How To Spend Money To Buy Happiness
What if I told you that spending money could buy happiness?
Hold on, in this article, I will not advise you to spend all your money and stop saving for the future. However, you shouldn’t be working your ass off and saving 80% of your money for one simple reason: money well-spend can make you happier.
Investors spend much of their lives accumulating the capital that will allow them to live out their dream retirement. Still, they rarely do because they have never been used to spending it and continue to accumulate it to maximize their long-term happiness.
Personally, I am a true believer in the importance of saving money but I am also convinced that money well-spend can make me happier and that more money might mean more problems (quoting a great artist) but definitely means happiness.
I read a lot of articles explaining that it is possible to improve your life by spending your money better, and we will see how in this article.
Saving and investing is not an end in itself.
When you invest, your goal is to make money. However, this is not an end in itself. Once you have a high salary or wealth, the thorny problem of how to spend it arises in a big way.
Yet 99% of all the information you read is about managing money to make it grow, to protect it from inflation and taxation. Rarely, if ever, is there any discussion of how to spend your capital to make you happier.
I am not talking about information on how to consume better (buying the best jumper or the most flashy car), but on how to spend money to optimise your happiness.
The old saying: "Money doesn't make you happy" is not entirely true.
In the US, based on research, people who earn $55,000 a year are not twice as happy as those who earn $25,000 a year. In the United States, once you reach the $75,000 annual income threshold, making more money has no influence on daily happiness. This alone should give many people pause for thought when you consider how hard they work to earn more.
Working more to earn more money could make your life more miserable because you will have less time to be with your loved ones and enjoy experiences. However, the extra money you will make could allow you to live memorable experiences that would eventually make you happy.
Instead of trying to earn more, people should aim to improve their lives and be happier by spending their money better.
3 Proven Ways to Spend Money to Buy Happiness.
There are three main principles for better spending:
Buying Experiences Instead of Items
Spending Money on People
Buying Time
The idea behind these three principles is to develop the reflex to ask yourself: am I spending my money in a way that gives me the most happiness? And get your personal answer aligned with your situation.
As an investor calculates its Return on Investment (ROI), it might be a good idea to calculate your Return on Happiness (ROH) based on your main expenses. You should try to visualise what brings you more happiness per pound spent between expense A and purchase B.
Buying Experiences Instead of Items
The first and most important principle for spending your capital better, in my opinion, is to buy experiences instead of material goods.
Many people buy the most expensive luxury clothes they can afford and often more. Why do they do this? There are many reasons: cultural, social, family, etc. Yet, there is no evidence that buying those luxury clothes increases happiness, quite the contrary.
Buying luxury clothes or any other expensive items will not make you happier.
After the immediate pleasure following the acquisition, we get used to and take the new object for granted. This is as true for clothes as for the sports car or the £6,000 Gucci bag.
The other disadvantage of buying things is that we quickly find something better, bigger and more expensive elsewhere.
It is a different dynamic when you buy an experience like a trip. For example, instead of buying a new car, you spend £10,000 to take the whole family on a three-week trip to Bali. You go on the trip and come back £10,000 poorer.
Experiences are not limited to travel, but all those you will remember for a long time. It could be a fancy restaurant, a football game, a visit to Walt Disney with your loved ones, or a seat at a concert.
Spending Money on People
Another benefit of investing in experiences is that they encourage more altruistic behaviour. It is because we tend to be more grateful for what we have done than for what we have. Gratitude comes alongside psychological benefits, including social behaviours such as giving.
In other words, if you give (it can be money, time, things, etc.) with the specific purpose of getting happiness out of it, you will not come out happier.
On the other hand, if you give without expecting anything in return, you open the doors to happiness.
Buying Time
In Happy Money, the authors mention that rich people do not spend time doing more enjoyable things in their daily lives than the general population. When I read this, I could not believe my eyes.
What is the point of accumulating money if that wealth does not allow you to do more of what you love?
If I may, I will use my own example. As soon as I could afford it, I rushed to pay to have a maid so that I spend more time doing what I really loved. It seemed the best use of my money.
In one line, I would rather have less money but more time for the good stuff.
Buying time has another strategic meaning closely linked to happiness. Research shows that living close to work is associated with a greater appreciation of life. In this sense, you should shorten the commute to and from work to be happier.
Now, you know what to buy to be happier. On my side, I need some sun - I will plan my next road trip to Asia to create new memories. You should do the same ;)
Have a great week!
Isaac
Stuff I liked this week
Technology - 2023 Forbes 30 Under 30 Consumer Tech list - From Pool Rentals To A Pet Adoption Marketplace: These 30 Under 30 2023 Finalists Are Using Tech To Meet Consumer Needs.