Happy Money
This is a book about the very best ways to spend money to reap the most happiness from every pound. Studies show that money can do a much better job of buying you happiness if you spend it right, since some purchases give you a bigger happiness bang for your buck than others.
If you don’t find a lot of joy in your work and work only to make money and use money to buy happiness. The key to happiness might not be in making more money to be happier, but perhaps on be conscious about and selective of spending on the things that will make you the happiest.
The goal is not to make money, but to be happy.
Strategic spending for happiness
1 Buy experiences rather than things
We adapt to things more easily than experiences. The joy from things diminishes quickly over time as we adapt to the ownership of things. Also we can derive joy from experiences before the event-joy from anticipation, during the event-the experience itself, and after the event-joy from reminiscence. In addition, things can be compared more easily than experiences. There will always be better things and we will want those (a never-ending pursuit or ‘hedonistic treadmill’). Experiences, on the other hand, are difficult to compare as there are nuances that make all the difference. It is, therefore, more cost effective to buy experiences rather than things (provided that the unit of interest is happiness).
2 Make it a treat
Abundance is the enemy of appreciation. This is the sad reality of the human experience: in general, the more we are exposed to something the more, its impact diminishes. Though we understand that enjoyment often fades overtime, we don’t always apply that knowledge when contemplating a new toy.
3 Buy time
A substantial minority said they would be willing to accept a pay cut to have more time with family. But many respondents indicated that they couldn’t afford to do so, often citing the high costs of housing as the barrier. Yet people who spend more money on housing reap few benefits in terms of happiness. Working long hours to earn more money to provide your children with fancier homes and shinier toys may represent a bad happiness trade-off—especially when doing so comes at the cost of actually spending time playing with them.
Faced with a decision between multiple products that differ in their features and price tags, ask yourself whether the differences in features will alter how you spend your time. If the answer is no, go cheap.
Taking the time to help others makes people feel effective (“If I have time to help you, I must be good at getting my own stuff done!”), and these feelings of competence lead volunteers to feel less overwhelmed by the multitude of tasks in their everyday lives. The same fifteen minutes can make us feel either time rich or time poor, depending on how we spend them
Pool paradox
Because the lens of imagination focuses on the foreground of happy pool ownership (poolside parties! lazy Sundays!) while blurring the not-so-happy background details (clogged filters, long commutes), we suggest a simple exercise before making a major purchase: Think about Tuesday. Take the time to consider what you’ll be doing from morning to night this coming Tuesday. How will the purchase affect you on Tuesday? This simple exercise—thinking about time use on a specific day—helps us make less biased predictions about how much any one thing will influence our happiness.
By consistently asking yourself how a purchase will affect your time, your dominant mind-set should shift, pushing you toward happier choices.
4 Pay now consume later
The French use the verb se réjouir to capture the experience of deriving pleasure in the present from anticipating the future. The se réjouir period provides a source of pleasure that comes free with purchase, supplementing the joy of actual consumption.
Because consuming later provides time for positive expectations to develop, delaying consumption also increases our ability to smooth over the cracks.
When is delaying consumption most beneficial in getting the biggest happiness bang for your buck?
When the delay provides an opportunity to seek out enticing details that will promote positive expectations about the consumption experience, as well as excitement in the interim. Think TripAdvisor and Birchbox.
When anticipating the purchase makes you drool, increasing the pleasure of eventual consumption.
Debt
Although the relationship between income and happiness is fairly weak among Americans, there is a much stronger relationship between individuals’ happiness and whether they have difficulty paying their bills. In other words, what we owe is a bigger predictor of our happiness than what we make.
The time value of money
This central tenet of finance is based on the idea that money earns interest over time. Put £100 in an account with a 3 percent interest rate today and in one year, the £100 becomes £103. We, therefore, should delay payment whenever possible, thereby hanging on to the money and earning interest for as long as possible. All else being equal, the maths makes complete sense, as long as the goal is to maximize your money. But should that be the goal?
Single-mindedly pursuing this goal may be overrated. It may be time to consider how to use your money not just to get more money, but to get more happiness.
5 Invest in others
By the end of the day, individuals who spent money on others were measurably happier than those who spent money on themselves—even though there were no differences between the two groups at the beginning of the day. And it turns out that the amount of money people found in their envelopes—$5 or $20—had no effect on their happiness at the end of the day. How people spent the money mattered much more than how much of it they got.
If you’ve been focusing on trying to make more money, remember that giving some of it away can be just as rewarding as getting more of it.
Across the 136 countries studied in the Gallup World Poll, donating to charity had a similar relationship to happiness as doubling household income.
Effects on children
They derived more happiness from giving the precious resource away than from getting more of it themselves. And the impact of investing in others on happiness was biggest when giving was most costly—when the treat came from their personal stash.
The key to get the most out of invest in others
Make It a Choice-not force, Make a Connection-the cause is related to the giver, and Make an Impact-it should make a clear difference.
The best way is to invest in others in ways that help you connect with people especially people you care about e.g. arrange a trip with and pay for those people.
Practice
For one week, keep track of all the money you spend. Rather than grouping your expenditures into the traditional categories used by the Bureau of Labor Statistics, try putting them into categories according to our five spending principles. Look at what are outside of these and how we can forgo them.