A Review of Happy Money: The Science of Happier Spending
The authors of Happy Money talk about five principles to get the biggest bang when spending your money. The authors did their research to document the findings in this book. They conducted interviews, extensive review of research journals and news articles, and worked with graduate students to conduct their own research on the subject. The result is an easy to read—not necessarily easy to implement—book on spending your money in ways that will bring greater happiness.
They also look at the issue from the corporate side by providing examples of how businesses have structured experiences to create employee and customer happiness. Finally, In the epilogue of the book, they make brief suggestions on how government spending could better align with the five principles.
One of the authors, Elizabeth Dunn, since the publication of the book, has been promoted from associate professor to full professor of psychology at the University of British Columbia. The other author, Michael Norton, has also been promoted since the publication of the book. He was promoted from an associate professor to professor of marketing at Harvard Business School. Fortunately, they continue to research and write on the topic.
Wealth and Happiness
It is not necessary to be in the top 1 percent to be happy. In fact, the author quoted research from 2010 that indicated, at the time, “in the United States, once people are earning around $75,000 per year, making more money has no impact at all on their-day-to-day feelings of happiness.”
The authors suggest simply focusing on earning more money may not be the best thing for happiness. Rather, it may be time to consider how to use your money to get more happiness. Their research found focusing on five principles when spending money may be key to more happiness.
Five Principles For Spending Money
The authors devote a chapter to each of the five principles:
- Buy experiences
- Make it a treat
- Buy time
- Pay now, consume later
- Invest in others
Not negating necessities, the authors strongly support buying experiences over material goods. However, it is important to note all experiences are not equal and the authors spend the time in chapter one to explain which experiences are more likely to generate happiness. They advise investing in experiences, that:
- Brings you together with other people
- Makes a memorable story for retelling
- Is tightly linked to your sense of who you are or want to be
- Provides a unique opportunity
Make It a Treat
In general, repeated exposure things can reduce our enjoyment. While “novelty attracts the spotlight of attention, focusing our minds and exciting our emotions.” The authors point out we appreciate more the things that we have limited access to or the things that will not last forever.
This is perhaps the most counterintuitive section of the book with statements like “a more likely culprit behind the perceived time famine in modern life is financial prosperity” and “time-saving products that only increase our efficiency may backfire.” But those who feel pressed for time have a harder time being in the moment. Being able to be in the moment is one of the important factors of being happy. However, those who buy products to save time on tasks they actually enjoy or fill the saved time with meaningless activities may find a decrease in happiness.
Pay Now, Consume Later
We are a consumer-driven society that tends to consume now and pay later. Delayed gratification is not the norm. Technological advances, like credit cards, are part of the reason for this pattern of consumption. The authors note that taking on debts can be necessary at times, but there is a strong correlation between happiness and the ability to pay bills. Shifting from a consume now, pay later to a pay now, consume later mind set may help you find more happiness and even spend less money.
Invest In Others
The authors talk about prosocial spending --spending on others and donations to charity. The authors state, “when prosocial spending is done right—when it connects us to others, and when it makes a clear impact—even small gifts can increase happiness…”
- Michael Norton: How to buy happiness | TED Talk
At TEDxCambridge, Michael Norton shares fascinating research on how money can indeed buy happiness -- when you don't spend it on yourself. Listen for surprising data on the many ways pro-social spending can benefit you and your work.
This book is about spending money. However, the authors do note that saving money can increase happiness by “buffering us from the unpleasant shocks of life on earth, providing a cushion that ensures we can bounce back and achieve the levels of happiness entwined in our DNA.”
In the final chapter, the authors make several suggestions for the way the government could collect and spend taxpayers’ money to increase happiness using the five principles as a guideline. They even note that the first ever United Nations Conference on Happiness in 2012 created a 158-page document, World Happiness Report, to provide a “how to” guide for policymakers interested in understanding how to measure and increase happiness.
This 2013 book about the pursuit of happiness through spending money following five principles is an interesting read. It encourages us to get off the consumer treadmill and gives us new ways to think about how we spend our money. The majority of the book is on personal spending but does “zoom out” to look at corporate spending and government policies and how they might better align with the five principles. Financial books about budgeting and building wealth would do well to reference these five principles of spending money.
Questions & Answers
© 2018 Kathy Burton