Small business owners face a number of challenges that can keep them from building their business from a shoestring operation to a booming, thriving company. If you are not making...
Can money buy happiness?
Yes, if you´re spending it right.
Do you believe that money can’t buy happiness?
Then chances are that you could benefit a lot more from reading this post than others.
Elizabeth Dunn, Professor of psychology at the University of British Columbia in Vancouver, Canada and Michael Norton, Professor of marketing at the Harvard business school are the Authors of the book Happy Money. The challenges the belief that money can’t buy happiness with tones of research and countless real life tests. They state that if you believe that money can’t buy happiness then you’re just not spending it right.
Does MORE money make you happier?
There is a big difference between the beliefs that money can´t buy happiness and the one that more money won´t make you happier.
I like talking about finance, investing, business and things like that and sometime people say to me that “money won´t make you happy”. While that might be true in some cases, in many cases it’s not true at all. If you believe that more money won’t make you happy that’s because you have “enough” of it, but what I later figured out was that when people say things like that, it’s a defense mechanism. They say things like that so that they won´t have to work on themselves, develop, build passive incomes, learn to invest or whatever it is that they are afraid of doing or learning to do. Research actually shows that (in the US at least) earning US$55000 per year instead of US$25000 per year will make you 9% happier (A tiny increase in happiness compared to the common belief of the US$25000 earner: that the increase in happiness would double if the income doubles). All around the world income has very little influence in how much people smile, laugh and experience enjoyment on a typical day. In the US at least, when people earn about US$75000 annually there is no increase in happiness earning more than that.
So more money make people happier, even though it´s not a big difference, but above US$75000 annually there is no measurable difference in happiness.
The five principles of happy spending
Elizabeth and Michael have done many studies and a lot of research on the relationship between how people spend their money and how it relates to happiness. They have found five key principles that they go through in the book.
The five principles:
- Buy experiences
- Make it a treat
- Buy time
- Pay now, consume later
- Invest in others
One of the reasons people think that money can´t buy happiness is that they rather buy “stuff” than experiences. But when we buy stuff, we most often only stay happy for a short period of time.
Have you ever bought something that you really wanted?
How did it feel?
But for how long?
I can only talk from my own experiences here but every time I´ve bought something that I wanted, like a new TV, IPad, phone, a new car or something like that, it took a couple of weeks or less then the thrill was over. I got used to having it and after that all the excitement was over.
So to make a comparison, the times I put my money into some experience instead like traveling, going on some event, making an awesome day with friends or something like that the, happiness can run forever. I can re-live the experiences over and over, just looking at pictures, sharing it with people I talk to or just thinking about it in my head. The experience of diving with thousands and thousands of barracudas and dozens of sharks when I was in Malaysia/Borneo or when me and my friend was fishing for barracudas in Mexico or the time me and some of my best friends went on a new year’s cruise from Stockholm to Tallinn. These are all memories that I can share and re-experience with new and old friends time after time and it still gives me joy just thinking about it.
Think about it, how much real joy do you really get from buying a bigger TV?
Compared to spending that money on some really awesome experience instead.
So can money buy happiness?
If you spend it on experiences it can 🙂
Make it a treat
“Many residents of London have never visited Big Ben. What stops them? When something wonderful is always available, people are less inclined to appreciate it. Limiting our access to the things we like best may help to “re-virginize” us, renewing our capacity for pleasure.”
The thing here is that if you get used to something that you really like to consume, do or feel you take much of the pleasure out of it.
One thing that a lot of people do (including me), that I haven´t even thought about in this way before, is how we nowadays consume TV series. I personally hate commercials, that´s why I basically haven´t watched TV in like 15 years. When I was younger I just thought it was a waste of time watching a 20 min episode of Friends that took 30 min to watch because of the commercials. Now when I know how affirmations program us, I prefer to do the programing on my own terms with my own goals and visions. ANYHOW, what I do (and many with me) is that when I start to watch a new TV series I want there to be several seasons released already before I start watching it so that I can watch them “marathon style”. While the feeling is nice, that I don’t have to wait for a new episode every week I never get the thrill of “getting a treat” every time a new episode airs. I can see people around me sometimes, they are excited because a new episode of their favorite TV show is released that day. That seems to give them more enjoyment (happiness) when they watch it.
One example that they bring up in the book is if you love a Starbucks latté or something and you have one every day, you get used to it. But if you settle for a simple brew Coffee from home on most of the days, and treat yourself maybe once a week with going to Starbucks with some friend, sitting down chatting and sipping on that delicious latté, you will enjoy it much more.
In my mind this also sounds like a way of feeling happier just by making simple things a treat instead of getting used to it.
I don´t know if this belongs here but think of a time when you really, really had to pee. Doesn´t it feel much better to pee then, than just an ordinary pee?
A much better feeling!
“By permitting us to outsource our most dreaded tasks, from scrubbing toilets to cleaning gutters, money can transform the way we spend our time, freeing us to pursue our passions.”
“When people focus on their time rather than their money, they act like scientists of happiness, choosing activities that promote their well-being.”
Most of us want more free time, right?
Time is our most precious asset in life, so it makes sense to make the most of it. I can remember driving my car to different gas stations trying to find the cheapest one, costing me 30 minutes of my time, saving me 1 or 2€ on a full tank of gas at best. That is not valuing my time very high and I know there are many people doing things like that, only thinking about the money and not thinking about the time it takes, at all.
Have you ever been at the store and they give out free samples of some new product? Maybe there is a line so you have to wait for a while to get your free sample. Instead of valuing our time, most of us would think about the money we save from the free sample instead of the time we spend.
What we could do instead is to just pick the first gas station we see or just buy the product (if we want to try it), saving us the time so that we can spend it as we like. The fact is that people who feel that they have plenty of free time are more likely to exercise, do volunteer work or participate in other activities that are linked to increased happiness and wellness.
A lot of high income earners could very well use some of their extra money to buy “free time” by outsourcing some of the demands of their daily life such as cooking, cleaning and gardening. “Wealthier” individuals all across the world report that they feel more rushed, are more often feeling time pressure and more often feeling stressed. Buying some free time could lower the stress and feeling of pressure and increase their levels of happiness.
Pay now, consume later
In modern age society many people have gotten used to consuming things and then paying for them later through digital technology and credit cards. By changing this principle the other way around – by paying up front and then delaying consumption, research shows that we can buy more happiness, even with less money spent.
Think about when you book a vacation, you book flight, hotel and all the activities that you want to do and pay for it in advance. Then several months later you go on your vacation, it almost feels like it´s free. Compare it to buying the full trip a couple of days before departure, and when you are there you pay for the activities on place. Since you pay for everything right before, many people might not enjoy it as much, thinking about how much it cost them, the “pain” of the price might take some of the happiness away.
When we pay for things far in advance, the cost of it is taken out of the emotion when we actually experience it, freeing us to enjoy it in a different way.
In an experiment Michael and Elizabeth made they learned about something they now call the “drool factor”. College students got to choose between two quality chocolate treats, some were instructed to eat it right away and some were told to wait for 30 minutes. When students had to wait to eat their chocolate, they enjoyed it more and expressed more interest in buying more of those chocolates. The delay provided an opportunity to build a visceral desire, to drool a bit.
Invest in others
This part turned out to be the most powerful and the one that the TED talk below is about.
Research shows that we as people get more happiness out of spending our money on others than spending it on ourselves. Sounds crazy, doesn´t it? But think about Christmas, what gives you more joy, giving or receiving gifts? Have you ever given someone a perfect gift and you see them just light up from getting it, isn´t that about one of the best feelings you can get?
So one of the experiments that Michael and Elizabeth made was that they were standing outside of the campus on the university in Canada and asked students if they wanted to be part of an experiment. The ones that said yes were given an envelope with a 5 or 20 dollar bill and a note with instructions on how to spend it.
The instructions were:
- Spend the money on yourself, give yourself a treat
- Spend the money on someone else
Some were given 5$ and some were given 20$ to see if there was any difference in happiness related to the amount that were spent.
Later on that evening they called up the students and asked what they got in the envelope and what the note said, after that they asked what they did with the money and how they now felt.
The results showed that the people who got money to spend on themselves (no matter if it was 5 or 20 dollars) felt no difference in happiness.
On the other hand, the people that got instructed to use the money on others (no matter if was 5 or 20 dollars) did so, and felt an increase in happiness that evening.
The same experiment was made in Uganda (In Africa), to see if there was any difference there but the results were the same.
Then Michael and Elizabeth looked at statistics from people all over the world who donated money, and they found that all over the world people who donates to help others are happier than the average person.
This is so funny, because a couple of days ago I helped a friend to buy a Donation package from Better Globe and just a few seconds after, he said something like: “Wow, now I feel so much better, I´m doing a good thing”.
The cool thing about this is that research shows happiness can be increased with such small amounts as 5$, giving it to a homeless person, or just buying a friend his or her favorite coffee from Starbucks or just donating it through donorschoose.org/.
Investing in others doesn´t have to be about investing money, it can also be in forms of time. Since time is the most presious thing that we have in our life, spending it to help others is basically the greatest gift anyone can ever give. Everyone that i know that has done volonteer work say it gives them alot of joy back. One other way to invest in others is by starting or contributing to a Social business.
Here is a article i wrote about social business
Can money buy happiness?
I would say YES, if you spend it in certain ways money can buy increased happiness.
Check out the TED talk if you want, it´s really interesting.
Comment below what you think about the subject of happiness, how to increase it and what makes you happy.