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If Money Doesn't Make You Happy, then You Probably Aren't Spending it Right

There is a weak correlation between money and happiness. The reason for this weak connection is caused by the way people choose to spend their money. In order for money to make a person happier, it should be used as follows:

1. Money should be used to buy more experiences and fewer material goods.

2. People should use their money to benefit others rather than themselves.

3. Money should be spent in order to buy more small pleasures rather than just a few large ones.

4. Money should not be spent on overpriced insurance.

5. Consumption should be delayed.

6. One should consider how peripheral features of their purchases may affect their day to day lives.

7. People should be aware of comparison shopping.

8. People should pay close attention to the happiness of others.

Many studies about money have proven that money buys happiness, but the truth is that money buys less happiness than people expect. Assuming that people spend money how they please, they should be pleased when they spend it. A possible solution to this contradiction is that the things that bring happiness simply aren't for sale. Although, this is a lovely statement if it were true. The statement is incorrect.

Money has been proven to allow people to live longer and healthier lives, allow people to buffer themselves against worry, and allow for people to have leisure time to spend with friends and family, and allows people to control the nature of their daily activities. Wealthier people also tend to have better nutrition, medical care, more free time, and more meaningful labor. All parts of a happy life. Yet, the people with these privileges aren't that much happier than those that have less.

This phenomenon occurs because people don't know how to spend their money. Money is an opportunity for happiness that is often squandered because people buy what they think will make them happy instead of the things that will actually make them happy.

Buy Experiences Instead of Things

Experiential purchases are made with the primary intention of acquiring a life experience while material munchies are made with the primary intention of acquiring a material good.

Over the long term, experiential purchases pay dividends in happiness while material purchases lose their effect on happiness over time. This is because experiential purchases are more frequently revisited. We do this because our experiences are centrally connected to our identities.

Help Others Instead of Yourself

Humans are social creatures and because of that, the quality of our social relationships is a strong determinant of our happiness.

People who spend more money of gifts for there's and donations to charity reported more happiness than people who spent more money on bills and expenses and gifts for themselves at similar or lesser incomes. This is because prosocial spending are strongly correlated with strong social relationships which are universally critical for happiness.

For the case of giving to charity, this type of spending on others allows for the opportunity for positive self-presentation which has shown improvements to one's mood and can even help facilitate the development of social relationships.

Buy Many Small Pleasures Instead of a Few Big Ones

It is inevitable that we adapt to our environment. Therefore when it comes to things that money can buy, we ultimately get used to them. That means that indulging in lattes, pedicures, and high thread count socks instead of sports cars, luxury vacations, and front-row concert tickets lead to more frequent doses of lovely things rather than infrequent doses of lovelier things. This is because money is a finite resource.

The case for many small pleasures is that more events lead to more opportunities of experiencing novelty, uncertainty, and variability. These characteristics make events and things harder to understand and as a result lead to having us pay more attention to them.

Large pleasures are more susceptible to diminishing returns. For example, eating a 12 oz cookies is not twice as pleasurable than eating a 6 oz cookie, but eating two 6 oz cookies on two different days is more pleasurable than eating a single 12 oz cookie in a sitting. This is because there is a temporal discontinuity between the experiences that make the experiences harder to adapt to. When you're eating one cooking in one sitting, you know what to expect, but when eating two on separate occasions, there are other factors that are at play that can affect happiness.

When it comes to wealthy individuals, they are not as prime to have a strong capacity to savor the mundane joys of daily life than less wealthy individuals. Actually, the positive impact of wealth is undercut by the negative impact of wealth on savoring.

Buy Less Insurance

Humans are adaptable creatures able to adapt to both good and bad things. People are not emotionally fragile creatures but we overestimate our own vulnerability.

Businesses take advantage of this by offering various forms of insurance against unhappiness. More often than not theses policies mostly benefit the seller and are widely acknowledged to be bad bets for the buyer.

People knowing that they are stuck with an object saw the object in a more positive light than they had initially. In contrast, people who knew they could exchange the poster at anytime were deprived of the emotional commitment and did not see the poster more attractive over time.

This means that insurance policies actually are unnecessary for happiness and the policies actually undermine it.

Pay Now and Consume Later

Overtime, financing has developed an industry that allows customers to consume now and pay later. This shift towards immediate satisfaction leads to shortsighted behavior and eliminates anticipation. That means people end up less well off as people make impatient decisions. Also, delaying gratification leads to more pleasure from the object or event due to anticipation. This is because people see the present under an emotional magnifying glass meaning that we see immediate satisfaction more closely than satisfaction that is delayed. Delaying gratification also introduces elements of uncertainty. These elements of uncertainty are what can help counteract the process of adaptation.

Beware of Comparison Shopping

Recent studies have shown that comparison shopping comes at a cost. This is because comparison shopping distracts consumers from attributes of a product that will be important for their happiness, focusing instead on attributes that distinguish the available options.

Comparison shopping focuses consumers' attention on differences between available options leading them to overestimate the impact of sleeting more versus a less desirable option. This is made worse by the fact that when we are comparison shopping, we are not making the same comparisons we will make when we consume what we've shopped.

When it comes to comparison shopping, we go through a lot of stress for the options that we did not choose to recede in the past and no longer be used as standards for comparison.

Follow the Herd Instead of Your Head

Nowadays with the internet, you can get a breakdown of every product or experience down to the gritty details, or you can choose to ignore all of that and go off of user ratings. Research suggests that the best way to predict how much we will enjoy an experience is to see how much someone else enjoyed it.


When asked to take stock of their lives, people with more money report being a good deal more satisfied. But when asked how happy they are at the moment, people with more money are barely different than those with less. This suggests that our money provides us with satisfaction when we think about it, but not when we use it. That shouldn't happen. Money can buy many, if not most, if not all of the things that make people happy, and if it doesn't, then the fault is ours. We believe that psychologists can teach people to spend their money in ways that will indeed increase their happiness, and we hope we've done a bit of that here.

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