Behavioral Finance

“Money can’t buy you happiness, but it can buy you a yacht big enough to pull up right alongside it.” David Lee Roth

Six Ways to Buy Happiness

Yeah, I know… this title seems to stand against everything I talk about. Over the past months, I have been saying that money can’t buy happiness, and I still think that’s a healthy and important outlook. But, there are some exceptions to this statement.

Well, six of them to be exact.

Research clearly shows that, done right, money can buy some measure of happiness. But—and this is a big caveat—it 100% depends on what we spend our money on. And, for the most part, you, me, and many others are spending our money on the wrong things.

How we spend our money is a touchy. It’s personal. It’s emotional.

Musicians have been telling us this for decades.

  • Mick Jagger has been ringing through our radios since 1969 that “you can’t always get what you want.”
  • David Lee Roth sings that “money can’t buy you happiness, but it can buy you a yacht big enough to pull up right alongside it.”
  • The Beatles are pretty direct with “can’t buy me love” and
  • Selena Gomez is getting in on this chorus with “It’s all the money that you’re saving, while the good life passes by.”

Money and happiness have a complicated relationship.

Money relationships are rooted in psychology. American psychologist, Daniel Kahneman, discovered that after people make enough money to cover their basic needs (security, food, shelter) any extra money earned does not necessarily make them any happier. At this point, if you want your money to max out happiness, the secret is how you spend your money.

We’ve all said it, or at least thought it, “if I could just earn more money, I’d be happy.”  

A bunch of researchers from the University of Virginia, The University of British Columbia, and Harvard University released a study demonstrating the apparent contradiction between money and happiness, which shows why this line of thinking isn’t productive.

“When asked to take stock of their lives, people with more money report being a good deal more satisfied. But when asked how happy they are at the moment, people with more money are barely different than those with less.” Published in the Journal of Consumer Psychology.

Honestly, think about that. We obsess—and I mean obsess—about making more money:

  • We trade 40 hours (or more) of our life every single week to work for money
  • We stress about money at night and lose sleep
  • We lie and cheat for money
  • We leave our kids with other people for money
  • We work until we’re exhausted and dread going to work for money
  • We push ourselves at work until we become depressed
  • We abuse our bodies at work for money
  • We spend an insane amount of time in our cars for money (30 minutes each way to work is 20 hours a month or 240 hours a year)
  • We spend tons of money on clothes just to go to work

You see, we do so many things for money, but the research shows after a certain point – this money doesn’t make us happier. So, what is the point beyond covering our basic needs?

If you’re wanting to maximize happiness through your money, it’s key to spend it on certain things.

Here are the results of the studies:

  • Buy experiences. Rather than goods, buy time. Freedom provides people with happiness.
  • Give money away. Donate money to others, including charities, rather than spending it solely on oneself.
  • Portion your spending. Spend small amounts of money on many small, temporary pleasures rather than less often on larger ones.
  • Pay now. Adjust one’s mindset to “pay now, consume later,” instead of “consume now, pay later.”
  • Focus on your well-being. Rather than buying products that provide the “best deal,” make purchases based on what will facilitate well-being.
  • Buy time. Time is our limited resource. Too often we trade our precious time for money. Find ways to buy time.

How does your spending stack up?

Click here for the Buying Happiness: Differential Consumption Experiences for Material and Experiential Purchases research paper.

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  • Reply
    My Lib
    May 16, 2019 at 8:34 pm

    It ’s true that money can ’ t directly buy happiness, but it can definitely come close. Nobody ever complained about being too wealthy, because that wealth can buy you both things you need and want. Money does, in fact, make the world go around – among other things of course.

    • Reply
      May 18, 2019 at 2:02 pm

      Yes, I agree, it doesn’t directly buy happiness, but when we consciously spend it on things that actually create value in our lives. Then it helps make use happier!

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