Money & happiness – ways to make it work

Blog #32 – Money & happiness – ways to make it work

The relationship between money and happiness is a topic worth lingering on, as it deals with two things that people tend to spend a lot of time (perhaps too much) thinking about. In previous posts, we have highlighted common misconceptions around the link between more money and increased individual happiness, and the positive relationship between happiness and prosocial spending, i.e., spending to benefit others, as opposed to ourselves.

An article published in Journal of Consumer Psychology in 2011 – titled ‘If money doesn’t make you happy, then you probably aren’t spending it right’ – addressed this area in some depth. Written by Elizabeth Dunn, Daniel Gilbert, and Timothy Wilson, the article began by highlighting the key finding that while money can buy happiness up to a point, the relationship is not as robust as most people imagine. Arising from this, as we have highlighted previously, we seek to use money to increase our happiness, but frequently go about it the wrong way, and so do not achieve the desired objective.

They write: “Because people don’t spend it right. Most people don’t know the basic scientific facts about happiness – about what brings it and what sustains it – and so they don’t know how to use their money to acquire it… Money is an opportunity for happiness, but it is an opportunity that people routinely squander because the things they think will make them happy often don’t.”

Arising from this contention and an analysis of the available evidence, the authors offer what they describe as “principles designed to help consumers get more happiness for their money”.

Among those principles are:

Buy more experiences and fewer material goods: Multiple studies have found that people tend to report greater happiness arising from experiential purchases than material ones, i.e., acquiring life experiences as opposed to ‘stuff’. Several possible explanations have been proposed. Among them is the human tendency towards adaptation. An example given in the article is that even if someone spends several days choosing a new hardwood floor, it will soon merely become “the unnoticed ground beneath their feet”. This is contrasted with the idea of how memories acquired on an African safari will continue to give pleasure long after the experience itself. This idea has been supported by research findings to the effect that the adaptation process occurs at a slower rate for experiential purchases.

 Use money to benefit others rather than yourself: The idea of prosocial spending was addressed at length last time out, so we do not need to reiterate those points here. Suffice it to say, research indicates that, perhaps partially arising from our nature as social animals, when we actively seek to build connections with others, we experience positive happiness spin-off effects. Most individuals desire strong social relationships. When we have those relationships in our life, we will tend to be happier. Prosocial spending benefits those relationships, hence the connection.

 Buy many small pleasures rather than few large ones: This point highlights the importance of doing all we can to avoid or delay adaptation to the positive things in our life. The adaptation process seems to be part-and-parcel of being human. As referred to earlier in this series, despite what we might expect, a lottery windfall may make us blissfully happy in the short-term, but over time we will tend to drift back towards our previous level of happiness. One of the reasons for this is that we become accustomed to our changed circumstances, and therefore somewhat immune to its initial impact on our emotional state. The same basic principle applies to how we spend our money, whether we have won the lottery or not. As they write: “If we inevitably adapt to the greatest delights that money can buy, then it may be better to indulge in a variety of frequent, small pleasures… rather than pouring money into large purchases.” So, rather than the single ‘big hit’ of winning the lottery, over time, our happiness might benefit more from an ongoing series of minor pleasures, accumulating new ones on the old, effectively staying a step ahead of the adaptation process.

 Pay now and consume later: The emergence and popularisation of the credit card in the middle of the last century was predicated upon the idea of ‘consume now and pay later’, but this instant gratification philosophy has been found to impact negatively on well-being. Firstly, it can encourage short-sighted behaviour (e.g., impulsive over-spending) and secondly, it eliminates anticipation. The first point is self-explanatory, but the second may require a little unpacking. If you are old enough to remember the world pre-internet, then you will know that material consumption worked very differently in those days. I can recall desperately flipping through CD racks in search of specific music albums, often in vain, and maybe not finding what I was looking for until months later. The same applied to books. But this delayed gratification meant that when you finally tracked down that item you wanted, you were genuinely excited to have done so. In 2017, this process plays out a little differently. Now, you can stream or download an album on the day it is released and you can pre-order books online. Is it more convenient? Perhaps, but does it add to or detract from our happiness? Research indicates there is a net loss, arising from the short-cutting past the sometimes lengthy period of anticipation that characterised the process. The take-home message here is that there are emotional benefits to be had from delaying pleasurable consumption.

The full article is freely available online here: https://scholar.harvard.edu/files/danielgilbert/files/if-money-doesnt-make-you-happy.nov-12-20101.pdf. It may or not be ironic to click and read immediately having read the point made immediately above…

Dr. Mark Barry

Mark Barry was awarded a PhD by University College Cork in 2015 for his research into adolescent well-being. He has lectured psychology at UCC since 2013, and is also a freelance writer.