Reading Corner is a segment for review of books on personal finance, frugal living, personal development, and related areas. My hope is that we can discuss the books together. Your thoughts on these books and recommendations for others are always welcome.
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Reading Corner: A Review of Happy Money
“Money can’t buy happiness” or so we’ve been told. In fact, according to Elizabeth Dunn & Michael Norton, authors of Happy Money: The Science of Smarter Spending, money can buy happiness if spent in the right ways. Here are five principles they recommend following in order to spend money and improve your happiness.
1) Buy Experiences
Spend money on experiences rather than material goods. Why? People place great value on their experiences because they build memories, whether good or bad. How often have you said, “I wouldn’t trade that vacation, first date, or time with so-and-so for anything” because of how much you value the memory of that experience?
The authors note that people’s biggest regrets are often those of inaction, meaning missing out on an experience. The biggest regrets are rarely about material goods.
2) Make It a Treat
People appreciate good things even more when they are scarce or rare. The novelty of new items and experiences wear off the more and more you are exposed to them. Think about the excitement of driving a new car on the first day after you purchase it versus driving it one year later, or the first bite of a long-awaited ice cream versus the twentieth bite. Make enjoyable things a rare treat for yourself in order to appreciate them more.
3) Buy Time
This third principle targets changing how you view time versus money. You’re probably familiar with the saying “time is money,” but thinking about time as money is actually detrimental to happiness. The authors encourage people to counter this by making having happier time as an end goal instead of counting time in dollars.
4) Pay Now, Consume Later
Pay now and consume later, or delay your gratification, for increased happiness. Anticipation is a strong booster of happiness. Think about this: anticipating a vacation can provide even more happiness than being on the vacation or thinking about it afterward!
This is in contrast to how we use credit cards, which are based on the model of consuming now and paying later. Credit cards separate people from the “pain of paying” because consumption can be immediate while payment is delayed. This leads to spending more than expected. Do you ever try to guestimate the balance of your credit card bill before looking at it? You probably guess lower than it really is! One way to fight that overspending is to pay in cash whenever possible.
5) Invest in Others
Give to others to improve your happiness. The authors state that giving can increase happiness, health, and the feeling of wealth. Remember how you felt the last time you chose to donate to a person or organization you valued? It feels good to give!
As we move further into the holiday season and get closer to the new year, these principles are great guidelines to help you think twice about what to buy and give yourself and others. How would your partner feel about being given the experience of a romantic wine tasting trip instead of receiving a new gadget? How will you feel about waiting until January for a day at the spa instead of booking one for next weekend?
If you’re interested in learning more about these principles, including the research behind them, additional real-life examples, and other author insights, I recommend reading Happy Money. The book is easy to read and takes only a few hours to finish. And in money-saving fashion, I suggest trying to borrow it for free from your local library before purchasing a copy.
What are your thoughts on the five principles? Have you increased your happiness by implementing any of them in the past or currently?