Will money make you happy? We’re often told that it won’t. However, new research points out that higher income levels can indeed boost one’s well-being. You must’ve noticed that spending money on things or pursuits makes you happy, at least for a while. Nevertheless, how do you maximize the happiness gained from spending your money?
Will Money Make You Happy in the Long Run?
While previous research suggested that there is very little improvement in people’s life satisfaction levels once their income levels increase beyond USD 12000/ year, new research suggests differently. In general, happiness, or well-being quotient, consists of two components:
- Evaluative well-being- describes how people rate their life in a comprehensive manner. This parameter reveals how satisfied one is with their life.
- Experiential well-being– on the other hand, this component denotes the positive or negative thoughts and emotions a person feels at a given time.
The new research points out that while one’s experiential well-being can plateau at an income of USD 750,000, evaluative well-being can increase steeply along with the rise in one’s income. This suggests that once your basic needs are met, and your life experiences have improved to your satisfaction, a higher income can potentially increase your happiness levels, provided you pause periodically and reflect upon your life choices.
Will money make you happy? Yes, of course, but knowing how to spend your money in the right way determines your happiness levels to a great extent.
Four Ways To Spend Your Money for Long-lasting Happiness
Elizabeth W Dunn, professor of psychology at the University of British Columbia, suggests that the relationship between money and happiness can be surprisingly fragile, depending on how you choose to spend the same.
In her research paper titled “If Money Doesn’t Make You Happy, Then You Probably Aren’t Spending It Right,” Dunn suggests the following principles to help you derive greater, long-lasting happiness for your money:
1. Understand Money Alone Can’t Buy You Happiness
As suggested earlier, money can make you a happier, more content person. Yet, we find that after a point, it seldom does. A higher income can mean improved living standards, access to better health care, improved nutrition, and possibly the freedom to pursue a hobby or create downtime for a recreational activity.
However, the efforts to maintain the higher income could also mean elevated stress levels, mental and physical exhaustion due to longer work hours, and possibly job burnout. Hence it is vital to devise a work-life balance that allows you to pursue activities that make you happy.
2. Opt For Frequent, Small Pleasures Rather Than Occasional, Bigger Ones
Ever noticed how we tend to relentlessly visualize lofty goals for years – like a bigger home or a luxurious car – yet once we achieve these goals, the happiness boost seems to vanish after a short while? Until we move on to the next big goal, and the cycle continues. This spiral of dissatisfaction – also known as the ‘hedonic treadmill’ – tends to return your happiness levels to the baseline, regardless of how monumental your achievement seemed.
Research by Diener et al. suggests that indulging in small pleasures can make you happier when compared to making infrequent large purchases. The small purchases could include an iced americano, a spa session amid a busy day, or buying that pair of shoes you’ve been eyeing.
3. Spend on Experiences, Not Things
Experiences in life can help us develop an upbeat personality. Society and social media usually compel us to chase after materialistic pursuits. However, these pursuits often offer only fleeting happiness before the ‘stuff’ thus acquired loses its charm. Rather than spending all your money on materialistic pursuits, set aside time and financial resources to create new memories and experiences that you’ll cherish forever.
4. Consider Spending on Others
Humans are social beings, so it isn’t surprising that the quality of our social relationships is one of the crucial factors determining our happiness levels. Therefore, investing in people who cheer you up and support you through rough tides and good times can help deepen your connection with them, thus boosting your well-being levels.
A study by author, Stephen G Post, shows that there is a strong link between happiness and prosocial spending or altruism. Spending on others can help you find a deeper purpose in life, thus increasing your happiness.
Spending on others doesn’t require you to spend huge amounts of money. You can even indulge in small acts of kindness like tipping your waiter generously for their effort, running small errands for an elderly neighbor, helping a stranger, or raising funds for a charitable cause.
Will money make you happy? It definitely can if you take time to consider what makes you happy and follow these principles consistently. Additionally, developing healthy financial habits can help you in your endeavor to maximize your well-being as well.