You can’t buy happiness—or can you?
What parts of happiness can money buy? It’s a question for academic researchers and financial advisors, as well as anyone who can afford a nice handbag or motorcycle but wonders whether it will yield enough satisfaction to justify the price.
Often, it won’t: researchers have found that experiences provide more happiness than material things.
Use money to go on the amazing trip you’ve always wanted and take a bunch of people who would enjoy it with you,” recommends Elizabeth Dunn, a professor of psychology at the University of British Columbia and coauthor of the book Happy Money, which examines the relationship between happiness and money.
Money does contribute to some forms of happiness. One study, published last year in the journal Emotion, shows that people who have $10 million report higher scores for life satisfaction than those with $1 million. But while higher income has been shown to stave off negative feelings, it doesn’t necessarily bring more positive ones. Nobel Prize-winning psychologist Daniel Kahneman has found that Americans who earn more than $75,000 a year don’t smile or laugh more than those with lower incomes.
“Money is pretty good at keeping [some causes of] sadness out, but not at bringing smiles in,” Dunn says. To smile more, you’ll need to look outward. The best ways to spend on happiness are to invest in others and to buy time for yourself, Dunn’s work shows.
Prioritizing time over money helps combat what Dunn calls “time famine,” the shortage of time that people experience as they become busier with work and other commitments. Hiring others to do unpleasant tasks is an easy way to trade money for time. But many study subjects report a reluctance to outsource tasks they can do themselves, even if they dislike doing them.
“In our more recent work, we find that even the super-rich don’t use money [enough] in that way,” Dunn says. While it’s common to employ a housekeeper or gardener, people who could afford to have their groceries delivered still go to the supermarket or park their own cars instead of using valet parking.
People also are happier when they use money to benefit others, via both philanthropic giving and generosity towards friends and family. “Wealthier individuals give proportionally less of their income to charity than people who earn less, so there’s more room to grow,” Dunn says. For families, combining two of these concepts—buying experiences and spending on others—can be a way for multiple generations to turn their money into happiness together, says Joan Crain, a Fort Lauderdale, Florida-based global family wealth strategist at BNY Mellon.
Typically, high-net-worth families set up philanthropic arms, which enable them to work on charitable giving across generations. But in one family working with BNY Mellon, the second generation was more interested in launching a venture capital fund to invest in local startups. They set up a limited partnership, with the parents and grown children all contributing capital.
“They were using the money in a way that was consistent with their values,” Crain says.
Spent incorrectly, money can actually be detrimental to your sense of well-being.
“If you buy expensive things that are supposed to bring you happiness and use them once or twice and then the novelty wears off, you may be trying to keep up with the Joneses,” says Jacquette M. Timmons, a financial behaviorist in New York City and the author of the book Financial Intimacy.
She suggests considering your priorities and how your spending reinforces or contradicts them. Recently, a woman was vacillating about whether to buy a $2,000 Peloton exercise bike, when a friend pointed out that the woman’s handbag cost more than that. To the buyer, $2,000 felt like a lot to spend on a bike but not on a handbag—an indication that she was subconsciously allowing herself to splurge on luxury accessories while reigning herself in when it came to fitness purchases.
Another client grew increasingly unhappy over a major home renovation as costs ran over budget by some $300,000. “What got muddled into her reaction to the renovation was the feeling that she had been taken advantage of because she had resources,” Timmons says.
Money can also get in the way of happiness when couples don’t agree on how to spend it. One woman recently told Timmons that her husband frequently questioned her spending on pricey hobbies but had recently gone in with a friend to buy a jet.
“Those expenditures are just examples of how they haven’t really talked about their personal and joint understanding of how resources would be spent,” Timmons says.
Although having plenty of money may seem like a route to happiness, Dunn’s research shows that limited access to certain things makes people appreciate them more. Taking something for granted—the expensive smoothie you grab on your way out of the gym, the parka you buy automatically just because it’s ski season, the automatic upgrade to the latest smartphone when your old one works fine—quickly leads to lower levels of satisfaction with the item.
Dunn suggests pulling back on these purchases for a time. When you return to buying them again, they may make you even happier—or, as often happens, you may discover you no longer care about them.
“It’s not because you want to save money, but because of the paradox of abundance,” Dunn says. An alternative is to simply keep the money without spending it. As noted earlier, a study published in the journal Emotion found that people were happiest when they had higher account balances. Sometimes just knowing your money is there can be a source of happiness.