Visit any Barnes & Noble and the financial shelves
will be chock full of books telling us how to make money, or invest it
more wisely. But a new book called “Happy Money: The Science of Smarter
Spending,” by Elizabeth Dunn and Michael Norton, presents an entirely new
perspective – challenging us to focus instead on how we spend money (one of the book's taglines: "If you don't think money buys happiness, you're just not spending it the right way"). Dunn and Norton’s bottom line: when it comes to
swiping your credit card, don’t always trust your instincts – trust the research
(which forms the basis for their five principles).
Said one reader, whose book review appeared at
goodreads.com:
“Once you get past a certain level of income, where your basic needs
are met, having more money doesn’t make you happier. But HOW you spend your
money CAN make your happier. Spending your money on experiences, delaying
gratification, etc. can make you enjoy what you do spend on.”
Here then are Dunn and Norton’s five principles:
1. Buy Experiences. The authors maintain
that spending your money on experiences will, in the long run, create more
happiness than purchasing material objects.
Experiences yield social connection and interaction, and therefore lead
to more happiness (and better stories) over time.
2. Make It A Treat. Author Dunn told
RadioBoston: “The fundamental barrier to human happiness is our tendency to get
used to what we’ve got.” The point is transparent – the more you are exposed to
something, the less impact it has. In
her interview with RadioBoston Dunn said people should “think about what they
like best, and save it for special occasions, or take a break between
indulgences.” The authors encourage us to “turn our favorite things back into
treats.” Observed Barry Schwartz, in his
book review for the LA Times: “There isn’t much point to drinking $50 wine if
it starts tasting like $10 wine, so keep that good wine for special occasions,
no matter how rich you are.” Added Schwartz: “Adaptation to good things may be
the biggest challenge we face when it comes to getting satisfaction out of our
lives.”
3. Buy Time. Dunn and Norton urge us to
ask one simple question before buying: “How will this purchase change the way I
use my time?” The authors explain: “When people focus on their time rather than
their money, they act like scientists of happiness, choosing activities that
promote their well-being.” Norton told RadioBoston: “Time is such an amazing
and valuable resource that we feel so restrained. It can be more motivating
than money.” RadioBoston sums up the authors’ intent: “Purchases that lead to
more free time, or time spent more productively or with friends and family, are
better than material goods.”
4. Pay Now, Consume Later. Imagine if you
walked into a restaurant and paid for the meal right away. Then, after your drank the wine, and consumed
the delicious appetizers, entrée and dessert, you just left. No bill to reconcile at the end. How would that make you feel? That’s the
basic principle underlying principle #4, which, interestingly enough, is the
opposite of how we use credit cards (consume now, pay later). Explained
Schwartz: “When we separate the moment of purchase from the moment of
consumption, we gain in two ways: we separate the costs from the benefits in
time. And we get to savor the thing or experience we’ve purchased in the time
period between the moment of purchase and its consummation.” So the next time
you buy tickets for a concert or a play, focus on the joy of anticipation.
5. Invest in Others. It’s a familiar recommendation, and the
research in this area is sound: people feel better when they spend on others, rather
than themselves. But not if we’re pressured to spend (as in charitable
donations) – that often makes us feel worse. And the research says that these
principles are true across cultures and are detectable “among children before
the age of two,” according to the authors.
So the next time you spend some money, make sure it’s
Happy Money. You’ll be richer for it.
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