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Wednesday, August 31, 2011 Post By: Grayne Wetzky

How money can make you happy

Money can't buy happiness. We've all heard this and yet we all look for ways to have more money. People don't act in accordance with the near universal knowledge that happiness is not for sale. Often you hear that this is because people are shortsighted and go after the wrong things in life.

Interestingly enough, it is not true that money can't buy happiness. Virtually anything you can do that makes you happy is easier to do if you have more money. Having enough money saves people a lot of worry, frees them up to spend more time with people they love and gives the opportunity to eat better and stay healthier. 

All of these things are instrumental in increasing happiness, and can all be had for cold cash. Still, the connection between wealth and happiness is incredibly weak. People with more money are just marginally happier than people with little money. To some this might show that it is indeed true that happiness can not be bought. The real reason however is that people don't know how to use their money to be happy.

There are certain money spending strategies that have been shown to make people happier. The good news is that even if you don't have a lot of money, by spending your money the right way you can dramatically increase your happiness.
The Journal of Consumer Psychology recently released a discussion on happiness related research that identifies principles that will increase the satisfaction people get from the way they spend their money.

Buy experiences

Buying things provides a short boost in happiness, but the effect is not very lasting. We get used to new things very quickly and soon after a big purchase will be looking for the next product to provide the same short term happiness. Some times buying things even has a negative impact on our mood. The product turns out to be less exciting than anticipated or the price gives us buyers remorse. The research shows that spending money on experiences provides a much more sustained feeling of happiness. When we go to new places or learn a new skill we can derive happiness from the memories for a long time. Experiences doesn't even have to be expensive and time consuming travels. As long as we stay focused on the things we are doing, people tend to derive happiness from all sorts of activities. The key is to stay focused on your current activity and not let the mind wander.

Buy many small things rather than a few large ones

Buying things does provide a temporary sense of happiness. The level of happiness we experience however is relatively unaffected by the magnitude of the purchase. For example, splurging on a cup of coffee in the morning might not provide the same sense of joy as buying a new car, but for most people they can buy a designer cup of coffee a lot more frequently than a new car. No matter how grand our purchases are we eventually get used to them. This is the reason why you will get more happiness bang for your buck by making frequent small purchases rather than infrequent larger purchases.

Don't use credit to buy things

If you want to buy something, save your money before you buy it. Not only will this save you the grief of paying off the purchase, you will also get to experience the happiness of anticipating the purchase. In America we are getting 'instant gratification' presented as a way of life. There is however satisfaction to be found in working towards a goal and seeing it true. When you have been planning for and saving up to a big purchase it builds anticipation and when you finally get to buy what you wanted it can be very rewarding.

Spend money on others

Most people experience more happiness when they give to other people. This can take the form of gifts to people we care about or as charitable donations. Anything that brings us closer to other people is virtually guaranteed to increase our happiness. Spending money on other people is one way to develop a closer connection.

Don't look back

 Most retailers offers money back guarantees and extended warranties to make it easier to commit to buying a product. While this might seem like a reasonable insurance against buyers remorse it can actually decrease the happiness derived from a purchase. The option of returning a product will often lead to constantly going back and reassess the purchase in case it 'should' be returned. This can diminish the enjoyment you get from a new purchase. To gain the most amount of happiness from something you buy, decide before hand that the product is something you really want to buy and stick with it. Instead of questioning if you made the right decision, spend your energy enjoying your new item.


Having money can be a powerful tool to increase your happiness, but like any tool it has to be applied correctly.



  1. @Brian, Thank you again. It is important to understand that buying things has very little effect on how happy we are, but it is also important to knowledge that financial security can be a powerful tool for building a rich fulfilling life.

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