Psychologists Answer the Question, “Can Money Buy Happiness?”

In an article published last year by the Journal of Consumer psychology, scientists revealed insights of a study regarding the relationship between money and happiness.

Their general conclusion is:

“If money doesn’t make you happy, then you probably aren’t spending it right”
-Elizabeth W. Dunn, Daniel T. Gilbert, Timothy D. Wilson*

Often the first thought about whether or not money can buy happiness is how much money is necessary for happiness. This is calculated by a simple formula.

To achieve peak happiness you must earn more than 3 times the poverty level. The following chart shows the poverty levels as determined by the U.S. Department of Health & Human Services. Visit their website for more information.

2012 Poverty Guidelines for the
48 Contiguous States and the District of Columbia

Persons in
family/household

Poverty guideline

1

$11,170

2

15,130

3

19,090

4

23,050

5

27,010

6

30,970

7

34,930

8

38,890

For families/households with more than 8 persons,
add $3,960 for each additional person.

For example, a family of four would need to have an income of more than $69,150 to reach a happy income. But, reaching this income alone does not guarantee happiness. To be happy, you must spend it correctly. The good news is that the psychologists have identified 8 principles to help you spend correctly and reach happiness.

1. Buy experiences instead of things

Things don’t last forever, but memories do. When it comes to happiness, it’s the doing that matters. Sure, some activities are more enjoyable than others, but in the end it’s the activity that brings rewards. Experiences are also more likely to be shared with other people, and other people—are our greatest source of happiness.
This might sound altruistic, but numerous studies and experiments have shown that when we spend money on others we feel good. Almost anything we do to improve our connections with others tends to improve our happiness as well—and that includes spending money.2. Help others instead of yourself

3. Buy many small pleasures instead of few

The scientists back up this principle with the following reasoning:

“(the) advantage of small pleasures is that they are less susceptible to diminishing marginal utility, which refers to the fact that each unit increase in the magnitude of a pleasure increases the hedonic impact of that pleasure by a smaller amount than did the previous unit increase.”

In other words: Eating two 6oz cookies on different days is more pleasurable than eating one 12oz cookie on one day.

4. Buy less insurance

This principle specifically speaks about extended warranties and the fact that nothing lasts forever. If you understand this to begin with, you won’t be so sad when your flat screen TV, or toaster quits.

5. Pay now and consume later

Impulse buying and immediate gratification (i.e. buy now, pay later) remove the anticipation that makes us value and enjoy purchases. When things come too easily, we don’t appreciate them as much, therefore, they do not make us happy.

6. Think about what you’re not thinking about

Consumers who expect a single purchase to have a lasting impact on their happiness might make more realistic predictions if they simply thought about a typical day in their life. So before making a major purchase consider both the good and the bad associated. You might look great driving in a big new truck, but will you use all of its features? Can you afford the gas?

7. Beware of comparison shopping

Consumers often get caught up in comparison shopping by comparing features rather than what makes them happy. Someone shopping for a home might compare houses based on physical characteristics and pricing. This could lead to buying a home that meets certain criteria, but doesn’t meet needs that will make the shopper happy.

8. Follow the herd instead of your head

It pays to find out what other people think. If you want to see a good movie, read viewer’s reviews. If you thinking about a vacation spot, find out what other people think. Don’t, however, go by what the professionals say, you’ll have more success following peer reviews.

Now, go spend and be happy 🙂

*E.W. Dunn et al. / Journal of Consumer Psychology 21 (2011) 115–125

Advertisements

Post a Comment

Required fields are marked *

*
*

%d bloggers like this: