Money CAN buy happiness – Here’s how…

If art is in the eye of the beholder, then I’d argue happiness is as well, since the term means different things to different people.  Research has shown that by allocating your dollars in certain ways you can “buy” happiness, at least incrementally.  I understand this won’t appeal to everyone, but here are four themes where this rings true:

1) Experiences over stuff – My wife and I like to travel and before we had our daughter we were able to do a fair amount of it. In 2009, we had some of the most amazing food and wine in the hill towns of southern Tuscany. We reminisce about it often. Experiences have a much longer and stronger appreciation value than do material goods. In many cases, the sense of appreciation from an experience grows as time passes. That memorable trip you went on with your parents or grandparents, who are now deceased, probably falls in this category. One reason why experiences trump “stuff” is because humans quickly adapt to the status quo. A new product is only new for a short time, so the satisfaction we get from it diminishes as time passes. Additionally, experiences tend to be deeply personal. When someone says, well I went to Italy and had a better meal than you did, it’s kind of tough to measure that. Focus on experiences.

2) Others over self – Spending money on others can have a longer-lasting and stronger impact than spending money on yourself. Some of our clients have “adopted” a family during Christmastime, buying gifts for them anonymously and giving them a Christmas they otherwise wouldn’t be able to have. The clients related to us the impact it had on them to see the excitement on the children’s faces when they delivered the packages. This is merely one example of how spending money on others can lead to a higher level of happiness.

3) Buy yourself time – When my wife and I bought our house we decided to save some money by doing a lot of the typical cosmetic upgrades ourselves. This meant painting, which I pretty much loathe. With copious amounts of TED Talks and audio books, I survived and the walls were painted. A few years ago, we decided to change the wall colors and we hired a professional painter to do it. I put this in the “best money ever spent” category because I was freed from monotonous work I don’t enjoy.  You probably have a similar experience, where hiring out or delegating a task had a similar impact. Time is finite. Wherever and whenever you can buy yourself time to do what makes you happy, you might consider doing so.

4) Keep marginal utilities high – About seven years ago, I traveled to China with my wife. Over the course of 10 days we ate only Chinese food for lunch and dinner. Granted there were many different varieties, but it was still what we considered Chinese food. In Shanghai, on the 11th day, we finally broke down and went to a McDonald’s. A quarter pounder with cheese never tasted so good!  Economists call this effect the marginal utility of a good. In most cases, the more we consume of something, the positive effect diminishes. The 10th day of Chinese food is much less satisfying than the first. By spreading out indulgences (large or small), we have a better chance of keeping the marginal utility (and our happiness) high.

I understand we’re all wired differently. Some of what I discussed might not be for you, and that’s okay. But by focusing your spending on experiences and others, buying yourself time, and keeping your marginal utility high, you can increase your happiness.

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Since 1995, Pittenger & Anderson has guided individuals and families going through money-in-motion events. We are a fee-only Registered Investment Advisor and a full-time fiduciary providing investment management, financial planning, and complimentary services to 700+ clients in over 30 U.S. states.

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