IN THE GRAND scheme of things, money is just a tool and net worth is just a number. We shouldn’t work solely to make more money. Instead, our goal should be to use that money to create as happy a life as we possibly can.
In their book Happy Money: The Science of Happier Spending, Elizabeth Dunn and Michael Norton explore this idea. How can we best use money to buy happiness? Dunn and Norton offer five key suggestions.
1. Buy experiences. The millennial generation gets a hard time in the press. We’re constantly berated for our spending habits, including traveling too much, eating avocado toast and drinking expensive coffee. But whatever our failings, the millennial generation believes in buying experiences over owning things—and that’s an effective way to use money to increase happiness, according to Dunn and Norton.
We’ve witnessed the generations before us purchase and hold onto far more items than can fit into their homes—which is why many folks also have storage units. We millennials don’t want to make that mistake: Buying experiences, and sharing them with others, gives us lasting memories that’ll bring far more happiness than we’ll ever get from another pair of shoes.
2. Make it a treat. If you commute to work every day, there’s a good chance you drive past a Starbucks. There’s an even better chance that the Starbucks drive-thru line is packed with cars.
I’m not here to tell you that you need to cut out the daily latte. Still, that special coffee drink may not be making you as happy as it once did. We adapt quickly to new habits and routines, including the coffee we consume. When we get used to having a special coffee every day, we don’t feel the same spike in happiness we initially enjoyed.
To combat this, we should forgo the daily latte and make it a treat instead. Drink a regular coffee Monday through Thursday and save the special coffee for Friday. That way, you’ll be able to look forward to the treat all week long, which is crucial: It isn’t always the event itself, but our anticipation of the event, that makes us happy.
3. Buy time. Are there any regular chores you absolutely hate? Whether it’s vacuuming, mowing the lawn, cleaning the shower or something else, outsourcing may be the key to increasing your happiness. We could use this newfound time to be with family, take a hike at a nearby trail or have a night out with friends.
That said, I think everybody should do a rigorous audit of their schedule before insisting that they simply don’t have enough time. We’re notorious for claiming we are busier than we really are. In fact, Dunn and Norton note that Americans, on average, spend about two months per year in front of the television, equal to some four hours per day.
4. Pay now, consume later. Another simple way to increase happiness is to adjust when you pay for things. It’s been found that when we pay for goods or activities beforehand, we free ourselves up to enjoy the purchase much more. Conversely, if we don’t pay until later, we’re less happy.
Have you been to an all-inclusive resort? You’ll know that there’s no hesitation when ordering that cold drink while sitting by the pool. When we pay for goods or services upfront, it allows us to stop worrying about the money and instead focus on enjoying what we paid for.
5. Invest in others. If you’ve ever given to charity, monetarily or with your time, you have probably enjoyed the good feelings that come with it. Giving back is a wonderful way to boost not only your happiness, but also the happiness of others in your community.
In one research study, participants were each given $20. Some of the participants were instructed to spend the money on themselves, while others were instructed to spend the money on someone else. After the task was completed, those who gave their $20 to others reported greater levels of happiness.
My challenge to you: In the week ahead, spend your money to increase happiness in as many ways as possible. For example, what if you bought a Starbucks gift card today (pay now, consume later), used it later in the week to buy a special kind of coffee (make it a treat) and also paid for the drink of someone else in line (invest in others)? It could make for a far happier week.
Ross Menke is a certified financial planner and the founder of Lyndale Financial, a fee-only financial planning firm in Nashville, Tennessee. He strives to provide clear and concise advice, so his clients can achieve their life goals. Ross’s previous blogs include Picture This, Rewriting the Script and Paper Chase. Follow Ross on Twitter @RossVMenke.