Author: Mary Beth Storjohann
Contrary to popular belief, financial peace and happiness is not brought on by the amount of money you earn, but instead by where we allocate the money that we do keep. When it comes to our finances, there’s a battle that we often face: Do we spend our money on possessions or do we spend it on experiences? And in the end, which will make us happiest?
Research done by Elizabeth Dunn and Michael Norton, academics and authors of Happy Money shows that though many fantasies of wealth involve fancy homes, expensive cars and designer wardrobes, the satisfaction that comes with these possessions actually wears off pretty quickly and one left with is a feeling of guilt and a pursuit of the next thing or object to being you happiness.
Instead of focusing on the items and possessions you can accumulate (which tend to lose value immediately after you purchase them), turn your attention to experiences when you’re spending your money. Whether you’re looking for a new vacation spot or trip, a dining event to remember or a basic date to an amusement park or winery, think about the memories you can create, who you’d most enjoy having the experiences with and set a goal of making them happen. According to Dunn and Norton, these experiences translate into more happiness because they’re associated with memories – which typically involve those you love and enjoy spending your time with.
If you’re struggling on where to start, here are 6 ways to gear your spending towards your happiness:
Figure out your values and kick FOMO (fear of missing out) to the curb: Decide what is most important to you about life and money. Is it time with family? Flexibility in work? Freedom to do what you want, when you want? Giving back? Security? Once you know where your priorities lie and you set clear-cut goals around them, you’ll be able to tune out the noise and distractions you likely face on a daily basis from social media, advertisements, and more. Knowing your values makes it easier to say “no” to the “shiny objects” and things that don’t matter and instead direct your dollars towards the things / experiences that are important to you.
Spend money on others: Whether it’s buying a latte for the next person in line at Starbucks, donating to a cause dear to your heart, or purchasing a meaningful gift for a friend or family member; the feelings associated with doing something good for someone else can outweigh the satisfaction of spending money on yourself.
Practice delayed gratification: Think about when you book a vacation. If it’s a couple months into the future, chances are you’re pretty excited about the trip and the potential fun you’re going to have right up until you leave. Who knows if the vacation will actually live up to your expectations, but chances are you are pretty happy thinking about it while waiting to embark. Book your trips now (and a few of them throughout the year if possible), but wait a bit until you actually leave. This will translate into extended periods of happiness.
Choose experiences over possessions: Chances are it’s the times spent with friends, family, out to dinners, on European or tropical vacations, hiking, game nights and more that you’ll look back on to make you happy. When spending your money, keep this in mind. If you are spending it on possessions, try to make them a part of experiences such as playing dress up with your daughter in the new clothes you bought, or using your new laptop to launch a side business pursuing your passion. The experiences tied to the possessions can give more happiness than the possession alone.
Focus on the little things. Instead of saving up for one big trip in the summer, why not take three smaller trips throughout the year? Or instead of quitting your latte habit completely – why not indulge once a week to make it a sweeter experience? The pleasant smaller experiences we have on a more consistent basis can translate into a larger happiness effect in the long term.
Invest in yourself: Consider investing your money in your personal growth. Whether it’s taking guitar or cooking lessons, learning a new language, starting kickboxing or taking improve classes at a local theater, spending your money on personal development will allow you to feel more satisfied and happier in your life as you achieve new milestones and gain new skills.