Editor's Note: This story originally appeared on NewRetirement.
The answer to the question “Does money buy happiness?” is … yes!
In fact, the research is overwhelming. And there are actually multiple ways to spend to increase happiness.
The following tips on how to buy happiness are valuable whether you are 75, 65, 55 or 15!
1. Buy Time
Time is indeed more precious than money.
Researchers have found that when people spend money on time-saving services like a house cleaner, gardener, take-out or grocery delivery, they can feel happier than if they are spending on material goods.
How much happier? One of the study authors, professor Elizabeth Dunn of the University of British Columbia, reports: “What we found is that people who spent money to buy time reported being almost one full point higher on our 10-point ladder, compared to people who did not use money to buy time,” Dunn explains. People from across the income spectrum benefited from “buying time,” she adds.
It makes sense. People who feel time-crunched are stressed, and research suggests that they are less active and less able to be around friends and family — both of which have been proven to increase happiness.
2. Save Adequately for Your Future
Saving is a form of spending.
People who have a written retirement or financial independence plan are more likely to adequately save and make better financial decisions. Furthermore, people with a plan are more confident and experience less worry and stress.
Use the NewRetirement Planner to create your roadmap to a more secure, wealthier and happier future. Find out how much you need for financial independence, if you are saving enough, whether or not you’ll run out of money in the future and how to get on track plus guidance for better decision-making.
3. Invest in Experiences
“The purpose of life is to live it, to taste experience to the utmost, to reach out eagerly and without fear for newer and richer experience.” ― Eleanor Roosevelt
When it comes to discretionary spending, you have a lot of choices for how to spend your money. There are two broad categories of spending: You can buy things or experiences.
If you want to buy happiness, invest in experiences.
Over the past 15-plus years, an abundance of psychological research has concluded that buying experiences improves our well-being far more than buying stuff. A new car, sweater or bike simply isn’t going to make you feel as good as going on a hike, concert, vacation or almost any other experience.
In 2003, Thomas Gilovich was the first to put forth this idea. He has added to his research and has shown time after time that experiences are what bring us happiness. And, he has also shown that experiences trump material possessions for pleasantness and excitement as well as happiness.
Part of the reason that experiences are better at returning happiness is that experiences enable you to anticipate an event and, more importantly, you are left with memories to draw on for the rest of your life.
Additional research has shown some interesting demographic differences. The happiness advantage of experiential spending is stronger for women than for men. And, other studies suggest that it is more relevant to young people and those who are highly educated.
4. Spend for Connection, Buy Experiences You Can Share With Others
Throw a party! Meet up for lunch! Travel across the country to reunite with college buddies! Take your kids or grandkids on a cruise. These things cost money (and may have to wait until after the pandemic), but they connect you to other people. And, money spent on strengthening social bonds is money well spent if happiness is your goal.
However, if you can’t make the experience social, additional research suggests that talking about what you did — telling stories, showing pictures and sharing how it made you feel — can also increase your happiness return on investment.
5. Invest in Experiences That Put You in a State of Flow
Experiences that put you in a state of flow are some of the surest to deliver an immediate sense of well-being. Flow? What is flow?
Psychology Today defines flow as follows: “Flow is when a person [1] is engaged in a doable task, [2] is able to focus, [3] has a clear goal, [4] receives immediate feedback, [5] moves without worrying, [6] has a sense of control, [7] has suspended the sense of self, and [8] has temporarily lost a sense of time.”
Think about experiences where you are so totally engrossed in a task that you lose the sense of time. Flow activities can be physical, intellectual, work-related, anything.
In addition to improving happiness, flow has been proven to improve well-being, concentration, self-esteem and performance.
6. Treat Others
A 2008 study gave participants $20 to spend on themselves and $20 to spend on someone else. Guess which expenditure delivered greater happiness? Yep. Spending on someone else.
Treating others — even with a minor amount of money can deliver happiness. (Did you hear about the recent “pay it forward” chain that happened at a Minnesota Dairy Queen? A succession of 900 strangers in the drive-thru lane bought the meals of the car behind them! Dairy Queen manager Tina Jensen told the Washington Post, “This was a feel-good moment at a time when we really needed to hear some happy stories.”
7. Spend Especially on Someone Close to You
A 2011 study suggests that — for happiness — it is important that you spend money on people you are close to and care about. Study participants who recalled spending a modest amount of money on someone close to them reported feeling more positive emotions than those who remembered spending on a mere acquaintance.
8. Give, but Strive to See the Impact of Your Charitable Giving
Charitable giving is a solid recommendation for how to spend money for happiness.
However, research suggests that if you know exactly how your money will be spent and, ideally, can see the spending in action, then you will feel happier than just giving the money to an organization without knowing or seeing the impact.
9. If You’re Buying a Thing, Put It in Context of How You’ll Experience It
Not all material purchases deliver less happiness than experiences.
Studies have shown that if you can think about how you experience things, then you are more likely to experience happiness (or, at least, less regret) from a purchase.
So, if you buy a new car, think about the purchase in terms of the exciting road trips you’ll take, how you can see better out the windows and will better enjoy the view or how the stereo system will enable you to belt out your favorite tunes on the way to the grocery store.
10. Express Yourself Through Spending
Whether possessions or experiences, spending that is a reflection of your personality or identity can make you happy.
A 2016 study found that people with a better match between their personality and the personality of their purchases reported more satisfaction with life. So, if you love travel and identify with an adventuresome lifestyle, then spending money on either travel (an experience) or even just a travel gadget (possession) will give you joy. Whereas, if you consider yourself a technology geek, then the new iPhone (a possession) might indeed give you happiness.
And, follow-up research focused on the differences between spending by introverts and extroverts. Your personality type will define the type of spending that makes you happy. Introverts found happiness in spending $10 in a quiet bookstore whereas extroverts loved spending on a drink in a crowded bar — but not vice versa.
11. Spend Within Your Lifetime Means
Even if you are spending on experiences or people you love, if you are spending beyond your means, you are bound to be stressed and unhappy.
And, overspending is not just a matter of your monthly finances.
It may be useful for you to think about your finances not as a monthly inflow and outflow, but rather as a big pool that you fill up or drain over your entire life. Think in terms of the lifetime value of your financial decisions rather than simply how it impacts you today.
You see, in life, you have a finite amount of time to create a finite amount of money. That money is used to fund your entire life. Spending more now, means that you have less to spend later. Saving more now means spending less in the near term, but more in the future.
Creating and maintaining a detailed retirement plan is a great way to visualize and manage your total pool of resources over your entire lifetime.
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