July 22, 2015, By William Sandin
In an amazing Gallup poll highlighted by the Wall Street Journal, it says that 100% of those who make more than $500,000 are “very happy”! That’s right. Not 98%. Not 99%. But a pure 100%.
And it turns out, we have some extra money in the budget, and I want to spend that money on myself. So for this episode, we’re going to figure out how a person, in this case, me, can spend money to increase their own happiness.
Now I know what you’re thinking, « Money can’t buy happiness. » And you’re right. Sort of. Studies have found that while having more money greatly affects the happiness for people living in poverty, once someone earns around $75,000 a year, the amount of happiness they get from additional funds flattens out.
So someone who makes on average $200,000 a year isn’t necessarily that much happier than somebody who makes a middle class salary, like me. So it’s kind of unbelievable to hear that, you know, me doubling my salary wouldn’t make me any happier. But while more money doesn’t necessarily mean more happiness, how we spend our money does.
And like any good reporter, I did a Google search, and watched a TED Talk on happiness by this man, Dr. Robert Waldinger. He’s the director of the Harvard Study of Adult Development, a study that started in 1938, and continues until this day, making it possibly the longest study of human happiness ever to have been conducted.
We found that many of the things we expect to predict well-being do, like taking care of yourself, taking care of your health, not smoking, not abusing alcohol, okay, exercising. But the surprise was that the quality of our relationships with other people actually keeps us healthier and keeps us alive longer. So we looked at their cholesterol, we looked at their blood pressure at age 50.
And we looked at their marital satisfaction. And what we found was that their marital satisfaction was by far the strongest predictor of what they were gonna be like when they were 80. Happiest marriages at 50, predicted better health and happiness at age 80. But to be able to predict across 30 years, that’s a big deal, that begins to get at causation.
relationships, it’s like exercise in a way, you don’t just do it one week, and then you’re done, right? That relationships have to be tended to.
your marriage, your friendships, they take work, they take constant attention over time, or they wither away. So how can I buy good relationships? Well, you can’t, but, but, that is a question you should ask of the researchers who actually study this. Luckily, these researchers also had TED Talks. And have been focusing on that very question, how spending our money affects our happiness.
The reason why I believe it’s actually very interesting to study spending is because it’s so ubiquitous, we all spend and we all actually have a lot of control over our spending. We are going to spend some of our money because we have to, and are we really thinking about spending it in ways that might actually make us happy?
And if yes, what can we learn as researchers to help people? So there’s a lot of methodology and findings that come from research done by people like Sandra and Michael, but I wanted to boil down some of the biggest takeaways. First off, and this shouldn’t come as a surprise, but spend money on building social relationships,
Though there is built into our close relationships this element of reciprocity, of giving back and forth, What we’re trying to do in our research is say you can do more of it, actually. So it’s probably not useful to give someone $5 and say, « Will you be a closer friend of mine? » because that’s not how it works. But it does work to say, « Hey, I really like you. « And I’d like to take you out to lunch. » So if you buy coffee, maybe you might want to spend it on buying coffee for yourself and your friend. Because we know that if you spend it on someone else, you also gain greater happiness.
The next big point is to spend more money on experiences and less on things. Tom Gilovich and his colleagues at Cornell, for about a decade now, have been doing research showing that, on average, buying stuff for yourself doesn’t do much for your happiness.
But buying experiences seems to make us happier. What we see when we when it comes to actually buying material goods versus experiences is that when we buy our second watch, for example, we might get the spike in happiness, but at some point this actually, this effect of happiness goes away. And to some extent, we might even regret at some point spending, investing that much money.
Whereas if we have experiences, we can go to a concert, there’s this effect of anticipated happiness, and we look forward to going to the concert for two weeks, even like building up to the experience. And then after the experience, we can always go back to it.
So we have a memory of the experience. We might even share it with friends, come back to it every once in a while, you know, when we get together for a fun night. And finally, if you’ve been thinking, « I do want that Apple Watch, and I know it would « make me happy, » then good, buy it, you should know what makes you happy.
If people manage to spend their money in a way that is aligned with their own psychological needs and preferences as reflected by their personality, then that seems to be making people happier. If I’m an extrovert, I might be better off spending my money on going out with friends, kind of, having a very social time, spending it on exciting stuff.
Versus like a friend of mine who’s probably more introverted, what they could do instead is spend it on things that improve their quality me time, so to say. The first thing that we recommend that people do is literally do an audit of your spending.
And what’s important to you is completely up to you, so I can’t say these are the things that should be important to you in life, but you know the things that are important to you in life. And typically, when you look at your spending in this way, you say, « Wow, I should really shift some money « from that big category over to this big category. » So to recap the big takeaways, in order to spend money to get happiness, first off, know yourself. Are you an introvert, an extrovert? How do you want to spend your money? Second, use your money to build social relationships. And third, put an emphasis on experiences over things. So if I were to analyze myself for my money, if I’m getting the best return, I am a person who loves my family and I love sharing experiences with them around food. So I’m thinking I will spend that extra budget money.