It’s natural to think that the more money you make, the more you can spend, and thus the happier you will be. But as you make more and spend more, you quickly discover a disconnect in this logic.
Happy Money is a recently-updated book (Elizabeth Dunn, Michael Norton) about the science of spending and how to make yourself happier when you spend. The principles are simple, yet we often overlook them. I’ll refer back to these principles frequently on this site, so here they are:
1. Buy Experiences. The best way to look at this is to consider the opposite first. Odds are, when you bought your current car, you were pretty stoked about it. You drove it just to drive it, to experience it. After a couple years you got less satisfaction out of it and looked at it as more of a mode of transportation.
Compare that to some experiences you’ve had, whether they were vacations or evenings out with friends. Do you have a memory or two that you remember often?
This is why you should buy experiences. Experiences give you joy well after you’ve bought them (if they even cost money). Physical goods eventually don’t give you happiness. You end up upgrading, enjoying it for a period of time again, and then continuing the cycle.
I hadn’t really thought about this before reading Happy Money. I used to think spending money on experiences was throwing away money since you had nothing to show for it when you were done, as opposed to buying a physical item.
2. Make it a Treat. Simply: if you get something too often, you take it for granted.
Remember the first time you flew first class and thought it was awesome? After your tenth time, you probably appreciated it less. You start nitpicking the first class experience and the food.
Perhaps a couple flights in economy will make you appreciate first class again.
3. Buy Time. Spend money on things that save you time, so that you can do things you enjoy with your time. One great and reasonably-priced timesaver: a Roomba vacuum.
4. Pay now, consume later. Since this site is geared to people with savings, I’m going to assume you aren’t sitting on a mountain of credit card debt. But the principle of paying now and consuming later is still relevant.
The key is to separate the payment process from the use of any major purchase, be it a vacation or a car. Buy your flights a couple months in advance. Consider paying in advance for a vacation rental. When it comes to to enjoy it, you won’t have to think about the cost.
Growing up, I was told to delay the payment process as long as possible to earn interest on the float. That’s not very relevant when bank accounts are paying less than 1% interest!
5. Invest in Others. In other words, help someone out. Donate time or money.
It is amazing how good it feels to help someone out. I’d argue that spending time helping someone feels much better than writing a check, which is a topic for another day.
It’s funny how the old adage “Buy low, sell high” is rarely practiced.