The latest research suggests that money can buy happiness, but only if we spend it the right way.
Common sense tells us that the lack of money is certainly no happy state. Some studies suggest that a minimum income of $75,000 increases happiness. This minimum provides shelter and food, without which it is really hard to be happy.
Beyond that minimum, buying more stuff doesn’t add to our happiness. After the initial high of that new dress or gadget, we return to our happiness baseline pretty quickly. The trick then, is to use money to raise our happiness baseline.
Generally, money can buy happiness if we (a) spend it on others rather than ourselves, (b) buy experiences rather than things, and (c) spread expenditure on many small things rather than one big thing.
Buy happiness for others
As anyone who has done it can tell us, spending on others make us happy. The modern term for this is pro-social spending.
Research shows that using $5 to buy a latte for another person makes us happier than buying one for ourselves. The same research found that there was not much difference between spending $5 or $20 on another person. Neither did it make any difference what people actually bought for others.
It’s not the amount we spend on others, but the fact that we do, that makes us happy. This is fascinating because it means that altruism benefits the giver and not just the recipient.
Traditional wisdom tells us to sacrifice our own happiness in order to give to others. Modern research suggests that there is no real sacrifice involved after all. The way to our own happiness is to give to others.
Buy happiness with others
Relationships are the biggest factor in our happiness. Money can buy happiness if we use it to buy experiences involving other people, or to somehow improve our relationships.
Having a latte with a friend increases happiness more than drinking alone. Going on a family vacation makes the whole family happier than saving that money to buy a bigger TV. Travelling alone and meeting new people makes some people very happy.
Not all experiences cost money, of course. A walk in the park with your spouse is free, and can increase both short term and long term happiness in your relationship. However, many experiences from concerts to holidays to meals do cost money.
Buy happiness often
Buying one big item brings a temporary high, after which we return to our happiness baseline. This means that shortly after a big purchase, we are no happier than before.
On the other hand, buying small frequent pleasures encourages change in our brains. Over time, these daily joys raise our happiness baseline.
This 3 minute video explains how buying frequent lattes with friends increases our happiness more than buying an expensive rug once every ten years.
In summary, money can buy happiness if we:
(a) spend on others rather than ourselves, regardless of how much we give or what we buy for them,
(b) buy experiences involving other people rather than merely for ourselves, since relationships make us happy, and
(c) spread out our purchases on small daily joys rather than one big item once in a blue moon.
If money can buy happiness, why not?
I now know better than to repeat the oft-spoken mantra that “money can’t buy happiness.” Perhaps the people who say that have just been spending on the wrong things!
The good news is that it doesn’t take much money to buy happiness. Beyond the minimum required to sustain life, just a couple of dollars spent in the right way can increase happiness for ourselves and others.
So there you go. Money can buy happiness. Now go forth and spend wisely!