You have probably heard and maybe even embrace that money can’t buy happiness. I’ve said so myself numerous times.
But behavioral scientists and researchers Elizabeth Dunn and Michael Norton argue this is not exactly true. Money, if you spend it right, can buy happiness.
So what’s the right way?
“Shifting from buying stuff to buying experiences, and from spending on yourself to spending on others, can have a dramatic impact on happiness,” Dunn and Norton write in “Happy Money: The Science of Smarter Spending” (Simon &Schuster, $25). Dunn is an associate professor of psychology at the University of British Columbia. Norton is an associate professor of marketing at the Harvard Business School.
Truthfully, I needed a break from all the dreary talk about the federal government shutdown and concern the country might default. So “Happy Money” is the Color of Money Book Club selection for this month.
I’m always trying to find research that looks at how people can do better with the money they have. I plan to use this book in my financial classes, where folks believe that if they just made more money, their level of happiness would increase. They could afford to buy better stuff, a larger home or cooler car. Yet studies show that more doesn’t increase your long-term happiness.
Dunn and Norton strive to show how to spend money in less typical but more pleasing ways. They offer five principles you can use to buy happiness:
Buy experiences. As frugal as I am, my husband and I decided many years ago to set aside two weeks a year, every year at the same time of the year, to take a luxury vacation with our children. My oldest has gone off to college, but she still wants to be included on these family vacations. As Dunn and Norton write: “Research shows that experiences provide more happiness than material goods in part because experiences are more likely to make us feel connected to others.”
Make it a special treat. Don’t overindulge yourself, the authors say, because “abundance, it turns out, is the enemy of appreciation. This is the sad reality of the human experience: In general, the more we’re exposed to something, the more its impact diminishes.”
Buy time. If you can afford it, you might decide you’d rather hire someone to cut your grass than do it yourself. You might spend a little more on an item rather than drive across town to save 10 percent. I’m a reformed bargain shopper. I realized I was wasting a lot of time going from store to store trying to save money. “We too often sacrifice our free time just to save a little money,” the authors write. “Many of use wish we had more free time to do more of what we love.”
Pay now, consume later. “Consuming later provides time for positive expectations to develop,” Dunn and Norton write. Paying for a vacation in advance may help you enjoy it more because by the time you take the trip you won’t be so focused on the cost. At the same time, fight the power of now. This is especially true when it comes to paying with plastic. In one study cited by the authors, 30 people were asked to estimate their credit card expenses before opening their monthly bill. Every participant underestimated how much he or she had spent on credit by an average of almost 30 percent.
Invest in others. I generally hate spending money. But when I helped a friend’s daughter by buying her books for college, I was elated. I was investing in her education, and that was an awesome feeling. My husband and I often get teased for our frugality, but we counter by telling people we are cheap for a purpose. We like spending money when it makes a difference in someone’s life. Dunn and Norton say their research shows that spending even small amounts of money on others can make a difference in your happiness level.
I love the five principles of happy money because they aren’t about getting more money but getting more out of the money you have. Let me leave you with this from Dunn and Norton: “Before you spend that $5 as you usually would, stop to ask yourself: Is this happy money? Am I spending this money in the way that will give me the biggest happiness bang for my buck?”
Michelle Singletary: firstname.lastname@example.org.
Washington Post Writers Group
Michelle Singletary will host a live online discussion about “Happy Money” at 9 a.m. Pacific on Oct. 31 at washingtonpost.com/discussions. Elizabeth Dunn and Michael Norton will join her to answer your questions. Every month, Singletary randomly select readers to receive copies of the featured book donated by the publisher. For a chance to win a copy of this month’s selection, send an email to email@example.com with your name and address.