Follow the Happy Money

By Ben Dolan

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In August my Mom had her fourth ankle surgery in the last 5 years (and hand surgery 3 years ago). At 72, psoriatic arthritis and osteoarthritis are starting to take a toll on her. During this difficult change in her health, through which my Dad has been there to help her each step of the way (thank God!), I’ve noticed another interesting change in my parents: the way they spend their money.

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Before my Mom started having health issues, when visiting for the holidays or otherwise, my parents were happy to spend on the latest kid fads (pokemon cards, fidget spinners, etc, etc). But, as my Mom’s health started to decline, I noticed that my parents started to get specific with their gifts. In particular, they requested that money gifted to us be used for a family experience or activity. In short, they want us to build memories together through lived experience. As it turns out, this is the kind of happiness money can buy.

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In their 2014 book Happy Money, Elizabeth Dunn and Michael Norton unearth the research linking money and happiness. While more money may not lead to more happiness, it turns out that certain spending can have a positive impact on happiness. As noted by Michael Kitces in his review of the book, those spending decisions fall into five categories:

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Buy Experiences, Not Stuff

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‍“The significance of this distinction is critical; it means, given the opportunity to spend money, choosing to purchase a vacation, engage in an event, or have some other experience, can lead to far more happiness than purchasing the new big-screen TV, the nicer car, or the bigger house. And notably, the research suggests that the length of the experience is less critical than just having the experience; one study found that 4-day vacationers were as happy as 14-day vacationers, and overall the studies suggest that the best experiential purchases involve a social connection to make it a shared experience.”

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Make It A Treat

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“Dunn and Norton suggest that an effective strategy for making spending more enjoyable is to vary what you purchase, giving yourself the opportunity to experience something anew as a fresh treat. A regular Frappuccino may become dull and boring, but a standard daily visit to Starbucks for normal coffee, with an occasional Frappuccino mixed once a week, is a treat. Notably, our urge to enjoy the experience of a treat is the same reason that businesses often give “limited time offers”, and in fact research has even shown that we actually enjoy television more when it’s interrupted by commercials (although we don’t think we will!), because the return of the regularly scheduled program then becomes a small treat and breaks up what otherwise becomes diminishing enjoyment of sustained watching!”

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Buy Time

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“The point here is not to obsess about time and time management, but simply to recognize that where there’s an easy opportunity to go the extra step of spending a little more in dollars to get back a little more time, it’s generally going to be a net positive for our happiness potential. Similarly, this also suggests why it can be so valuable to simplify one’s financial life; complexity demands time to manage it, and if greater material affluence leads to diminished time affluence, the net result may not be positive!”

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Buy Now, Enjoy Later

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“the anticipation of buying it now and waiting to get it can actually make you even happier with the result. This may be especially true for experiential purchases, where the experience itself may be relatively brief, but the anticipatory build-up extends the period of enjoyment and excitement for far longer (and is also why we seem to derive more enjoyment from the all-expenses-paid [up front] vacation that allows us to just enjoy the moment while we’re there!).”

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Spend On Others

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“While much of the focus on how “money can buy happiness” is about spending on ourselves, it turns out that one of the most effective ways we can put money to use to create happiness is spend it on others and give it away. In fact, the research finds that “prosocial spending” – money spent on/for others – is actually far more correlated to happiness than how much we spend on ourselves (even though the bulk of our spending is still on ourselves). In one global study, the fact that someone had donated to charity in the past month was as much of a happiness boost as doubling household income! More generally, Dunn and Norton’s summary of the research suggests that more we feel our altruism is a result of our active choice, the more we feel connected to the subject of our giving, and the more we feel our giving has an impact, the more we want to give and the greater the happiness we derive.”

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My parents are wise to combine many of these categories into one gift for us. And with the help of modern medicine, I hope my parents will be able to enjoy many of these family experiences with us for years to come.