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We're often told that money can't buy happiness. Happiness, after all, is that elusive feeling — it's something we dream about, desire and strive for — but it can't be thrown into a shopping cart, or paid for with the swipe of a credit card.
Or can it? The blurb on a new book, "Happy Money: The Science of Smarter Spending," offers this provocative idea: “If you think money can’t buy happiness, then you’re not spending it right.” What if our money could, in fact, help us lead happier lives — if we just spent it in the right ways?
Elizabeth Dunn, of the University of British Columbia, and Michael Norton, of Harvard Business School, believe there's a key relationship between money and happiness. But it's not about how much money you have, it's about how you spend it.
There are plenty of resources available for people looking for a get-rich-quick scheme, but not much for people looking to become happier with the money they already have. Norton told Radio Boston this gap reflects the way people think about money to begin with:
There are bookshelves filled in every bookstore of investing, saving, the way to use money, get ready for retirement, and they exist because all of us have a sense that we’re not that good at that and we need some help.
We looked around and we realized no one told us anything about how to spend our money once we have it, there’s no advice on how to do that, and the reason for that is we think we know. We walk around and we think, "I know how to use my money to make myself happy" and we buy all kinds of things and then it turns out research shows are all the wrong things to make ourselves happy.
Norton and Dunn then discussed their five principles of “happy money":
Principle 1: Buy Experiences, Not Things
The idea that buying expensive appliances and material goods won’t make us as happy as spending money on travel or meaningful experiences is nothing new, but Norton and Dunn say people can scale down their perception of experience spending to maximize their happiness.
“Experiences are not just a monthlong vacation in Europe, but also buying a nice meal out, or even taking a coworker out to lunch,” Norton told us. Reminiscing and talking about the experience with friends can not only extend that happiness, but create memorable experiences later, he said. “You don’t really reminisce about the things we bought with pictures in our office.”
Principle 2: Buy Time
“Happy Money” means money spent that will improve the way we spend our time. Purchases that lead to more free time, or time spent more productively or with friends and family, are better than material goods, the authors argue.
Norton says consumers often don’t put enough thought into how they will use their new purchase. “You’re not thinking about how it’s going to change your time,” Norton said. "You buy a big house, and it seems amazing, but then you’re commuting. You’re underweighting the fact that you’re going to be in traffic for three hours every single day of your life. No nice house is going to counteract that and you’re going to get home and be yelling at people every day for the rest of your life.”
Norton added: “Time is such an amazing and valuable resource that we feel so restrained. It can be more motivating than money."
Principle 3: Make It A Treat
“The fundamental barrier to human happiness is our tendency to get used to what we’ve got,” Dunn told us.
To beat that tendency, Dunn says people should think about what they like best, and save it for special occasions or take a break between indulgences. Dunn says something as simple as a favorite TV show can lead to a happier life if it feels like a treat instead of a routine.
Principle 4: Pay Now, Consume Later
Credit cards and online shopping can make following the “happy money” ideas more difficult.
If you’re planning a vacation, Dunn says paying for the trip months in advance will help you enjoy it that much more. In fact, Dunn said, “by the time it happens, if it’s already paid for, that can actually make it feel free.”
Principle 5: Spend Money On Others
Norton and Dunn gave research subjects varying amounts of money, with the added stipulation that some participants spend their cash on themselves and others on a treat for someone else.
They found people who went shopping for others came back with a more pleasant experience and felt happier after the experiment.
“People who buy things for themselves buy things as usual, nothing that interesting and they aren’t much happier,” Norton said. “People who spent money on other people, they buy gifts for people, they put a lot of thought into it, they give money to homeless people, and that kind of spending really does make you happier at the end of the day.”
Buildout of radio interview by Jared Bennett for WBUR
Michael Norton, associate professor of marketing at the Harvard Business School
Elizabeth Dunn, associate professor of psychology at the University of British Columbia
Excerpted from "Happy Money," by Elizabeth Dunn and Michael Norton. Copyright © 2013. Used by Permission. All rights reserved.
This segment aired on May 29, 2013.
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