Money can buy happiness

Want to buy a house? Go on a holiday? While it may be true that people with higher incomes are usually happier than those who struggle, aren't we told that materialistic items are not important? Does money really buy happiness? Scientists from the University of British Columbia have answered with a resounding yes – but only if spent correctly.

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Money lets us do what we want, live longer and healthier lives, cushions us against stress, and gives us time to relax with family and friends. We have eight tips to share with you today, to help you enjoy life just a little bit more.

1. Spend on experiences

According to 1,000 Americans surveyed in 2012, people enjoy experiences more than materials [1]. Participants in the study were asked to think of two recent purchases - one experiential, and the other materialistic - and say which they enjoyed more. As you can probably guess, the majority preferred the experience. The reason for this is that shared experiences connect people more than shared consumption. You are more likely to bond with a person who told you a funny story about trecking in the Himilaya's than someone who bought the same shoes. You are also more likely to get tired of those new shoes. When we use a purchased good multiple times, what we bought starts to lose it's "newness", and becomes less exciting and a part of our everyday surroundings. On the other hand, experiences like skiing and diving and travelling are exciting and temporary - we have no chance to adapt.

2. Helping others more than yourself

We like to spend time with others. sistersFor this reason – almost anything that strengthens our connections to family and friends make us happy, and this includes spending money. Professor Dunn and colleagues handed out $5 or $20 notes to students, who were randomly assigned to spend the money on themselves or someone else [1]. When the participants were called up later that night, those who spent the money on their friends were much happier than those who treated themselves – regardless of how much money they received. By giving gifts to those we love, we strengthen our friendships and connections by showing that we care.

3. Small things are better than the big things

It might be better to purchase a number of little treats rather than extravagances like sport cars, around the world trips, and luxury villas. The reason for this is adaptability – we fear it, we fight it, but in the end we always lose. No matter what we purchase, at some point it will cease to be new. And because – for most of us – money doesn't grow on trees, it might be better to invest our finite financial resources on many little gifts rather than the big presents, which ultimately we will no longer appreciate.

4. Insurance is not always worth it

We like to think insurance will help protect the happiness which we obtain with our purchases. Yet the research shows that extended warranties for electronics and other small items is unneccessary - the happiness that comes with their original purchase far outweighs any subsequent loss.

5. Buy now and consume later

When we do lay-by or pay off our bills in small increments, we take away the element of anticipation – and anticipation is the source of free happiness. We want to look forward to new adventures and the arrival of our shoes from Zalando, and not be consumed by the payment process.

We also tend to think more about our purchases when we pay ahead.

To test this hypothesis, Professor Barbara van Leeuwen of the Australian New University offered participants bananas, apples, paprika crisps and chocolate bars as a snack [2]. The participants who were told they could eat their food straight away tended to choose the unhealthy options, while those who would eat their snack in a week preferred the healthy foods. It seems that delayed gratification helps us to appreciate our purchases more, and resist the short term temptations.

Another way which delayed consumption can bring about happiness is through uncertainty. Often consumers face some uncertainty when making a purchase – what should they choose, what will it be like, and how will it be used. Such uncertainty can help counteract the effect of adaptation, which helps you to enjoy the purchase for much longer than when you instantly receive the goods.

6. Realism

Don’t think about things in overly simplistic terms. Yes, buying a holiday house in Miami might mean long days on the beach and some extra income when you’re not there, but you also need to think about costs, commute, and the organization which it requires. If you are more realistic when purchasing something new, you have lower expectations - avoiding disappointment if the situation is not exactly idyllic.

7. Don’t compare too much

Yes, a new iPhone might be cheaper if bought in America, but if you focus on comparing prices and the potential savings, you can easily lose the point of the purchase. Focus instead on the benefits – with a new iPhone you can use WhatsApp, access your emails anywhere, and turn to Google Maps when lost. If you focus on the $50 savings – the benefits become insignificant in comparison to the price, taking away some of the happiness the purchase could bring.

8. Listen to the majority

Time and time again we are told to break away from the pack, but when it comes to buying something new, positive reviews increase the likelihood of consumer satisfaction. The influence of group satisfaction has been extensively studied. For example, in 2009, women were asked to predict how much they will enjoy a speed date with a particular man [3]. Half of the women were given a picture and an autiobiography written by the man, while the other half of participants were given another woman's rating of her date with the same man. Women were 50% more accurate at predicting how much fun their date will be when given another woman's rating, than they were with only the man's photo and autobiography. We like what other people like - and if other people have enjoyed time with tonight's date - we most likely will too.

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Sources:

[1] Dunn, E., Gilbert, D. & Wilson, T. (2011) If money doesn’t make you happy then you probably aren’t spending it right. Journal of Consumer Psychology, 21(2), 115-125.

 [2] Read, D., & van Leeuwen, B. (1998). Predicting hunger: The effects of appetite and delay on choice. Organizational Behavior and Human Decision Processes, 76(2), 189-205. 

[3] Gilbert, D. , & Wilson, T. (2009). Why the brain talks to itself: Sources of error in emotional prediction. Philosophical Transactions of the Royal Society B, 364, 1335-1341.

 

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