by Graham Witcomb
Money can buy happiness, to a point. As a child, you were probably told that money doesn't buy happiness. It turns out that this wise advice is wrong, sort of. Many studies have found that wealth is significantly correlated with subjective well-being, but only up to a point.
In 2010, a Princeton study by Daniel Kahneman and Angus Deaton found that earning more than $US75,000 per year won't significantly increase your day-to-day happiness. But don't worry. The fact that your financial achievements no longer fill you with undiluted pleasure may mean something else – that you're spending it wrong.
Most of us make the seemingly logical assumption that as material things last longer than one-time experiences, they should also make us happier for longer. A weekend getaway, we reason, is only good for a few days. A new TV, however, will give us years of enjoyment.
It turns out we have it backwards. We quickly adapt to ever-present material goods so their ability to make us happy diminishes over time. That new TV quickly becomes a "new normal".
A 1978 study found that even lottery winners get used to their new wealth and eventually revert back to their pre-win level of happiness. So, scratch that scratchie? Not just yet.
A 2014 study by Thomas Gilovich found that spending money on experiences, rather than goods, provides a
much greater and longer lasting sense of wellbeing.
The reason, Gilovich concluded, is that: "(1) Experiential purchases enhance social relations more readily than
material goods; (2) Experiential purchases form a bigger part of a person's identity; and (3) Experiential
purchases are evaluated more on their own terms and evoke fewer social comparisons than material purchases.
" Gilovich is suggesting that buying "stuff" to keep up with the Joneses won't make you happy but buying
experiences might.
And it turns out that one of the most satisfying experiences is spending the money not on oneself but someone
else.
In 2013, researchers at Harvard University approached people on campus and gave them either $5 or $20 and
told them to spend it by the end of the day. Half the participants were asked to spend it on themselves; the other
half were told to spend it on someone else. When asked what would make them happiest, most participants
predicted that spending more money ($20 versus $5) and spending it on themselves would do more for them
than giving it away.
However, when the researchers checked up on their subjects that evening, those who had spent the money on
someone else or donated it to the homeless reported feeling significantly better.
But there's a final twist: no difference in mood was found between those who spent $5 or $20 – which reinforces
the idea that it isn't how much money you have to spend, but how you spend it, that has the biggest effect on
your happiness.
Source:
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