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Happy Money

While so often financial planners are relegated to discussions about saving and investing, this month I wanted to tackle the other side of that conversation.  Spending.  To wit, is it possible to spend your money in ways that, while they may be less typical (or obvious), would actually produce a happier you?  To answer this question, I recently read a book entitled "Happy Money, The Science of Happier Spending," by Elizabeth Dunn & Michael Norton.  Dunn & Norton turn the typical financial conversation (how to make and/or save more money) on its head by instead asking, "How should we spend our money?"  Indeed, around the world, the authors recognize that income seems to have surprisingly little influence on whether people laugh, smile or experience enjoyment.  Instead, the authors believe five big ideas can transform your spending patterns and actually make you a happier person:

1) Buy Experiences - Think about a recent purchase of a material thing (a television, piece of jewelry, home, etc.).  Now compare it to the purchase of a life experience- a concert, trip, or special meal.  For most people, the experience brings to mind friends, family, sights, smells and happiness.  The object does not.  Research shows that while buying an experiences increases one's happiness before, during, and after the purchase, purchasing a material item delivers no such complete and lasting benefit.  

2) Make it a Treat -  “Abundance, it turns out, is the enemy of appreciation.”   The more we’re exposed to something, the more its impact diminishes.  To find more happiness, cut back on what you enjoy, and enjoy it more, less frequently.  This section continues on with questions ranging from whether drivers really experience more happiness behind the wheel of an expensive car, to pointing out that commercials may actually INCREASE our enjoyment of television, and concluding with a discussion of why you might be better off eating popcorn at the movie theatre with your left hand.  Crazy, right?

3) Buy Time - In this section, Dunn & Norton discuss the relatively simple idea that you should use your money to buy things that increase your free time, thereby allowing you to do more things you enjoy.  The authors explore why around the world wealthier people are more likely to report they feel stressed.  Could it be desiring increased affluence will actually decrease your happiness? 

4) Pay Now, Consume Later - Here we learn that delay enhances the pleasure of consumption by providing an opportunity to develop positive expectations.   Enjoy chocolate?  Try buying some, then setting it on the counter for a week (okay, you might have to hide it better if your family isn't on this!)  Then eat it.  You'll enjoy it more than if you had just eaten it right away.  What about the inverse?  Consider that financing major purchases and its polar opposite promise to "consume now, pay later," have become the answer to everything.  While the relationship between income and happiness is fairly weak, there is a much stronger relationship between an individual's happiness and the difficulty they have in paying bills.  In other words what we owe is a bigger predictor of our happiness than what we make.  The takeaway?  You guessed it.  Instead of worrying about making more money, focus on owing less. 

5) Invest In Others - Studies show spending money on others increases happiness in ourselves more than spending it on our self.  How much money you give away is just as accurate a predictor of happiness as how much money you make.  And this relationship exists whether you come from a wealthy situation or a poor one.  One recent Gallup world poll showed regular donations to charity had the same effect on happiness as doubling one's household income!

     Of course, I can't share all the details of this 150 page book in a newsletter.  I haven't even touched on how business owners are using this information to both better structure their customer's experiences as well as their own employee's compensation.  That's why this month, I have a special offer.  If you're a current FWM client and interested in learning how to spend your money in happier ways, send me an e-mail and I'll send you a copy of the book!  I'll also send the first five (5) non-FWM clients to respond a free copy as well.  That's right, just let me know you slogged your way down to this point in the newsletter, are wanting to hear more (like how when you pay your babysitter may be even more important than how much you have to pay them), and I'll send you your own copy absolutely free.  Then, let me know what you thought :)

Note: Reading this book isn't an invitation to spend money BOTH in the ways mentioned in the book AND in your current fashion, but to realign your future spending habits with the recommendations provided :)

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