Are You Happy?
Take a minute. Assess where you are in life. Do you feel happy, or even remotely ok with your life? Is your job not the right fit? Could your relationships be better?
What if the issue isn’t your relationships or your job, but how you’re spending your money?
Two professors, Elizabeth Dunn and Michael Norton, set out to find what truly brings joy and happiness with money. Their book, Happy Money: The Science of Happier Spending is the result of their journey.
Happy Money covers five principles the researchers found to spend money in a more fulfilling way. The best part is you can start today. You don’t need to be Warren Buffet to use these principles, or even in a higher income bracket. They are scientifically validated actionable principles that everyone can use.
Summary of Happy Money
This is a review of the five principles outlined in Happy Money and some actionable advice you can begin using right away for a happier and more fulfilling life. At the end, I will give an overall rating based on the quality of the advice and how actionable the advice it is.
Principle #1: Buying Experiences
When it comes to happiness, what do you think generates more happiness per dollar spent: material possessions or experiences? The professors argue buying experiences is one way people begin enjoying their lives more.
Instead of looking at bigger houses or nicer cars, the professors argue buying experiences is the way to go. From what their data showed, experiences such as travel, going out with friends, and going to events generated the highest forms of happiness. This still proved true even if the individuals in the study thoroughly enjoyed their purchases. Think of a person who loves cars buying a Porsche or Ferrari. Of course they will get a huge boost in happiness because it’s a possession they enjoy owning. Even when controlling for those individuals, the professors found experiences still showed to be the best happiness per dollar spent.
What You Can Do:
Fortunately, this is a fairly simple and straightforward concept. When deciding on how much you want to spend on your next big material purchase, take a minute and pause. Ask yourself, is there anything or anyone I would rather do or see? Have I wanted to travel with someone or go somewhere new? The professors argue those purchases would yield a far more enriching life, than buying the latest BMW or having the biggest house on the lot.
Principle #2: Make it a Treat
“An over-indulgence of anything, even something as pure as water, can intoxicate.” – Criss Jami
The quote above pretty much sums up the next principle. If human beings overindulge ourselves, the things we love end up hurting us. The professors argue the same point for your spending patterns as well. If you consume too many things you like too frequently, then the treats that once gave you joy end up making you feel worse off.
The professors argue the key to this principle is balance. By restricting yourself the access to some of the things you love even just a little bit can help you savor the experience more.
What You Can Do:
Personally, I found this point pretty intuitive and incredibly easy to implement in one’s life. For example, I love sushi. I mean, I love sushi. That being said, I know what can happen if you eat too much or too often. That’s right, stomach aches for days. The stomach pains are almost worth it, but I have noticed times where I would eat sushi just because it’s available and not savor the experience. Applying this principle helped me realize my treat was becoming an expectation and not the savory experience that gave me joy.
What I did to balance it out is now I only consume sushi once a month. If I do any more than that, it loses its appeal. A question I have for you is, what did you overindulge on? What’s no longer a treat you’re glad to spend money on?
Principle #3: Buying Time
This principle is a fun one. It really makes you question why you want money in the first place. The professors found the Gross National Happiness Index. This index measures the overall happiness for specific countries. After a few hours of digging in the article and the data, the professors saw some peculiar findings.
In the United States, people’s happiness typically doubled when they increased their overall income by $10,000. For example, people making $40,000 per year were measured at twice as happy than people making $30,000 per year. However, according to the professors, there is a stopping point. After around $70,000 the relationship between in income and perceived happiness begins to diminish. This means every increase after $70,000 gross income, the person doesn’t receive as big of a boost of happiness.
Let that sink in for a minute. Every $10,000 dollar increase typically doubled a person’s happiness until $70,000. Then, people only got small bursts of overall happiness for every increase in their income. When I read this I was a little flabbergasted. If the six figure salaries of people were only getting them so much happiness, what were they missing?
The professors say time. In their research, they noted many of the people with higher incomes were actually becoming unhappier because they worked more than ever, but felt they had no time. However, the professors had a counter-intuitive suggestion to get more time back in the day.
What Can You Do:
The professors argue that giving time is a great way to remind yourself how many hours you have in a day. When the participants of the study were asked to devote a half hour to another person for the sake of simply giving them the time of day something interesting occurred. The participants started feeling like they truly had more time in the day, than what they felt previously. By donating time to other individuals the professors saw people filling in some gaps where money was thought to make them happy.
The simple act of donating a half hour gave the perception of having more time. I definitely, thought this concept made a lot of sense. Plenty of people have felt like they have more money when they donate, why would time be different?
Principle #4: Buy Now Consume Later
This principle is a little counterintuitive. The professors stated their participants reported a higher level of happiness when they purchased an item and then waited to consume it. The underlying assumption they tested was to see if the “hype” built with waiting would make the experience of using the item more fulfilling. When the participants were left to their own devices, they would day-dream about what they ordered. Even the thought was enough to get them through the day, and the item hadn’t even been delivered yet. When they looked at the data it was the opposite of what happens with credit cards.
People typically use credit cards to buy now and pay later. Credit card companies have played on the immediate gratification impulse within human beings for decades. In the book, the VP of Visa admits to manipulating that impulse within human behavior. Fortunately, there are ways to protect yourself, which is covered in other posts.
What Can You Do:
For future purposes, you can try ordering something way ahead of time to give you the ample chance to build the “hype” around it. In one case, I ordered a video game called Persona 5 ahead of time to test the principle. If I am being honest, this principle didn’t really stick for me.
I felt next to no increase in happiness while waiting for the game. In fact, I almost forgot I ordered it. Now, this may not be the case for other people, and I would hate to take a good experiment for other people to test on their own time. The overall principle makes sense with an effort to delay gratification, but I personally did not get much out of it.
Principle #5: Invest in Others
This principle is golden. By far one of the best chapters of the book and one of the best principles to act upon. Much like buying time, the professors found the more people gave and invested in other people in their lives, the happier and more fulfilled they were. Now, this seems pretty cliche, but this principle does have its place. The experiment they ran to test this assumption was pretty cool.
They had a graduate student standing on a street corner outside of a Starbucks. The graduate student would hand people a note with a couple bucks in it. The letter said they had to either spend the couple bucks on themselves or on another person. Typically the vast majority of the participants spent the money at Starbucks. The graduate student followed up with them afterwards and recorded their overall happiness. The results?
The study showed even spending as little as a couple bucks can give a boost in overall happiness. When the professors looked at the data, the people who ended up spending the money on someone else were significantly happier than the ones who spent in on themselves. This shows you don’t need to be Warren Buffet or a money mogul to boost your overall satisfaction in life.
What Can You Do:
The action the professors suggest is keep it simple. Even paying for someone else’s coffee counts as investing in others. Even the smallest act can give you a much needed boost in overall happiness and satisfaction in life. In order to apply this principle, I bought a friend of mine lunch. Before meeting up I wasn’t in the greatest of moods. The work day wasn’t going as well as I thought it would be, some family issues arose, but as soon as I offered to pay for lunch I noticed something.
Not only did my friend express her gratitude, but simply changing my frame of reference from myself to the other person was enough to change my general outlook on the day. It was a great lesson in simplicity because sometimes all you need to do is get outside yourself and do something kind for another person.
I would say overall Happy Money is a 4 out of 5. All the principles are very actionable and for the most part I had no problem with applying them. The only one that didn’t stick as well was pay now, consume later. The point makes sense, but applying it didn’t help me feel any happier, nor did it give me a benefit by waiting to play the video game.
That being said, Happy Money overall is very actionable and simple to use. The authors really put a lot of time, effort, and planning into how they apply the principles. Happy Money itself is also a decent read for non fiction fans. Since reading Happy Money, I’ve been applying the principles to create and sustain a healthier view of spending.
My questions for you are, what principle do you want to practice? How will you practice the principle?