We’ve all heard the expression—“Money can’t buy happiness.” That may not be completely true.
Psychological science suggests that how we spend can have a big impact on how happy we are with our lives.
Today’s BIG IDEA— Research shows that spending your money in certain ways is much more likely to improve your personal level of happiness and life satisfaction. Today, we will learn what those things are.
The photo in this post is a picture of my good friend Eric that I took 7 years ago while on a scuba diving trip to the Maldives. I still remember the day like it was yesterday.
On this great adventure—my wife and I, and Eric, spent 10 days on a liveaboard (a boat you sleep on every night) anchoring near a different island each night and diving a new location every day.
On this particular day, we woke up while it was still dark to grab a light breakfast and strap on our dive gear. Even at 6am, the temperature had hardly changed from the night before—and the water temp was only a few degrees cooler than the air.
We walked out onto the dive deck and splashed into the cerulean sea.
Almost as soon as we descended, I could see a group of five giant manta rays hovering over the shallow sand like silent UFOs—streams of sunlight shooting through the crystal-clear water. The mantas stuck around for nearly 45 minutes—sometimes coming so close to investigate that their graceful wings brushed up against my skin.
The experience was so surreal and profound that I found myself welling up in my scuba mask.
Why was this experience so powerful for me?
Many psychological studies help explain why.
- Purchase experiences not things. Dr. Thomas Gilovich is a psychology professor at Cornell University who has been studying the relationship between happiness and spending for more than 20 years. He is a firm believer in the Easterlin Paradox, which suggests that once our basic needs have been met, money doesn’t have much effect on increasing happiness. However, he advocates spending money on experiences. “Our experiences are a bigger part of ourselves.” In a sense, “we are the sum total of our experiences.” Purchases on memories, especially with loved ones, far surpass the pleasure hit that fades following material purchases.
- Spend your money on others. It’s probably no surprise that studies consistently reveal that spending money on generosity and the good of other people can have a long-lasting effect on our happiness. Generosity is one of the best ways to cure out-of-control spending.
- Align your spending with your values. Billy Graham once said that “nothing will reveal our real priorities more than our calendar and our bank statements.” Very convicting. How we spend our time and money is very telling about what is truly important to us. We often develop blind habits in spending that don’t align with our deepest values. It’s no surprise we have such high rates of clinical depression and anxiety.
- Schedule things to look forward to. Interestingly, some studies have shown that just thinking of your favorite movie can raise your endorphins! This study suggests that anticipation is often a huge part of enjoyment. I always feel more productive and happier when I have an upcoming vacation. It turns out there is scientific support for this!
- Live within your means. As of this writing, US debt is $29.27 trillion—yes, that’s trillion with a “T.” Our country leads the world in debt and we owe about 45% of total global debt. It is clear—debt is completely normal in our culture. But we often drastically underestimate the crushing weight of debt on our mental health. When you are in debt, it means you owe someone money. Have you owed a friend money? Does that ever feel good? Financial guru Dave Ramsey argues that getting out of debt does incredible things for our mental, physical, relational, and spiritual health.
- Buy back time with your money. A great way to improve your happiness is to pay someone to do something you don’t enjoy—then use the time to do something you love. Outsourcing is a great way to get back time. Yes, some people would rather do everything themselves. But it’s not usually a good use of your time to do things you hate and are not good at, when you could be investing that time in your business or building memories with your family. Whether you do it for productivity or happiness—outsourcing can be a great investment.
- Invest in yourself. While I was in graduate school for psychology, I remember my professors told us something I never forgot—“You are the instrument.” What they were essentially saying is that we should never stop growing, and should take great care of ourselves. If we didn’t do those things—we could not bring our best to our clients. The same applies to leading our families. When we are burned out or stagnant, we cannot give them our best, which in turn degrades the quality of our lives. Furthermore, we thrive when we are growing. We also expand our capacity for greater impact on the world. Highly successful people frequently recommend spending a percentage of your income on personal growth.
- Get rid of stuff and make more room for what truly matters. Author Wayne Mueller argues that every single possession we allow into our life requires more time than we think it will. Possessions need to be maintained, insured, cleaned, stored, and organized. All of this involves time. We suffer a kind of “death of a thousand cuts” that often leads to a strong undercurrent of chronic anxiety. If you want a great resource on how stuffitis and stuffocation can harm your mental health, I recommend you check out the Becoming Minimalist blog by Joshua Becker which now has more than 1.2 million monthly readers (I have no relationship with his blog). To use Becker’s tag line—“the life you want is hidden under all your stuff.” My wife and I are making headway this weekend by doing a minimalism purge day.
- Often the best things in life are free. Dr. Tom Stanley has perhaps done more studies on US millionaires than any other person. His studies show that most millionaires are actually quite frugal and live well below their means (which actually plays a huge role in how they became wealthy). But his surveys reveal what researcher Brene Brown also says—most of life’s best moments are free or nearly free. It could be putting your child to sleep at night, a conversation with your spouse, or a quiet morning walk through your neighborhood. Practicing gratitude for the simple joys of life works wonders for keeping us content and happy.
Thinking back to my 2012 trip to the Maldives—it involved building incredible memories with my wife and my best friend. It gave me something to look forward to for almost a year. It refreshed my soul. It also involved adventure, health, and growth—three of my core values. This helps explain why this was such an unforgettable experience!
Your homework—Turn information into action
- Take 15 minutes this weekend to identify one area you want to change above. Then experiment with a new way of spending right away. Write down what you experience.
- Use this list at your next family budget meeting to see how your spending habits line up!
- Read my previous blog post on the Hedonic Treadmill https://leadyoufirst.com/get-off-the-hedonic-treadmilll/
- Thomas Stanley—The Millionaire Next Door
- Shawn Achor—The Happiness Advantage
- Dave Ramsey—The Total Money Makeover