professor and Stumbling on Happiness author Dan Gilbert, a majority of respondents—57%— reported greater happiness from experiential purchases. Only 34% of respondents said that material goods brought them happiness. Gilbert and his colleagues also found that the type of experience wasn’t that important :
But when it comes to happiness, the nature of the activity in which people are engaged seems to matter less than the fact that they are engaged in it… people were maximally happy when they were thinking about what they were doing, and time-lag analyses revealed that mindwandering was a cause, and not merely an effect, of diminished happiness. A wandering mind is an unhappy mind, and one of the benefits of experiences is that they keep us focused on the here and now.
Maintaining presence, the practice of focusing on the here and now, has long been touted as a great method of maintaining happiness. Experiences make that easy, especially if it’s something you’ve never done before. How could you not be in the moment if you’re experiencing something brand new? As explained by Elizabeth Dunn, associate professor of psychology at the University of British Columbia—and co-author of Happy Money: The Science of Smarter Spending —change is a huge part of buying happiness. In her research, she found that buying big things like a house didn’t make people any happier :
This was one of the most surprising findings I came across. It’s quite striking that what so many of us are pouring our incomes into turns out not to have that big an impact on happiness. The human happiness system is fundamentally attuned to change and houses are very stable.
So if you want an easy boost to your happiness, you need to get out in the world and do some new things. But you don’t have to do it alone! In fact, it might even be better for you to buy experiences with others. Being social makes us happy, and investing in experiences that you can talk about later with others is a great way to do that. You get the benefits of a new experience, as well as the perks of feeling like you were involved in something special later on. Think of something of you’ve always wanted to do and get some friends or family involved. If you can, plan multiple things far ahead, so you can build the anticipation (which can help you enjoy it even more).
Make It Rain for Others
When you think of buying happiness, you probably think of spending money on yourself. That’s perfectly normal, but there’s a strong case for spending money on others to create happiness. Sometimes seeing someone else’s smile can do more for you than making yourself smile.
In the TED talk above, social science researcher Michael Norton describes an experiment he conducted in Canada in which people were given money and asked to spend a certain amount of money each day. Some were told to buy things for themselves and others were told to buy things for others. When it was all said and done, the group that was told buy things for others reported feeling much happier. Of course, this was in a first world country and performed with a sample of fairly wealthy undergrads. They ran the same experiment in Uganda, where things are a little different, and got similar results, with the group who bought things for others reporting more happiness. Of course, if you can’t buy something for others, or donate money, volunteering is a great way to buy your happiness with a different kind of currency—your time.
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Spending money on others doesn’t have to mean buying them trinkets and trivets, either. Think of a way to invest in others as if they were a stock or bond. Instead of money, you know that you’re going to get a great return rate on happiness. Know a painter that’s short on cash? Buy them some canvases and feel the joy when you see them become beautiful paintings. Have a niece or nephew that’s learning to read? Buy them a collection of books and try not to smile when they read them out loud to you. Sure, you could just toss some money at someone, but finding a way to invest in what they love will make a huge difference for both of you.
Buy the Right Kind of Material Goods
There’s nothing wrong with buying a material item, but there are some ways to increase the chance that it will actually make you happy. You might get sudden rush of excitement when you buy something expensive, but nothing kills your happiness faster than a big wave of buyer’s remorse.
The Comfort Principle: Spend Money Where You Spend Your Time
One of Lifehacker’s main tasks is to help you save money. But once you’ve saved money, where should
When we first talked about the comfort principle, we came up with a generic list that holds up pretty well:
Make a list of your own and really think about what you spend your time doing. Be careful about trying to trick yourself into doing things, too. You might think that buying an expensive treadmill will get you to run more, but there’s a good chance it will just become something that sits in the guest room. Stick to «experiential items» whenever you can. Just like with buying experiences, experiential items offer you excitement and joy over extended periods of time. A good book that you’ll enjoy reading over and over, or even a video game that gives hours of entertainment are good examples of these.
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If you’re going to splurge on things, it’s best to only splurge on inexpensive things. When you buy a bunch of expensive things, they seem exciting and special for a little while, only to lose their luster. Same goes for inexpensive things, but you spend a heck of a lot less them. So go ahead, splurge a little and feel that happiness surge. Just do it with things that don’t cost you an arm and a leg so you have some limbs left when the magic’s gone.
Lastly, make sure you don’t overdo it. Trying to buy too many things will take away the excitement of buying something. Abundance is the enemy of appreciation, and getting yourself a treat loses a lot of its power when you take it too far.
Buy Yourself More Time
When Money Can Buy Happiness, Use It
There are a handful of problems you can’t solve by throwing money at them. Happily, money can still
Of course, it doesn’t have to be a house cleaner. It can be anything that frees up time. Services like Amazon Prime Pantry or Yummy.com can do your grocery shopping for you, or a nanny or babysitter can watch the kids a couple times a week. When you have more time to do the things you want to do, you’ll be much happier. It’s not always cheap for these kinds of things, but if you use that extra time well, it may be well worth the price.
Beware of the Pitfalls
As you open your wallet for all of these potential happiness boosters, it’s important to stay aware of the downsides. First, manage your expectations. Nobody—including the experts—believes that you can become happy just through buying things. Experiences, time, and material goods can only go so far. Inner peace, love, and overall contentedness can’t be bought with any amount of money.
Second, be sure to buy what you like. Not what others like. Following the herd can sometimes make you feel like a part of the group, but in the long run you’ll be spending money on things you never actually wanted to buy in the first place. In those instances, you might be better off looking for a herd that fits your likes a little more.
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With those things in mind, go forth and find some fun things to do, some people to invest in, and some items that will give you some real bang for your buck. Is money the key to happiness? No, so don’t ever believe it is. But money is a part of our lives and you might as well use it for things that make the work day worth it.
One more thing: happiness is not a place you reach and rest at. Instead, imagine it like a garden, as it takes constant upkeep and care. As soon as you stop watering and pulling weeds, it can go away. So while it may be true that money can’t make you perpetually happy, it can certainly be a quick watering that your plants so desperately need every now and again.
How to buy happiness
Time and money are both scarce resources. They are also resources that can be traded. Time can be exchanged for money (which is what most of us do when we go to work) and money can buy time.
It would make sense that people’s willingness to exchange time and money for each other would vary based on circumstance. In my Year of Living Frugally post, I talked about carefully planning my meals around sales, cooking those meals myself, and making enough so I could bring leftovers to work during my first year out of college. A few years later when I had another in-office gig that paid much better, I bought my lunch every day. Different finances, different choices.
But according to a series of articles currently running in Harvard Business Review, most of us systematically err on the side of valuing money more than time. Indeed, series author Ashley Whillans, an assistant professor at Harvard Business School, and her colleagues have found that even people with plenty of money fail to use it strategically to buy time. This is partly because they have a lot of money. When you can earn a lot per hour, the opportunity cost of substituting an hour of leisure for an hour of working seems very high.
This is a problem, since there’s an argument to be made that time is more valuable than money. Empirically, Whillans’ research finds that having lots of time generally makes people happier than having more money (beyond a reasonable level of comfort). Or there’s this: you can make more money, but you cannot make more time. Once a second is gone, all the money in the world cannot buy it back.
The good news is that even if you aren’t worth billions, you can make some wise choices to buy happiness by buying time. Some of my favorites:
Negotiate for time. When starting a new job, or talking with your manager about a raise, try asking for more time in addition to more cash. Then when the cash can only go so high, double down on the time; this is often easier for a manager to give than money in a budget. What this means practically: asking for more vacation days, and/or asking to work from home twice a week. Telecommuting won’t cut your work hours, but it buys you back your commute which, statistically, is the worst part of people’s days. As for vacation, Whillans’ (and others’) research finds an extra week gives people the happiness boost of quite a bit extra in salary.
Get stuff delivered. Sometimes shopping is fun. Plenty of people might enjoy a leisurely trip to a nice grocery store, for instance, or going to a favorite boutique when the new styles have come in. Sometimes shopping is not fun. Spending two hours of your weekend going to a store to buy a Lego set for your kid’s friend’s birthday party, or a certain kind of light bulb that the store turns out not to carry, is just maddening. Order online and get this stuff shipped.
Offload nagging tasks. Yes, you can get your house cleaned and lawn mowed, and those are both great ideas. But outsourcing can go beyond that. Our youngest child is in preschool five mornings a week this year. Rather than trying to get by on less childcare, we converted those 15 hours of nanny time into household/personal assistant time. Meals get made, customer service people get called, the van’s oil gets changed, the UPS store gets visited, contractors get let in even if I have to be somewhere. I highly recommend this. Even five strategically deployed hours per week could do a lot.
Invest in your hobbies. My husband often travels for work. So, back when we first had children and I wanted to continue singing in my choirs, we made the strategic decision to hire a regular sitter for my rehearsal nights. Now that I’m singing again, we’ve continued with this policy. I’m glad to have the room in my finances for this, but if you look at happiness research, getting together weekly to do something fun with friends would be a huge boost for just about anyone. It’s definitely worth driving your car for an extra year, if that would be the trade-off.
How to Buy Happiness: Michael Norton at TED Talk (Full Transcript)
Michael Norton – Social science researcher
So I want to talk today about money and happiness, which are two things a lot of us spend a lot of our time thinking about, either trying to earn them or trying to increase them. And a lot of us resonate with this phrase, we see it in religions and self-help books: money can’t buy happiness. And I want to suggest today that, in fact, that’s wrong.
I’m at a business school, so that’s what we do. So that’s wrong, and in fact, if you think that, you’re just not spending it right. So instead of spending it the way you usually spend it, maybe if you spent it differently, that might work a little bit better.
Before I tell you the ways you can spend it that will make you happier, let’s think about the ways we usually spend it that don’t, in fact, make us happier. We had a little natural experiment. So CNN, a little while ago, wrote this interesting article on what happens to people when they win the lottery. It turns out people think when they win the lottery their lives will be amazing. This article’s about how their lives get ruined. What happens when people win the lottery is, one, they spend all the money and go into debt; and two, all of their friends and everyone they’ve ever met find them and bug them for money. It ruins their social relationships, in fact. So they have more debt and worse friendships than they had before they won the lottery.
What was interesting about the article was, people started commenting on the article, readers of the thing. And instead of talking about how it made them realize that money doesn’t lead to happiness, everyone started saying, “You know what I’d do if I won the lottery …?” and fantasizing about what they’d do. Here’s just two of the ones we saw that are interesting to think about. One person wrote, “When I win, I’m going to buy my own little mountain and have a little house on top.”
And another person wrote, “I would fill a big bathtub with money and get in the tub while smoking a big fat cigar and sipping a glass of champagne.” This is even worse: “… then I’d have a picture taken and dozens of glossies made. Anyone begging for money or trying to extort from me would receive a copy of the picture and nothing else.”
And so many of the comments were exactly of this type, where people got money and, in fact, it made them antisocial. So I told you it ruins people’s lives and their friends bug them. Also, money often makes us feel very selfish and we do things only for ourselves. We thought maybe the reason money doesn’t make us happy is that we’re spending it on the wrong things; in particular, we’re always spending it on ourselves. And we wondered what would happen if we made people spend more of their money on others. So instead of being antisocial with your money, what if you were more pro-social with it?
We thought, let’s make people do it and see what happens. Let’s have some people do what they usually do, spend money on themselves, and let’s make some people give money away, and measure their happiness and see if, in fact, they get happier. The first way we did this was, one Vancouver morning, we went out on the campus at University of British Columbia, approached people and said, “Do you want to be in an experiment?” They said, “Yes.” We asked them how happy they were, and then gave them an envelope. One of the envelopes had things in it that said, “By 5pm today, spend this money on yourself.” We gave some examples of what you could spend it on. Other people got a slip of paper that said, “By 5pm today, spend this money on somebody else.” Also inside the envelope was money.
And we manipulated how much money we gave them; some people got this slip of paper and five dollars, some got this slip of paper and 20 dollars. We let them go about their day and do whatever they wanted. We found out they did spend it in the way we asked them to. We called them up and asked them, “What did you spend it on? How happy do you feel now?” What did they spend it on? These are college undergrads; a lot of what they spent it on for themselves were things like earrings and makeup. One woman said she bought a stuffed animal for her niece. People gave money to homeless people. Huge effect here of Starbucks.
So if you give undergraduates five dollars, it looks like coffee to them, and they run over to Starbucks and spend it as fast as they can. Some people bought coffee for themselves, the way they usually would, but others bought coffee for somebody else. So the very same purchase, just targeted toward yourself or targeted toward somebody else. What did we find when we called at the end of the day? People who spent money on others got happier; people who spent it on themselves, nothing happened. It didn’t make them less happy, it just didn’t do much for them.
The other thing we saw is the amount of money doesn’t matter much. People thought 20 dollars would be way better than five. In fact, it doesn’t matter how much money you spent. What really matters is that you spent it on somebody else rather than on yourself. We see this again and again when we give people money to spend on others instead of on themselves. Of course, these are undergraduates in Canada — not the world’s most representative population. They’re also fairly wealthy and affluent and other sorts of things.
We wanted to see if this holds true everywhere in the world or just among wealthy countries. So we went to Uganda and ran a very similar experiment. Imagine, instead of just people in Canada, we say, “Name the last time you spent money on yourself or others. Describe it. How happy did it make you?” Or in Uganda, “Name the last time you spent money on yourself or others and describe that.” Then we asked them how happy they are, again. And what we see is sort of amazing, because there’s human universals on what you do with your money, and real cultural differences on what you do as well. So for example, one guy from Uganda says this: “I called a girl I wished to love.” They basically went out on a date, and he says at the end that he didn’t “achieve” her up till now.
Here’s a guy from Canada. Very similar thing. “I took my girlfriend out for dinner. We went to a movie, we left early, and then went back to her room for … cake,” just cake. Human universal: you spend money on others, you’re being nice. Maybe you have something in mind, maybe not. But then we see extraordinary differences. So look at these two. This is a woman from Canada. We say, “Name a time you spent money on somebody else.” She says, “I bought a present for my mom. I drove to the mall, bought a present, gave it to my mom.” Perfectly nice thing to do. It’s good to get gifts for people you know.
What we see again, though, is that the specific way you spend on other people isn’t nearly as important as the fact that you spend on other people in order to make yourself happy, which is really quite important. So you don’t have to do amazing things with your money to make yourself happy. You can do small, trivial things and still get the benefits from doing this. These are only two countries. We wanted to look at every country in the world if we could, to see what the relationship is between money and happiness.