Behind the science of happiness and money
We are all running after that one thing that we believe will make us happier. That one thing is of course money. But we must also stop and think about how money will actually increase our happiness.
Dr. Liz Dunn has been researching this exact topic and I recently interviewed her. She is a professor of Psychology at the University of British Columbia. She conducts experimental research on self-knowledge and happiness and is the co-author of “Happy Money: The Science of smarter spending.”
The book talks about 5 ways in which we can increase our happiness by spending money on the “right” things. Let’s dig into a couple of those:
1. Spend on Experiences, not stuff
Somehow there is a narrative in society that once we make more money, we will be able to buy all the “stuff” that will make us happier. “Stuff” like watches, jewelry, electronics, fancy cars, yachts, mansions, etc. But research does not support this idea. For example, buying a new, bigger house does not add to our overall happiness.
As per research, what truly adds to our happiness is “experiences”. Experiences make our lives richer. Experiences actually add to the definition of who we are as a human being. So, when you have the choice between spending money on stuff or experiences, choose experiences.
On a day to day basis, your choice could be as simple as spending that money on buying a new pair of jeans or buying a month of yoga classes or salsa classes or rock climbing gym membership. Ditch the jeans and go for the experience — whether it be yoga, salsa or rock climbing. You will find yourself to be a new person as a result of those experiences.
On a monthly, quarterly or yearly basis, it could be the choice between spending the additional $30K on upgrading your car or taking a long trip to 10 countries in Europe. Take the trip to Europe. You will have stories to tell for the rest of your life. Those stories will enrich your life. You will connect with others, learn new things, grow yourself as a human being and remember those stories even 50 years later.
In fact, as per Dr. Dunn, here are the 4 kinds of experiences that will maximize your happiness:
Experiences that bring you together with others
Experiences that make a memorable story
Experiences that are linked to your sense of self/who you desire to be
Experiences that are unique
So, when possible find experiences that will meet all 4 of the above criteria and you will find your happiness soar.
As Mark Twain said: “20 years from now, you will be more disappointed by the things you didn’t do than the ones you did do.” However, in the case of material goods — the opposite is true. In fact, a lot of people’s biggest regret is buying something they wish they hadn’t.
We feel the benefits of our experiences long after the time has passed. Our satisfaction with experiences increases over time while our satisfaction with stuff decreases over time.
Experiences lead to stories that live with us forever. Experiences help us grow as human beings. Experiences amplify our existence. Experiences connect us to others. Experiences define us.
So, go out and indulge in an experience. You will be richer as a result of it.
2. Spend on Others
Dr. Dunn and her colleagues — Michael Norton and Lara Aknin conducted an interesting experiment. Lara asked passers-by in Vancouver if they would be willing to participate in an experiment. If the passerby agreed, Lara asked them how happy they were, took their contact information and gave them an envelope. Inside the envelope was a $5 Bill and a note.
For some the note read:
“Please spend this money today before 5 PM on a gift for yourself or on any of your expenses”
For others it read:
“Please spend this money today before 5 PM on a gift for someone else or a donation to a charity.”
And to make it even more interesting, some people got $20 instead of $5. So how did everyone fare at the end of the day?
Well, those who spent money on others were measurably happier than those who spent it on themselves. And to make it even more interesting, the amount of money in the envelope — $5 or $20 did not affect the level of happiness at the end of the day.
So — as you can see, spending on others gives us more happiness, no matter how much we have or how much we spend.
To build on this experiment even further, this time Lara handed out $10 Starbucks gift cards to strangers. This time, the instructions were a little different.
She told some people to:
“Use the gift card to take someone else out for coffee at Starbucks”
She told others to:
“Give the gift card away to someone but do not accompany them to Starbucks”
So, in both the cases, people spent money on others. Lara handed out additional $10 Starbucks gift cards to others — telling them to spend the gift card on themselves.
So who was happiest at the end of this experiment? It was people who used the gift card on someone else and who spent time with them at Starbucks.
In a nutshell: Investing in others in a way that allows you to connect with them while your money is being spent gives you the most happiness. You want to be able to see the effect of the money being spent. In fact, the correlation is so strong that investing in others improves our own happiness even when we don’t have enough for ourselves but we still invest in others.
So, the next time you are thinking of spending your hard earned money… think about what will give you the most “happiness” bang for your buck.