My next few blogs will discuss the book: “Happy Money: The Science of Happier Spending” by Elizabeth Dunn & Michael Norton. This little book is a survey of the research on how spending effects our happiness.
The authors state in the prologue that findings show more money has little influence on whether people smile, laugh and experience joy. The goal of the book is to “help you use the money you have to get more happiness.”
This blog summarizes chapter 1 and it’s lesson: Buy experiences!
Studies have found that buying a nicer home does not increase happiness. You may be more satisfied with your living arrangements but not happier.
Experiential purchases (a vacation, meal, concert, sporting event) result in increasing happiness. The authors reference an ongoing study of adults over 50 that looks at all purchases by this demographic group. They find that people who spend more on leisure have “significantly greater satisfaction with their lives.” And, housing had zero bearing on their life satisfaction.
In fact, satisfaction with experiences grow over time while the purchase of material goods decreases. And, people are much more likely to have buyers remorse after a material purchase than a experiential purchase.
Finally, the authors give a few recommendations on how to enhance experiences. Experiences will be improved if:
- The experience is with other people – it fosters social connections.
- The experience makes for a memorable story.
- The experience is linked to who you are or who you want to be.
- The experience provides a unique opportunity.
The above lessons really resonate with me. I remember when I bought my second house. It was a 3,000 square foot house on a beautiful piece of property. I thought I made it. Looking back, It was a lot more house than we needed and it was money that could have been saved or spent on experiences.
I remember walking through the empty house after it was sold thinking: we didn’t use half the space, yet we heated it and cooled, paid taxes, updated and repaired the extra square footage, and I thought why? It didn’t create more happiness. It did provide a nice home in a nice neighborhood for my children. But, there were other affordable “nice” options.
Today, at the old age of 51, when I reflect on what has made me happy, my happiness is found in the experiences I have had over the years with my kids and friends: coaching soccer, running events, concerts, casual dinners out, vacations. I would rather live with nothing than give up those memories.
Personally, I have made it a point to live in an apartment below my means so that when an experience opportunity comes along I can take it and not worry about the expense.
We will never have all the money we want, so how we spend it is about tradeoffs. Spend the limited resources you have smartly and try to optimize your happiness. When your old and house bound, will the big house and expensive cars make you happy or will memories of time spent with family and friends at a restaurant, concert, sporting event, on a hike, a vacation, etc. be what gives you comfort and joy?