Scientists confirm that money can buy happiness – but only if you spend it the right way.
Despite what we all think, the connection between money and happiness is surprisingly muddled. Having money is pleasurable, but having more money doesn’t guarantee happiness. No wonder Singaporeans often get into drunken arguments about whether money actually buys happiness or not.
Science and the clever people who work there have uncovered some findings that settle this question once and for all. The verdict: yes, money can buy happiness, but only if we spend it in specific ways.
Here are 5 principles that explain how money buys happiness.
1. Buying Experiences (Not Things) Makes You Happy
You may have heard your cynical friend saying (probably more than once) that buying things doesn’t make you happy. No matter how dismissively she said it, your friend is actually quoting the findings of Dan Gilbert, professor of psychology at Harvard University.
According to Gilbert, if we want to use money in a way that will make us happy, we should focus on experiential purchases, not material ones.
In a survey involving 1,000 people, 57% reported greater satisfaction for money spent on a trip, concert or other life event. In contrast, only 34% said that spending the money on a material object (such as a car, or an appliance) brought them greater happiness.
It’s easy to see the reason for this. Material things lose their lustre (sometimes literally) over time. However, a great life experience stays with us, providing us with continued enjoyment as we reminisce with family and friends.
But if that’s true, then why do you feel so sour about leaving the store without buying that newest SuperDry Windcheater?
Because you’re confusing the material item with the experience. You’re not hung up about the jacket per se, it’s the idea of strutting down the snowy streets of Tokyo that’s got you hooked.
2. Spending Money on Others Makes You Happy
Social connectivity is important not just for the smooth running of society, but also for maintaining our personal well-being. In fact, human contact is so crucial that prolonged isolation can produce long-term brain damage in babies and prisoners.
If social deprivation is bad for us, then is social inclusivity good? Yes, according to science – especially if you spend money on others instead of just yourself. Spending on others (a ‘pro-social’ activity) has been shown to create lasting good moods.
This was reported by participants in a Harvard study who were told to spend a set amount of money on others. In contrast, those who spent the money on themselves were not as happy as they predicted they would be.
And in case you think this only applies to people with buckets of money to spare, study participants in South Africa also reported that spending money was more satisfying when others were the beneficiary. Among the participants, 20% reported living below the poverty line.
Even children know this. Researchers found that when asked to share sweets with a hungry puppet (which acted like it gobbled up the treats offered) children were happiest when they dipped into their own stash.
The takeaway is this: spending on someone else is an easy way to use your money to buy happiness. You don’t need to spend a bomb buying the perfect gift for this to work, and everyone enjoys all the benefits that come with an improved mood.
So hurry, show this article to your newly promoted colleague and enjoy your free lunch.
3. Spending (Frequent and Small Amounts) on Yourself Makes You Happy
There goes your sister again, unwrapping yet another Amazon package and posting her loot for all her 50,000 Instagram followers to see. Urgh, she’s so annoying. If you bought handbags as frequently as her, you’d have 50,000 followers too. Just wait, you’ll have even more followers once you finally save up enough for that Hermes Birkin.
Actually, science says the reason you’re not as happy as your sister (apart from your obvious sibling jealousy) is because you’re not spending money frequently enough.
Shopping makes us happy because the act of buying something gives us pleasure. However, the positive feelings fade over time, until the next purchase comes along. Given that few of us can afford to freely buy whatever we like, our best bet is to make small but frequent splurges.
In this area, Harvard psychology professor Gilbert and his colleagues suggest that it might be more rewarding to devote our limited money to “purchasing frequent doses of lovely things rather than infrequent doses of lovelier things.”
But that’s not to say we should give up on our big dreams; after all having something to work towards gives us motivation and meaning. However, depriving ourselves just to afford that expensive purchase may leave us feeling slightly cheated in the end.
The solution is to strike a balance between saving for that vacation, and buying occasional small treats to keep yourself happy.
4. Buying What YOU Like Makes You Happy
It’s no secret that consumerism has evolved to cater to higher-level needs. We’ve made basic needs so easily attainable that you even have to be careful which brand of rice to buy – lest you be considered unfilial.
Having taken care of basic survival needs, we next seek to express our ideals, hopes and beliefs. This is the drive that causes us to buy and use our favourite brands.
When we get caught up in trends and marketing hype, we run the risk of spending money on products that don’t align with our inner expressions. In other words, it’s just not you.
Sure, it feels good to buy that iPhone 7, but if you believe that true music fans must have earphone cables dangling around their persons, then you’ll be happier and more satisfied buying a mobile phone with a headphone jack.
Spending money to try to project or uphold an image not aligned with your inner self only makes you miserable. Instead, focus your spending towards your own satisfaction; that’s how you can truly buy happiness.
5. Spending Money With Others Makes You Happy
Another finding from social psychology gives us one more suggestion for using our money to buy happiness: spend money together with others.
If you’re about to go on an epic adventure, (like say, hot-air ballooning in France), see if you can get a friend or loved one to join you. If no one in your immediate circle is interested, or have the means to join in, you might want to consider a less epic (but no less enjoyable) activity that your friends are able and willing to join in.
Once again, it’s our need for social connection at play here. To be extraordinary can elicit praise and admiration from our peers, but it also makes us different. And thanks to our primitive brain, to be different is to be set apart.
From the journal Psychological Science: “[Participants] in our study mistakenly thought that having an extraordinary experience would make them the star of the conversation. But they were wrong, because to be extraordinary is to be different than other people, and social interaction is grounded in similarities.”
That‘s science-speak for why no one likes a braggart, but it also illustrates how we can spend our money in the happiest manner.
We aren’t saying that you shouldn’t go floating over vineyards by yourself, but, according to science, spending money together with others on a shared activity will bring you more satisfaction in the long run.
Using the Right Credit Card Can Make Spending More Satisfying
Now that you know how money can buy happiness, make use of the right credit card when paying for your purchase to derive even more satisfaction from your shopping.
Consider the American Express True Cashback card for your purchases, which gives you unlimited cashback of 1.5% (3% cashback for the first S$5,000 within the first 6 months).
If you prefer to earn air miles for free plane tickets, check out the American Express Singapore Airlines KrisFlyer Credit Card. This card awards you 1.1 miles for every S$1 spent on eligible purchases.
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By Alevin Chan
A Certified Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimize happiness and enjoyment in his life.