As pay day rolls round again you may be thinking that if only you won the lottery you’d be so much happier.
But according to Michael Norton, associate professor of business administration at Harvard, most of us don’t think about money in the right way. ‘If we ask people whether they think money will make them happy, they say yes,’ he says. ‘But if you get them to reflect on when they were the happiest in their life, it’s often unrelated to how much money they had at the time. A lot of our peak experiences have very little to do with money.’
Norton is one of the leading proponents of the new science of smart spending and firmly believes people can use the cash in their pockets to change how they feel. The crucial thing, he says, is not to focus on how much you have, but on how you spend it. His research with fellow psychologist Elizabeth Dunn demonstrates that by making small adjustments to your spending behaviour, you can increase your feelings of satisfaction and wellbeing.
So, could you make better choices? Here are some tips:
We get the most happiness when we spend our money on an experience, rather than on an object. So this week don’t worry about buying yet another item, head out with mates for Sunday lunch down the pub, or go see something at the theatre.
If you do go shopping, don’t spend it all in one shop. That first purchase makes it much easier for us to buy a second thing, and then a third, as the momentum takes over. At the time, this feels great as you get a rush of excitement about your lovely new things. But days later, you’ll be wondering why you bought so much that you didn’t need. You’re less likely to get carried away if you go to lots of different places.
If you’re lucky enough to have some cash to spare, will you be happier if you spend it on several small luxuries or blow it on one quality item? Well, it depends. Sometimes it makes sense to spend money on quality, but overall you’ll get more pleasure from little luxuries. This is because we overestimate how much enjoyment we will get from something new, and we underestimate how quickly that enjoyment will wear off.
Treat yourself or someone else? People who spend a higher proportion of their income on giving to others or to charity are happier than those who spend proportionately less on such causes. Academics believe that so-called 'prosocial spending' – when you spend on others – makes you feel good about yourself. In addition, it strengthens your relationships with people, and it’s these relationships that contribute the most to your happiness. So next time you have a bit of spare cash, consider who might benefit from it. Even if it’s just a cup of coffee for a friend.
‘Happy Money: The Science of Smarter Spending’ by Michael Norton and Elizabeth Dunn, is published in May (Simon & Schuster)
Read 'Happiness can't buy you money!' by David Meckin on LifeLabs