Originally published on July 16, 2014
About Elizabeth Dunn & Michael Norton, Authors
Elizabeth Dunn is an associate professor of psychology at the University of British Columbia. Michael Norton is an associate professor of marketing at the Harvard Business School. Both of their works have been featured on numerous well known media sources. For example, Michael Norton's research has been featured twice in the New York Times magazine. Furthermore, he was selected for Wired magazine's Smart List as one of the "50 People Who Will Change the World."
What is great about it?
We've all heard that money does not buy happiness. Despite the numerous well-publicized studies backing the aforementioned statement, we still refuse to believe that it is true.
How can we "buy" happiness? The authors of Happy Money go through five chapters of how money can buy happiness.
1) Buy Experiences
Humans adapt to change and we typically get used to what we have. While we may experience an initial spike from buying a new car or a house, the satisfaction wears off pretty quickly. What we remember more vividly are novel experiences such as traveling. Believe it or not, there are studies that have suggested unpleasant experiences are sometimes the most memorable.
2) Make it a Treat
In general, the more exposed we are to something the more its impact diminishes. "One afternoon, students came into a psychology lab to complete a simple task: eating a piece of chocolate. The following week they returned for a second piece. Overall, the students enjoyed the chocolate less the second time than they had the first." This also means that that BMW will not make you anymore happier in the long run than driving a Ford.
"Abundance is the enemy of appreciation, scarcity may be our best ally"
3) Buy Time
The longer your commute to work is the more unhappy you are likely to be. Time spent driving to work destroys happiness levels. Consider biking to work if you are less than five miles away.
"People who feel they have plenty of free time are more likely to exercise, do volunteer work, and participate in other activities that are linked to increased happiness."
4) Pay Now, Consume Later
Delaying consumption can provide the opportunity to further seek out positive expectations of the joys of product/service being consumed. For example, those who waited twenty-four hours to drink their favorite soda felt happier than those who drank it on the spot. When you pay prior to your consumption whether it be a concert or your fast food meal, you are more likely to enjoy what comes after. This is because you never have to think about how much your meal will cost or the concert during your "enjoyment process". It's already been paid for!
5) Invest in Others
Did you know that spending money on others actually gives you more happiness than if you were to spend it on yourself? Obviously you will be poorer, but it helps your happiness level. A recent study showed that those who were given $5 or $20 and asked to spend on someone else or donate it to charity were measured happier than those who spent it on themselves. Whether they had spent $20 or $5 on someone else, that amount didn't make a difference on happiness levels.
Here are some excerpts from the book:
Long after the housing bubble burst, almost 90 percent of Americans continued to describe home ownership as a central component of the American dream[...] In a carefully controlled study of more than six hundred women in Ohio, homeowners weren't any happier than renters [...].
"The benefits of investing in others don't stop at just making you feel happier. Giving your money away can make you physically healthier, and even make you feel financially wealthier. In a study of more than a thousand older adults, individuals who provided money and other forms of support to both relatives and non relatives reported better overall health."
What is the not so great about it?
The authors go through many studies and real life examples of their theories and concepts behind how money can be spent to increase happiness. While I understand the focus is on that, it doesn't necessarily talk about the repercussions of excessively "investing in others", the finance detriments of paying now versus later, or even having a meaningful life vs a happy life. While it may be good for your happiness to "invest in others", if you had a friend that paid for your meal every time you guys grab lunch, that would condition you into believing or even expecting that he or she would pay the next time around. We call that freeloading or taking advantage of a generous person.
Therefore, it is important to understand that the authors' comments should be taken with a grain of salt and not to be used to its extreme. The concepts presented by the authors do shed new light on smarter spending. Though some of which many of us are already aware of which includes buying experiences versus tangible items and giving to others.
What is your final recommendation?
It's always a good sign when what you think is not great about a book is the fact that it leaves you wanting more. That's how I felt when I finished the book. I asked myself are there more tricks and tips for getting the most out of your money or the bang for your buck. After all, what is money for if it is not a tool to bring us happiness and a well-balanced life. We trade our time for money and in turn we all expect that money will bring us happiness. While we should not believe that money by itself will bring us happiness, it is easy to understand that when properly utilized, money can be a tool used to bring us happiness.
Conclusion: Happy Money: The Science of Smarter Spending is a recommended read for those who seek to use money a tool to bring happiness, where money is not the end goal.