82. Happy Money: The Science of Smarter Spending
Rating: ☆☆☆1/2
Recommended by:
Author: Elizabeth Dunn and Michael Norton
Genre: Non-Fiction, Finance, Happiness, Self-Improvement
224 pages, published May 14, 2013
Reading Format: Book
Summary
Professors Dunn and Norton delve into behavioral science research to explain how money can buy happiness—if you follow the five core principles of smart spending:
- Buy Experiences: Most Americans describe owning a home as an essential component of the American dream. But recent happiness research suggests that home ownership is far from dreamy. Material things (from beautiful homes to fancy pens) turn out to provide less happiness than experiential purchases (like trips, concerts, and special meals). Whether you’re spending $1 or $200,000, buying experiences rather than material goods can inoculate you against buyer’s remorse.
- 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. Rather than advocating wholesale self-denial (say, giving up coffee completely), we’ll demonstrate the value of turning our favorite things back into treats (making that afternoon latte a special indulgence rather than a daily necessity.
- Buy Time: 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. Yet wealthier individuals do not spend their time in happier ways on a daily basis; thus they fail to use their money to buy themselves happier time. When people focus on their time rather than their money, they act like scientists of happiness, choosing activities that promote their well-being. For companies, this principle entails thinking about compensation in a broader way, rewarding employees not only with money but with time.
- Pay Now, Consume Later: In the age of the iPad, products are available instantly and our wallets are lined with plastic instead of paper. Digital technology and credit cards have encouraged us to adopt a “consume not and pay later” shopping mind-set. By putting this powerful principle into reverse—by paying up front and delaying consumption—you can buy more happiness, even as you spend less money. Because delaying consumption allows spenders to reap the pleasure of anticipation without the buzzkill of reality, vacations provide the most happiness before they occur.
- Invest in Others: New research demonstrates that spending money on others provides a bigger happiness boost than spending money on yourself. And this principle holds in an extraordinary range of circumstances, from a Canadian college student purchasing a scarf for her mother to a Ugandan woman buying lifesaving malaria medication for a friend. The benefits of giving emerge among children before the age of two, and are detectable even in samples of saliva. Investing in others can make individuals feel healthier and wealthier—and can even help people win at dodge ball.
Quotes
“Looking back on their past decisions about whether to purchase experiences, 83 percent of people sided with Mark Twain, reporting that their biggest single regret was one of inaction, of passing up the chance to buy an experience when the opportunity came along.”
“The Big Ben Problem suggests that introducing a limited time window may encourage people to seize opportunities for treats. Imagine you’ve just gotten a gift certificate for a piece of delicious cake and a beverage at a high-end French pastry shop. Would you rather see the gift certificate stamped with an expiration date two months from today, or just three weeks from now? Faced with this choice, most people were happier with the two-month option, and 68 percent reported that they would use it before this expiration date.25 But when they received a gift certificate for a tasty pastry at a local shop, only 6 percent of people redeemed it when they were given a two-month expiration date, compared to 31 percent of people who were given the shorter three-week window. People given two months to redeem the certificate kept thinking they could do it later, creating another instance of the Big Ben Problem—and leading them to miss out on a delicious treat. Several years ago, Best Buy reported gaining $43 million from gift certificates that went unredeemed, propelling some consumer advocates and policy makers to push for extended expiration dates. But this strategy will likely backfire. We may have more success at maximizing our happiness when treats are only available for a limited time.”
My Take
There a lot of practical advice in Happy Money that, if followed, is likely to make you happier. In my life, I have long practiced “pay now, consume later,” especially with travel (which also involves spending on an experience, rather than a product). For me, at least half the fun of a trip is the planning that goes into it. I also really enjoy looking back on trips that I have taken in the past and have never regretted any money that I have spent on travel. I am also a big fan of “make it a treat” and can personally attest to the happiness boost that results. As a devoted student of happiness, I can unequivocally recommend Happy Money as a way to increase your happiness.
