How to Buy Happiness: 5 Science-Backed Principles to Know TODAY
This is my own condensed notes of the book Happy Money: The Science of Happier Spending by Elizabeth Dunn and Michael Norton.
She is the Professor of Social Psychology at the University of British Columbia, he is the Professor of Business Administration at Harvard Business School, and together they merged psychology and money, with the aim of answering the question: how to buy happiness.
When I read it, it’s like a lightbulb went off in my head. I’ve invested a lot of time and effort to learn how to increase wealth – via saving money, investing, earning – but not as much in learning how to spend it.
All I know is to be cheap when I didn’t have a lot, and to spend mindfully when I have a little bit more, prioritising small businesses.
It turns out money CAN buy happiness, and the best part is you can extract max happiness out of every ringgit following these 5 core principles.
How to Spend Money: 5 Core Principles of Happier Spending
The book divides each Core Principles into individual chapters. What I’m going to do is to share the most important points and research-backed conclusions from each chapter.
Core Principle #1 – Buy experiences
- Material things provide less happiness than experiential purchases
- Buying bigger houses and nicer cars doesn’t bring that much happiness, yet they’re two of the top expense categories for many people. Spending moderately (not excessively) on these two WILL make you happier, as you have more disposable income for other spending
- Go on trips. Don’t worry too much about the price – the experience matters more. Even experiences that are a little bit painful can produce lasting pleasure (ie you’ll still think fondly of that sucky camping trip)
Core Principle #2 – Make it a treat
- Abundance is the enemy of appreciation. When something wonderful is always available, people are less inclined to appreciate it (that’s why you never visit that famous tourist attraction in your city)
- Therefore, you should turn your favourite everyday things into occasional treats to enjoy them better
- Aka if you like Starbucks, then have it but once a month, not daily. It’ll feel more special
Core Principle #3 – Buy time
- A lot of wealthy people are cash-rich but not time-rich. You’d be happier with more time instead of more cash
- Time affluence predicts job and life satisfaction
- A lot of people waste time via commuting to and from work. You’d be happier living nearer to work
- Buy time-saving devices and outsource chores you don’t like. These expenses will free up your time and allows you to enjoy things you love
Core Principle #4 – Pay now, consume later
- ‘Buy now, pay later’ model used by credit cards and instalments reduces happiness
- Waiting and delaying consumption increases happiness
- Making upfront payment for pre-order purchases = enjoying them to the fullest
Core Principle #5 – Invest in others
- Spending money on others provides a bigger happiness boost than spending on oneself – the more people give away, the happier they felt
- It generates abundance mindset, as opposed to scarcity mindset. Even giving away 1 ringgit will make you feel wealthier
- But the act of giving money must be a choice, not by force (ie why charity feels good but paying taxes is not)
The trick: hitting as many core principles when you spend money
This part of the book blew me away. Each of the core principles work well on their own, but I didn’t think that they can be stacked onto each other.
- Invite someone who asked you for advice/support to a neighbourhood cafe (#5 – invest in others)
- Have a lovely chat and improve relationship (#1 – buy experience)
- You managed to fit in the meetup after you freed up the time by outsourcing chores, especially the ones you hate (#3 – buy time)
- Pay for the coffee from prepaid card (#4 – pay now, consume later)
- Enjoy an extra-special frappuccino instead of your usual daily black coffee (#2 – make it a treat)
My mind = kaboom.
So simple, yet something that I don’t do often – the intention was there but the framework was not. This book provided structure to my ‘let’s test out everything and see if it works’ method.
I don’t know about you, but I am *extremely* motivated to get the most happiness value out of my spending. Firstly, I hate buyers remorse (who doesn’t tho?).
Secondly, planning my spending around this spending doesn’t require unlimited wealth, which is an unattainable goal in the first place.
It is better for me to learn how to master my money, than let money be my master. Just Principle #1 alone eliminated the vast majority of luxury products that I know won’t make me happy.
What if you don’t have money to spend?
But of course, none of this matters if you don’t have disposable income. Those who make a good salary can simply reallocate spending priorities, but those who don’t are stuck and have way less option. You don’t need me to tell you how the minimum wage of RM1200 per month is not anywhere near the living wage. All the money goes to life’s necessities and not much else.
The battle for higher minimum wage goes on, but it’s important to know what else society can do to contribute, because this is not a single-solution problem. On a personal level, many of us can do #5 – Invest in others, but I’m also aware some of you work in government agencies or have decision-making positions in your respective companies.
Here’s how you can help chip in towards support networks. Bonus: happier people make more productive employees
Some good government policies include:
- Providing safe community spaces for fun, low-cost experiences (#1 – buy experiences)
- Providing affordable housing at places with abundant job opportunities, so commutes are shorter (#3 – buy time)
- Actively discourage the growth of ‘buy now, pay later’ financing plans (#4 – pay now, consume later)
- Allocating resources and doing Public-private partnerships to help the less privileged, which don’t require beneficiaries to spend more time just to get the help (#5 – invest in others)
And some examples of how companies can actively participate:
- Factor in experiential benefits, such as massage/spa vouchers and home cleaning services as job perks (#1 – buy experiences)
- Regularly schedule fun and engaging office activities (#2 – make it a treat)
- Allow employees opportunities to volunteer and donate to their favourite charities (#5 – invest in others)
I’m sure there are more ways, but this is a start. If you know of any other good measures, or currently implementing them to positive results, do share in the comments section 🙂
I’ll end here. Hope the points in the book helped you as much as it helped me develop an updated spending philosophy. The full book is definitely worth a read, so find it if you can (I got mine from Big Bad Wolf). Share this article with friends and family – it would be my joy to help Malaysians spend in happier ways.
If you enjoyed this article, you’ll probably enjoyed a similar ‘how to buy happiness’ article of mine, also a book summary: How My Dream Home in Malaysia Would Look Like
Hi Suraya, what about those time-sharing deals/calls that one gets from time to time? Which category would that fall under? Most of the time, it comes at a cost… of time… principle no. 2? Make it a treat? Depends on how one looks at it.
Hey Daniel, you answered your own question didn’t you 😀