It’s the age-old question: Can money buy happiness?
Much of the time, our energy and focus is on work and career, which primarily is about the chase for the almighty dollar. Generally, people want more for basic needs, including a roof over their heads, food, clothing and maybe a car.
And we all want more of the fun things money can buy, including vacations, entertainment and the latest high-tech toys.
It can be a valuable exercise to take a step back from the daily grind to examine what money means to you and how you spend it. “I think deep down, the brain equates money not so much with happiness as with security and survival. These are nonnegotiable values, primal motivators,” says Kenneth Reid, founder of DayTradingPsychology.com.
“Research shows that the greatest psychological stress occurs when one is unable to act in one’s own best interest,” Reid says. “But when we are able act in accordance with those primal imperatives, we feel a sense of deep satisfaction. Such acts can be as simple as clipping a coupon and saving 25 cents.”
Ultimately, the goal of money management is to provide discipline and a process for doing the things we must do that may not feel good at the time but are crucial to our future success, says Joshua Wilson, chief investment officer at WorthePoint Financial in Fort Worth, Texas. “Money shouldn’t be viewed as a score card, but as a ticket to different degrees of freedom. Some people require more to get to the degree of freedom that they need.”
Money can have paradoxical effects, Reid says. “We’ve all heard stories about how sudden wealth, such as lottery winnings, can be disruptive, even devastating, to a person or a family. A phrase comes to mind from complexity theory: ‘more is different.’ It means that scale brings unique challenges. Too much, too soon can be as bad as too little, too late.”
Behavioral economists have identified some ways money could increase levels of happiness.
Neil Krishnaswamy, a certified financial planner for Exencial Wealth Advisors in Plano, Texas, recommends the book “Happy Money: The Science of Happier Spending” by Elizabeth Dunn and Michael Norton. “This book provided me with great insights, particularly in how we think about our discretionary spending,” he says. “Once our essential, or nondiscretionary, expenses are met, how should we think about spending our discretionary dollars in ways that lead to real, lasting fulfillment? If we’re more conscious of how our spending is connected to our values and learn from some of the recent scientific research, we might just be able to use money in a way that really does buy happiness.”
Science shows that there are several ways we can spend money more effectively to increase life satisfaction.
Buy experiences. Dunn and Norton’s research reveals that satisfaction with experiential purchases increases over time, while satisfaction with material goods decreases over time. “I met an older woman the other day in a dentist’s waiting room. She had an intense vitality about her that was impossible to ignore,” Reid says. “We struck up a brief conversation, which led to my discovery that she also spent two months a year leading walking tours in faraway lands. Money may not buy happiness directly, but it might buy you the challenges you need to achieve something even deeper and more lasting — something we don’t have a simple name for.”
Buy time. Spend your money to free up time for family, friends or meaningful hobbies and activities. For instance, hire a housecleaning service or use a dry cleaning service that picks up and drops off to reduce your time spent on errands.
Pay now, consume later. Technological innovations have made it possible to fulfill almost all desires immediately, Krishnaswamy says. “We are enabled more than ever to consume sooner and pay later. With the Internet, we can shop faster, pay with a credit card and have things delivered to us the next day. When you shop at Amazon.com (ticker: AMZN), you may be tempted to join their Prime program, giving you two-day shipping on all purchases. While efficient and often very practical, shopping this way may deprive you of the experience of delayed gratification.”
Invest in others. Research shows there are good strategies to invest in others that can boost happiness, Krishnaswamy says. Make it a choice to invest in someone, make a connection with them and make an impact in their lives, he says.
In the end, money may mean different things, including power, freedom or security. If your goal is happiness, research shows that how you spend your money could actually help boost life satisfaction. Maybe money can actually help you buy happiness after all.
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