If money doesn’t make you happy, then you probably aren’t spending it right

Psychological, social, emotional and cognitive factors systematically cause consumers to make incorrect forecasts of the happiness benefits of their purchases, squandering the opportunity for happiness. These factors also affect the level of happiness that may be gained from a purchase. Whilst everyone is different, a recent article[1] posed eight principles to assist people to increase their happiness from spending money:

1.   Buy experiences instead of things. Experiential purchases (an event or series of events one lives through) provide greater happiness than material purchases (a tangible object) because the pleasure is prolonged due to our slower adaption to differing experiences than unchanging material things. Additionally, we anticipate and mentally revisit experiences more often than material purchases.[1]
2. Help others instead of themselves. The ‘hypersocial’ nature of humans has the effect that people who devote more money to spending on others are happier, irrespective of income or culture.
3. Buy many small pleasures instead of a few big ones. Happiness is more strongly associated with the frequency rather than the intensity of people’s experiences, because pleasure derived from one intense purchase is more susceptible to diminishing marginal utility.
4. Buy less insurance against unhappiness. Purchasing warranties to guard against the loss of goods may be unnecessary emotional protection, as people often overestimate their emotional vulnerability to loss. Purchasing return policies may also be unnecessary as the emotional benefit of total commitment to a purchase may lead people to appreciate it more and experience less regret.
5. Allow anticipation to build. Anticipating consumption (as opposed to consumption itself), is a ‘free’ source of happiness. The pleasure from anticipating consumption may even outweigh the pleasure of consumption, as anticipation is ‘unsullied by reality’.
6. Keep it real. Consumers might have more realistic expectations of the degree of happiness that their purchase will provide if they simply thought about the unpleasant, inessential details that will still occur in their daily life.
7. Beware of comparison shopping. Comparison shopping can alter the psychological context of shopping to focus attention on the wrong attributes for a particular consumer.
8. Follow the herd. Research suggests that the best way to predict how much we will enjoy an experience and increase happiness is to see how much someone else enjoyed it.

In conclusion, money can buy many, if not all, of the things that make people happy. If it doesn’t, then the fault is ours.

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