The Science of Using Money to Buy Happiness

Hey there, time traveller!
This article was published 18/06/2022 (279 days ago), so information in it may no longer be current.

So, because everything in the world has been so easy lately, let’s take on a challenge today and tackle the age-old question, “Can money buy happiness?”

Rather than just speculate on it, we will review the latest science and what it tells us about getting the most happiness value for money. The good news is that — like everything else to do with money – if you are smart, you can get a lot more value.

My thanks and acknowledgements to Dr. Elizabeth Dunn, a social scientist, professor, and researcher into happiness. Her book (with Dr. Michael Norton) Happy Money: The Science of Happier Spending is a terrific guide to some of the behavioural choices that lead to maximum happiness per dollar.

These are themes I explore at length in my own book, Managing the Bull 2022, but Dr. Dunn supports it all with recent high quality research to back up our joint conclusions.

Let’s start with her Principles of Money Happiness:

• Buy experiences;

• Make it a treat;

• Pay now, consume later;

• Buy yourself time;

• Invest in, and share with, others.

The concept of using money for experiences instead of stuff is a well-known trend, supporting ever-fancier travel offerings and events, capped off by multi-million dollar trips to space.

But at our level, this can be done for very little (or no) money, by using funds to do new, unique and exciting things, ideally with a life partner or family.

Having a shared experience to talk about provides value for years, while a purchase of a thing seldom provides the same lasting joy, as you watch it depreciate and become out of fashion or be replaced by newer models.

Making things a treat seems like a no-brainer. We all have things we used to love to do, but we’ve done them so often that they are no longer special. Dr. Dunn’s research involved chocolate, among other things, and actually measured the amount by which an occasional indulgence is more rewarding than a habit.

The lesson is to take a break from things you really like and make them into a special occasion.

Pay now, consume later is a concept close to my heart and one I have espoused often in this column and in my book.

Dr. Dunn’s experiments proved what many of us have known for years. If you pay cash for something, you enjoy it much more than if you borrowed to attain it.

For example, people are willing to pay as much as three times more for event tickets if they can charge them rather than pay cash. Other people who had paid off a trip in advance (think of COVID cancellations and re-books) enjoyed their vacation much more than those who had used a credit card and knew that they still had to actually pay. A common comment was, “I am here for free (because it was already paid)!”

We’ve really just scratched the surface here today, so consider buying one of those books and definitely tune in next week when we talk about buying yourself time and maximizing your own happiness by investing in others. Both are great ways to increase your level of happiness for very little cash outlay. Since we all agree that time is our most valuable commodity, you don’t want to miss more detail on that.

Now get out there and enjoy the sunshine and heat. That’s free!

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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.

David Christianson, BA, CFP, R.F.P., TEP, CIM is recipient of the FP Canada™ Fellow (FCFP) Distinction, and repeatedly named a Top 50 Financial Advisor in Canada. He is a Senior Wealth Advisor and Portfolio Manager with Christianson Wealth Advisors at National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.