We all interact with money on a daily basis – based on our spending behaviors, it can affect us emotionally in different ways. Some habits reap happiness, while others bring immense stress and anxiety. We can feel happier about our investments with a more intentional approach to spending.
Dr. Elizabeth Dunn is a Professor of Social Psychology at the University of British Columbia. Elizabeth co-authored a book on the subject called Happy Money: The Science of Happier Spending; she’s also conducted extensive experimental research, gaining valuable insights we’ll hear about in this episode.
Actions You Can Take Right Now
- Spend money on experiences instead of things. Research shows that we are happier spending money on experiential purchases – so taking trips, for instance, or seeing a live show.
- Pay now, consume later. You will feel better about consuming something if it has already been paid for. This works in business, too; if you give your customers an up-front fee rather than gradually adding to the cost of service over time, they may have a greater perceived benefit.
- Prioritize time over money. Having time to do the things we want to do brings more happiness than monetary gain – but we can trade our money in for more or better quality time. Help your employees benefit from this, too, by offering the choice between a monetary bonus or more time off.
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Episode Highlights and Excerpts
- The way we spend our money has a significant impact on our happiness levels. While income levels are often difficult to control, we can change our spending habits to maximize our emotional gains.
- While more expensive purchases make people happier on average, it isn’t true that more expensive always equals happier. It has less to do with the numerical amount and more to do with your emotional connection to the purchase.
- “...about a decade of research now shows that people get more happiness from buying experiences like trips, concerts, and special meals than from material things.”
- Because experiences feel more connected to our sense of self, they are emotionally resonant and therefore more likely to make us happy.
- Experiences tend to provide the most happiness when they make us feel connected to people we care about.
- People feel a “twinge of discomfort” when they are faced with high prices for the things that they want. Paying upfront can help to minimize this discomfort.
- Upfront payments sting at first, but once paid, the stress disappears and you no longer need to worry.
- Delayed payments (using a credit card or services like AfterPay) sting slightly less to begin with but continue causing distress for a prolonged amount of time.
- Pay upfront where possible. The best-case scenario is making a purchase weeks or months in advance – because by the time you consume or experience the purchase, it will almost feel like you got it for ‘free.’
- Upfront payments may also be a better alternative for your business in terms of perceived benefit.
- Uber and Lyft have grown significantly more popular than regular taxi services, some of which can be attributed to the different pricing models. Rather than wondering what astronomical fee will be charged at the end of the trip, passengers know instantly what the journey will cost.
- Rather than adding gradually to customer bills as they use your service, consider charging a one-time up-front fee.
- There is a powerful phenomenon called hedonic adaptation, meaning that we get used to everything in life – including purchases.
- Even if we buy something that we really appreciate, we simply get used to it and stop noticing it.
- Taking a break from those purchases can potentially help us rediscover the joy in those items and experiences.
- Alternatively, we may discover we don't need them at all, which presents an opportunity to save money.
- When we prioritize time over money, we get real benefits in terms of our happiness. The problem is that in the process of making enough money, we experience a lack of time.
- Even as people become wealthier, they feel that time is scarce. There is a perceived trade-off between material abundance and time affluence – feeling like you have enough time to do the things that are important to you.
- Once you have financial stability, you can actually begin to trade some of your money in order to gain more time or spend better-quality time.
- As a simple example: you might invest in a self-operating vacuum cleaner to free up more time for personal hobbies, or you may hire a personal assistant to take care of menial yet time-consuming tasks.
- Research shows that we get more joy from our own money by using it to benefit others rather than ourselves.
- You can feel happy while spending your money by giving to charity, buying gifts for friends, or treating somebody to dinner – anything that allows you to express generosity and elevate someone else’s happiness.
- It is believed that this is why we are such a thriving species; we benefit emotionally from helping one another.
- “If you think about everything that humans have been able to do, it's really the result of all of us working together and being willing to make sacrifices to ourselves in the short term in order to help one another.”
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Dr. Elizabeth Dunn
Dr. Elizabeth Dunn is a professor in the Department of Psychology at the University of British Columbia. Dr. Dunn conducts experimental research examining how time, money, and technology shape human happiness. She is the co-author of “Happy Money: The Science of Happier Spending” (Simon & Schuster) with Dr. Michael Norton. Her work has appeared in top journals, with three papers published in Science, and she has given a talk at TED (here), PopTech! (here) and TEDx (here).
She was selected as one of the “rising stars” in academia by the Chronicle of Higher Education in 2004 and was an honoree for the 2007 Mind Gym Academic Prize for pioneering work in positive psychology. In 2010, she received a New Investigator Award from the Canadian Institutes of Health Research, as well as UBC’s Robert E. Knox Master Teacher Award. Her research has been featured in hundreds of media outlets around the world, including The New York Times, The Globe and Mail, The London Times, Maclean’s, Time, and CNN. Dr. Dunn is also an avid surfer and skier.