If money doesn’t make you happy, then you probably aren’t spending it right!
So what is right? In the first part of this series, 8 Ways to Get More Happiness for Your Money (Part I), we introduced the research findings by Elizabeth W. Dunn, Daniel T. Gilbert and Timothy D. Wilson, published in the Journal of Consumer Psychology.[i] The article discussed four ways to increase the happiness we get from spending money:
- Pick experiences instead of material goods.
- Spend money on others, rather than on yourself.
- Choose many small pleasures rather than fewer large ones.
- Buy less insurance—because you don’t need the emotional protection.
In this article we discuss the rest:
(5) Delay consumption – pay now and consume later.
The ‘enjoy now and pay later’ convenience of credit cards can undermine our well-being. It leads us to do shortsighted things like getting into debt above our paying ability and not saving enough for retirement. It can ruin our lives in the end.
Another benefit comes from advantages of delaying gratification. A lot of research including the famous marshmellow experiment shows that failing to delay gratification makes us less well off compared to those who can delay.
Those who delay gratification get an additional bonus in terms of happiness because they also get to enjoy anticipation. As the paper explains, “The person who buys a cookie and eats it right away” gets a certain level of pleasure from it, “but the person who saves the cookie until later” gets the same pleasure when eating it “plus all the additional pleasure of looking forward to the event”.
Those with little patience forego that anticipation and that pleasure. Anticipation is enjoyable, even if the actual experience turns out to be not so great.
Thinking of future events can trigger stronger emotions within us compared to thinking of the same things happening in the past. This is why delaying gratification leads to more happiness.
(6) Think about what you are not thinking about (when spending).
The researchers recommend that we consider how peripheral features of our purchases may affect our day-to-day lives. Here’s why it matters:
We see the distant future in simple, high-level ways rather than in finer detail. But happiness lies in the details. Your current situation matters to you happiness more than the more stable elements of your life. This is why it is important to think of how our purchase can affect how we spend our time. “For example, consider the choice between a small, well-kept cottage and a larger “fixer upper” that have similar prices. The bigger home may seem like a better deal, but if the fixer upper requires trading Saturday afternoons with friends for Saturday afternoons with plumbers, it may not be such a good deal after all.”
When estimating how much happiness you’d get from a purchase, first imagine how your typical day is likely to go afterwards. That way you are more likely to be realistic in your estimate and less likely to be disappointed as a result.
(7) Beware of comparison shopping.
This advice is valuable both before and after spending money.
Helpful as comparison shopping is for getting good deals, it has its dangers. By highlighting differences more than they do similarities, comparison shopping distract us by focusing our attention on irrelevant attributes and preventing us from considering actual features that we desire. It can even lead us on to choosing less desirable options.
Once you have spent the money, run away from comparisons. We all know that our thrill at a new purchase or experience can be significantly dimmed if we find that we could have paid less for it rather than what we actually paid.
(8) Pay close attention to the happiness of others.
That is follow the heard, not your head. Researchers say that the best way to predict how much we will enjoy an experience is to see how much someone else has enjoyed it. This is why book, movie or product reviews are so popular.
In one experiment women were asked to predict how much they’d enjoy speed dating a particular man. One group were shown a photo and given autobiographical details while the others were shown speed date ratings given by other women for this man. Results were surprising: Women who saw the ratings were more accurate in their estimation. In fact seeing the rating reduced inaccuracy by about 50%. The writers concluded that François de La Rochefoucauld, the 17th century writer was correct when he wrote: “Before we set our hearts too much upon anything, let us first examine how happy those are who already possess it.”
Next time you spend money…
Keep these tips in mind. Money can buy many, if not most, if not all of the things that make people happy. If it doesn’t you are doing it wrong!
If you haven’t read it already, please check out the first article in this two-part series: 8 Ways to Get More Happiness for Your Money (Part I).
We look forward to learning of your experiences in the comments and some interesting discussions on how money and happiness are related.
[i] E.W. Dunn et al. If money doesn’t make you happy, then you probably aren’t spending it right. Journal of Consumer Psychology. 21 (2011) 115–125. Accessed online on 2 Sept 2014 at http://www.wjh.harvard.edu/~dtg/DUNN%20GILBERT%20&%20WILSON%20(2011).pdf