By Ashley Kopmeyer
We have all heard the phrase that money can’t buy happiness, and—no doubt—we know of one or two examples of people in our own lives (perhaps even in our families) who are living proof. Previous research by Daniel Kahneman and Angus Deaton published by the National Academy of Sciences provided evidence that—to an extent—emotional well-being rises with income, and those with higher levels of income report higher levels of satisfaction with their lives. A new book by Elizabeth Dunn and Michael Norton provides further evidence that how we spend our money can influence the satisfaction and enjoyment we experience.
In Happy Money: The Science of Happier Spending, Dunn and Norton outline 5 key ways that spending can have a positive impact on happiness. I will highlight my favorite:
Buy Experiences, Not Stuff
Think about the last time you felt happy. What were you doing? Who were you with? Chances are the happy moment that comes to mind was connected to an experience you were having—and more than likely sharing with loved ones—perhaps a family vacation, a weekend get-away with your significant other, or witnessing the joy of a child’s laughter. I recently gathered with a group of friends who shared the memories of golf vacations taken together. Their enjoyment of happy times lives on in their memories.
Contrast that to the joy you received at acquiring a long coveted material item—a new car, perhaps, or a big screen TV. Chances are your excitement peaked at the moment you received it (or perhaps even sooner as you anticipated receiving it), and almost immediately began to fade. You may have even started experiencing buyer’s remorse almost instantly. No doubt, with the passage of time, the object of your desire became less desirable—partly because of familiarity, and partly because a newer, more beautiful version became your coveted item.
Dunn and Norton’s research suggests that over the long-term, we value memories created by experiences more than we value material goods. So, if we want to get the most happiness from our purchases, we should think about using our money to create happy experiences with our friends and families, rather than purchasing more stuff.
For specific steps to take in your own financial planning,
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