By Carol Ringrose Alexander, CFP, AIF, CDFA
any people assume if they had more money, they would be happier. Day-to-day happiness and emotional wellbeing rise with income up to $75,000, but then plateau, according to a Princeton University study1. “We suspect that this means, in part, that when people have a lot more money, they can buy a lot more pleasures, but there are some indications that when you have a lot of money, you will savor each pleasure less,” said Daniel Kahneman, who designed the Princeton study with Angus Deaton. “Perhaps $75,000 is a threshold beyond which further increases in income no longer improve individuals’ ability to do what matters most to their emotional wellbeing.” The good news is you can use the money you already have to generate greater happiness. In “The Behavior Gap,” Carl Richards explores the connection between money and happiness. First, money can buy happiness – up to a point. Second, experiences matter more than objects. Third, happiness sneaks up on you when you let it. “We may have an inalienable right to pursue happiness,” Richards says, “but there’s no guarantee that we’ll actually capture it. Maybe we’ve let ourselves get so caught up in the pursuit that we’re missing the point.” Changing the focus from making more money to being a better steward is appealing. “Happy Money: The Science of Smarter Spending” by Elizabeth Dunn and Michael Norton extols five principles that can lead to greater happiness.
Research shows investing in shared experiences like a concert or trip has a longer-lasting impact than buying material objects.
“By permitting us to outsource our most dreaded tasks, from scrubbing toilets to cleaning gutters, money can transform the way we spend our time, freeing us to pursue our passions,” according to Dunn and Norton in “Happy Money.”
Pay Now, Consume Later
Delaying consumption enables us to enjoy anticipation of an event or vacation without the inconvenient intrusion of reality. Vacations provide the most happiness before they occur. By delaying consumption, purchases can be enjoyed as if they were free and people are less prone to overspend. Eliminating debt is one of the best routes to reduce stress and increase happiness.
Invest in Others
Spending money on others provides greater happiness than spending on yourself, according to numerous studies. Most people use more than one of these strategies. Karen Wicker, president of Candor Public Relations, said, “When building a business, nothing gives me greater joy than to know I’m able to employ others and provide for their families. In sharp contrast, I equally enjoy spending $25 on a movie and popcorn with my teenager.” Even though having more money doesn’t necessarily increase your level of happiness, spending it thoughtfully can.
Make it a Treat
When something wonderful is always available, you are less likely to appreciate it. Rather than giving up your indulgence entirely, turn it back into a reward.
Study by Daniel Kahneman, winner of the Nobel Prize in Economic Sciences, and Princeton professor Angus Deaton. 1
FEBRUARY 2015 // SLICE 37
How to Spend Money to be Happier
Slice is a lifestyle magazine serving central Oklahoma, featuring restaurants, events, shopping and culture.