I would never assume everyone reading this article has their financial needs met. However, there are two assumptions I make when writing about money.
1. More people have their financial needs met than think they do. In our consumeristic society, the baseline of need is always revised upward. The items considered “needs” today would have been considered a luxury not that long ago. Most of us have our financial needs met.
2. Minimalism provides greater financial flexibility to those who choose it. When we remove ourselves from the constant pursuit and accumulation of material possessions, greater financial flexibility is one of the benefits experienced quickly and recognized easily.
Based on those two assumptions, I want to talk about how to increase our overall happiness and well-being with our money.
Or, more specifically, how can we spend our money in ways that improve our subjective well-being? Not based on conjecture, but science.
There is a fascinating study recently published in Advances in Experimental Social Psychology by researchers from Harvard, the University of British Columbia, and Simon Fraser University.
In the study, Prosocial Spending and Buying Time: Money as a Tool for Increasing Subjective Well-Being, the researchers discuss four possible uses of our money.
Three of the uses result in an increase of subjective well-being, one does not.
After our immediate needs are met, purchasing additional personal possessions does not contribute, in the long-run, to increased happiness. But there are choices we can make with our financial resources that do increase our overall life satisfaction.
When determining the best use of our money, this research is valuable. Their findings are summarized below.
Spend Your Money on These Three Things to Increase Happiness
1. Purchasing Experiences.
Whether going to the zoo, the ballgame, or Europe for two weeks, spending money on experiences shared with others brings more lasting happiness than physical possessions.
According to the study:
The earliest and most well-developed line of research treating money as a resource to be intentionally utilized shows that, on average, people experience greater happiness when using money to purchase experiences, as opposed to material goods.
Based on their findings, spending money on experiences rather than material goods results in more positive feelings before consumption, during consumption, and after consumption.
2. Prosocial Spending.
Spending money on others—whether supporting a charity, treating a friend to dinner, or buying a gift for another—brings more lasting happiness than physical possessions.
When we entered personal spending and prosocial spending into a regression predicting happiness, we found that people who spent more money on others reported greater happiness; in contrast, the amount of money they spent on themselves was unrelated to happiness.
By conducting tests of universality, we have been able to demonstrate that the joy of giving is not merely a quirky feature of North American college students, but rather a fundamental component of human nature, detectable from the first years of life across a wide range of contexts.
Based on their findings, spending money on others enhances social connection, provides opportunity to make a meaningful impact, promotes well-being and autonomy. And in each regard, delivers these results in more measurable and lasting ways than buying material possessions.
3. Buying Time.
Whether paying someone to rake your leaves, clean your house, deliver your groceries, or buying a smaller house to reduce your commute, research indicates there is happiness to be found in not just purchasing positive experiences (above), but also purchasing the removal of negative experiences.
People who regularly buy time report greater life satisfaction.
The researchers admit this finding requires some deeper analysis and study, “Although experimental manipulations are necessary to enable clear causal conclusions, this longitudinal study provides the strongest evidence to date that the broad proclivity to prioritize time over money predicts subsequent well-being.”
But based on their findings already, buying time provides more opportunity for people to choose relationships, reduce daily stress, and help navigate major life decisions. Even across socioeconomic variables, those results were discovered.
Your specific financial circumstance varies from the person next to you because nobody is exactly alike in this regard. However, the studies above do indicate some consistencies among us as human beings.
If you want to direct your financial resources toward pursuits that pay off in the long-run, choose to purchase experiences, prosocial giving, or buying time. Based on the studies, spending your money on those three things is the best way to increase happiness.
Maria Pinto says
I agree with Cariad about buying local. This keeps more money in your community at a time when small businesses are hurting due to Covid 19. Plus it says that you care to keep real Capitalism alive, especially for the Mom & Pop & family businesses that built this country. I think there is also a trend to bring back business to America, and to be able to buy more consumer goods made in America with care and quality.
Elle says
Many years ago I read this “Now that I can afford broccoli, I’d rather grow it”.
Having achieved my debt-free goal 10 years ago I came to realize how true this is. Once $ is available, debt-free and the mortgage $ in savings was a much better feeling than “stuff”. When I really want something, I can pay cash. And it’s amazing how little I want.
If someone had told me this 30 years ago, I would likely have reacted negatively. I live it. I get it!
Simone says
We are all about experiences. Have to agree with this list. The only exception for us is hiring out a task that we could easily do. Maybe when we gave more expendable income this might be an option.
Judy says
I have always found it hard to pay others to do something that I am fully capable of doing myself. I had my house cleaned for me only once before a move. So I don’t buy time—- but I do create extra free time for myself by often saying no to unnecessary requests from others. Unless I am passionate about something—- I would never obligate myself to volunteer or attend an event just because I was asked. I have no problem saying no. It’s a small word that leaves me with lots of freedom! :)
Cariad says
Buying goods and services from local businesses is another form of prosocial spending. I have been really happy to do this through the pandemic. It supports local businesses and the money stays in the local economy rather than going to a multinational company.
Maria Pinto says
I don’t think it is right to criticize someone who has a companion animal. You may not know there situation and many disabilities are not physical.
Having a domestic animal/animals as a friend is understated. The unconditional love they give knows no bounds, and they ask for so little in return.
Sibylle says
Maria Pinto – I agree with you, I have several pets, they bring me comfort and joy every day, and every Euro invested in their wellbeing is money well spent.
I was only trying to say that – as a petowner – I must be careful not to put my wellbeing too far above theirs; it‘s my job to make their lives great (because I chose them) not the other way around.
Celia says
I’m quite surprised to see pets were not mentioned. There’s often a good bit of money to be spent, whether on a single betta fish or a horse. I’m pretty sure the relationship of pet ownership to life satisfaction is well studied. Maybe another article on that?
Sibylle says
I‘m quite happy that pets weren‘t mentioned.
When people buy pets just because it will make them feel better, I fear a great risk of people disregarding the wellbeing of the respective animal as we can see in those countless ‚emotional support critters‘ that are being dragged/carried around into circumstances far beyond their species needs and wants just people feel they can do anything to make themselves feel better.
And as far as responsible pet ownership goes, that‘s very well mentioned here (though indirectly): Buy experiences.
Abigail Muller says
I’ve seen too many pets neglected by their owners. Some surely bring joy but not all are cared for properly.
Ann Van Dyke says
I have heard all this before…and I try to practice it. However, I would like to point out that being able to buy experiences instead of things implies that you have disposable income and is a position of privilege.
Jackie says
There are so many wonderful experiences you can do for free or very little cost. Perhaps you and a friend or family member can take a picnic lunch to a pretty park and look for different birds or animals. Try visiting a free museum, festival, street music, art gallery. Anything you don’t normally do. Just have fun and make happy memories. That is priceless.
Abigail Muller says
Jackie, I agree. Some of my favorite experiences are those you describe!
Tina says
My daughter and I have driven to visit family in nearby states. My husband and I take the commuter train and bus to Chicago museums. I took a bus to Los Angeles. We took a public water taxi around Chicago. Since we live near Chicago, we toured Argonne, Springfield, Racine, Milwaukee and more. Look at local libraries and museums.
Gabrielle says
Position of privilege doesn’t necessarily fit in this equation. My husband worked for 40 years preparing for retirement: delivering pizza, fixing caskets, etc. before getting a college degree at age 34. Took him 10 years. Parents had no means to help him . Hard work , not privilege. Raised 4 children on one income so did without a lot of things. Extreme discipline. And I am thankful for it all.
Denise Willert says
Amen.
Alice says
Thanks for sharing this and for providing a synopsis.
Gabe Clark says
So kind of you to point out the small mistake! Another source of happiness is to realise what truly matters
Diane says
Yes, so true. Time and experiences are priceless. My daughter gave me a little box of ” coupons” in her cute hand writing for Christmas several years ago to do things together. We went kayaking for my birthday, we went and visited an artist to see his studio to inspire her, a museum and Boston for the weekend one year instead of gift exchange at Christmas. We had so much fun and we each share and explore more than I would on my own and so many nice memories to recall later on. Priceless! Thank you for the reminder!
Tina says
People know I will use old magazines and cardboard to create art. My jewelry and boxes have been on display at a local museum. I also make decorations and flowers out of misprinted papers. I conducted some classes locally. When I was a child, we never had glitter. We used a paper punch and candy wrappers if we wanted something shiny.