Yes, money can make you happy (but it depends on how you spend it)
Yes, money can make you happy (but it depends on how you spend it)
1000 Ways to Improve Our Lives / No. 55
Good morning from Berlin,
A while ago, the two economists Daniel Kahneman and Angus Deaton figured out – which is basically not surprising – that higher earners generally reported better life satisfaction, but people's day-to-day emotional well-being only rose with earnings until a certain threshold (in their study, it was an annual household pre-tax income of 75,000 US-dollar).
This is just one example of what is well documented in the economic literature: People with more money tend to be more satisfied. At least up to a certain level.
So money can satisfy you. But does it also make you happy?
To begin with, what is the difference?
Satisfaction is based on reason, while happiness comes from our hearts or feelings. Plus: Satisfaction is the result, while happiness is a process.
So again, can money make us happy? If yes, what are the conditions?
Some years ago, the scholars Elizabeth W. Dunn, Daniel T. Gilbert, and Timothy D. Wilson collected findings from multiple academic papers to distil the chief lessons of the research community on how best to spend to maximize happiness. In their study they formulated eight general recommendations and lessons.
1
Spend money on experiences such as travel, concerts and sporting events rather than goods.
2
Give money to others via charities, personal relations, or political donations rather than using it solely on oneself.
3
Spend small amounts of money on many small, temporary pleasures rather than less often on larger ones.
4
Don't spend the money on "extended warranties and other forms of overpriced insurance".
5
Switch from the mentality of "consume now, pay later" to "pay now, consume later" because "research shows that thinking about future events triggers stronger emotions than thinking about the same events in the past."
6
Think carefully about the day-to-day consequences, particularly the negative ones, of a purchase before you commit to it: "Over time, psychological distress is predicted better by the hassles and 'uplifts' of daily life than by more major life events."
7
Avoid buying things because they are comparatively better from a monetary perspective: "Comparison shopping may lead people to seek out products that provide the 'best deal'" rather than the greatest happiness.
8
Ask previous consumers for their opinions before purchasing.
So yes, money can make us happy.
Maybe we should all check our spending!
Onwards,
The Strolling Economist
Tell your friends!