As financial advisers, we work with clients to help them identify and achieve their financial goals. Unfortunately, many clients get caught up in materialism and the pursuit of ‘more’, believing this will buy them happiness and fulfillment. Fantasies of great wealth often involve visions of fancy cars, palatial homes and the leading designer brands. Yet satisfaction with these material purchases wears off fairly quickly. What was once exciting and new becomes old hat and remorse sets in.
Academics and authors of ‘Happy Money’, Elizabeth Dunn and Michael Horton have come up with six surprising ways how people CAN buy happiness.
1.Spend money on others, not yourself
Elizabeth Dunn via a range of social experiments discovered that money can buy happiness, but only if it’s spent pro-socially, i.e.:when we invest in others rather than in ourselves. People were happier when they spent money on others or gave a gift to others, than when they spent money on themselves.
2.Spend money to give you time
People feel they are busier and have less time than in previous decades. Research indicates this time famine perception is due more to financial prosperity than to actually doing more things. Scarcity increases value and conversely, when something is valuable, it is typically perceived to be scarce. As time becomes worth more money, people see that time as increasingly scarce.
People who feel they have plenty of free time are more likely to exercise, do volunteer work and participate in other activities that are linked to increased happiness. For example, connecting with friends, nurturing intimate relationships, viewing art, music etc which are precisely the activities people on the brink of death wish they would have spent more time doing in their everyday lives.
Money can be used to buy free time by outsourcing mundane jobs to others, but it is how people consume the extra time they buy that really matters. If instead of doing something meaningful, they fritter away the hours by mindlessly watching TV, obsessing over looks or gadgets, or drifting aimlessly from one undertaking to the next, then happiness does not come with rising wealth.
3.Spend money now but wait to enjoy it
Research reported in the book ‘The Myths of Happiness: What Should Make You Happy, but Doesn’t. What Shouldn’t Make You Happy but Does’, uncovered that the anticipation surrounding a holiday created a greater sense of happiness than when the person was actually on the holiday. This suggests we should take several small holidays rather than one large annual holiday. This will maximise the pre-holiday happiness effect throughout the year.
4.Spend money on experiences rather than possessions
There is growing evidence it is experiences, not things, that make us happy. Many experiences can be low cost but very memorable and will have long-term lasting benefits. If you can afford it, take your family on holidays and adventures - get involved with what they are doing and give the gift of your time, wisdom and assistance rather than just money or some ‘thing.’
5.Spend money on many small pleasures instead of a few big ones
A number of research projects indicate those who frequently treat themselves to low cost or no cost activities or indulgences were more satisfied with their lives. Undertaking many activities can yield small boosts to happiness in the short-term that accumulate, one step at a time, to produce a large impact on happiness in the long-term.
6.Spend money on fundamental feelings
If money isn’t making you happy then it’s possible you are spending it on keeping up with the neighbours, validating your wealth, flaunting your looks, power or status. The problem isn’t in the money, but in how you are using it.
Dunn believes the most direct and reliable way to extract happiness and fulfillment from money is through need-satisfying pursuits, for example by spending capital on developing ourselves as people, on growing and on investing in interpersonal connections. Such activities have been shown by researchers to bring happiness and, equally important, not to stimulate ever-increasing addiction-like desires for more and more. In other words, the purchases or expenses that will yield the greatest emotional benefit are those that involve goals that satisfy at least one of the three basic human needs of competence (feeling capable or expert), relatedness (belonging and feeling connected to others), and autonomy (feeling a sense of mastery and control over one’s life).