Most people know that a wise financial plan starts with saving more and spending less. But there’s more to it than that. How we handle our money can also affect our happiness, according to researchers in the field of positive psychology. Certain purchases give people a bigger emotional boost than others, says Elizabeth Dunn, co-author with Michael Norton of Happy Money: The Science of Smarter Spending.
With science on your side, here’s how to spend and save your way to a simply satisfying life.
Choose Experiences Over Stuff
Your 1980s-era bathroom is crying out for an upgrade but the kids want to go to Yellowstone. The renovation may seem like the smarter purchase, but seeing Old Faithful with your family may bring more lasting joy.
Studies from Cornell University and the University of Chicago reveal that people consistently get more enjoyment from trips, restaurant meals and concerts than from couches, clothes or even houses. “Experiences make better stories than material things,” says Dunn, and they bring us closer to others. “It’s more interesting to hear about someone’s African safari than their marble countertops.”
And while we quickly get used to our stuff, pleasant memories can bring on a smile time and time again.
Turn Your Favorite Things Into A Treat
In a study of college students, Dunn and her colleagues found that those who refrained from eating chocolate for a week enjoyed the candy significantly more than those who were allowed to indulge all their cravings without delay.
Scarcity can enhance pleasure, as Dunn discovered when she swapped her daily latte for regular brewed coffee and started savoring only the occasional latte. “Taking a break from our favorite things is a way to save money and maximize happiness,” she says. (Check out these tips for doing a no-spend month.)
Prioritize Time Over Stuff
Purchasing a modest house that’s close to work will make you happier than a larger, more stylish home in the suburbs, says Laura Rowley, author of Money and Happiness: A Guide to Living the Good Life. Studies consistently find that commuting is one of Americans’ least-enjoyed activities, while time spent with friends and family is among the most cherished. “The irony is that what makes us most unhappy is blocking us from what makes us happiest,” Rowley notes.
Pay Now, Consume Later
Nothing beats the bliss of a beach vacation in winter, especially when paid in advance. Turns out all those hours you spend Googling “swimming with dolphins” can provide endless satisfaction beforehand. “Anticipation can be quite a potent source of happiness,” says Dunn.
As for that advance payment, Dunn says the pain of paying in the moment often compels people to be more frugal. Debt is one of life’s biggest happiness thieves, so it’s best to avoid it if you can.
Spend On Others
Got a little extra cash? You might be tempted to splurge on yourself, but spending on others will give you an even bigger boost. Dunn and her colleagues gave study participants $5 or $20 bills. Some were asked to spend the money on themselves, others on someone else. Participants whose windfall benefited others said they felt happier. “People had no problem spending the money on themselves,” Dunn says, “but at the end of the day, it didn’t make them happy the way spending on others did.”
So why not take a friend to dinner or give a donation to charity? It’ll be money well spent.
By Sara Eckel