How to Buy Happiness (Part 2)

In Part One, I explained how buying experiences rather than material goods promotes happiness.

Well, get ready for another bombshell. If you really want to buy happiness, spend what little money you have on other people.

Yep, that's right. It's scientifically proven that when people spend their money on others, it brings more joy than when they spend it on themselves.

A study conducted in 2013 is one of the most illustrative examples of this. The experimenters gave participants either $5 or $20 and directed some of the participants to spend it on themselves and other participants to spend it on someone else by the end of the day. Those who spent the money on others reported increased happiness while those who spent it on themselves experienced no change in their mood. Surprisingly, the amount of money didn't even matter. So even those who spent $20 on themselves did not experience the same boost in happiness that those who spent $5 on others.

This sentiment has been proven again and again. For example, people who give more of their annual bonus to charity or others report a higher degree of happiness than people who spend it on themselves.

So why does this happen?

People are social beings. Spending money on others promotes relationships and hence increases happiness. Spending money on others also improves our perception of ourselves. Ie, by viewing ourselves as altruistic, generous individuals we think more highly of ourselves. Third, when challenged to spend money on someone else, it usually forces people out of their routine schedule, bringing excitement into an otherwise monotonous day.

I had the opportunity to put this into practice a few weeks ago. When a customer gave me a $20 tip at work, I immediately thought about what I would spend it on...a new scarf, a fancy lunch, etc. But then I remembered this research and I resolved to find a way to spend it on others. Since my supportive coworkers were partially the reason I received the tip, I chose to spend it on them. I racked my brain for the best way to use it and eventually settled on purchasing a Groupon deal at a local bakery for $40 worth of pie for $20. The following day, I made a trip out to the bakery, picked out a few pies and delivered them to my coworkers as a surprise.

It was even more satisfying than I imagined to see my coworkers faces light up as they indulged in goodies I had bought for them.

So the next time you feel down in the dumps resist the urge to splurge on yourself. Instead, try buying something small for your mother, or sister, or best friend...or even the homeless guy on your block. Your wallet and heart will thank you!

How to Buy Happiness (Part 1)

Part of being smart about money is not just knowing how to save, but also how to spend. After all, money is meant to be spent. But for someone like myself who has such a small discretionary income, spending money is difficult for me so I'm intent on deriving the utmost pleasure from my purchases. In the first installment this two part series I'll share two ways in which I've found that money can in fact, buy happiness.

How? 

Spend your money on experiences not material items.

Why?

The Anticipation- Studies show that the mere anticipation of going on a trip, seeing a concert, or enjoying a good meal boosts people's level of happiness.

Eliminate Comparisons- Every new product on the market (phones, computers, cars, even shoes) are quickly replaced by a newer model. The worth of your purchase is directly correlated to the "newness" of the product and your happiness inevitably decreases as the novelty wears off and others get a newer version of whatever you've got. The same can't be said for the memories you make while taking a painting class or visiting a new city.

Shared Experiences- It's human nature to feel happy while surrounded by the people you love.  And since most experiences involve other people, it's no surprise that more happiness is derived from purchasing an experience rather than material item.

Over the past year, I've challenged myself to spend less on material goods and more on experiences. For a clotheshorse like myself, it's been a bit of a struggle. Last Christmas instead of asking for a gift from my younger brother, I requested he use the money he would have spent on a present to buy a train ticket to visit me in New York. It's hard for me to think of a material good of the same value (about $30) that would have brought me more enjoyment than hanging out with my bro for the day.

Stay tuned for part two where I'll reveal another way that money can buy happiness ;)