By Joni Lindquist

There has been quite a bit of research in recent years regarding happiness and its tie to money.  At a high level, people with higher income/lifestyle are generally happier.  However, happiness may stem far more from how you spend your money rather than how much money you have.  It is similar to Maslow’s hierarchy of needs – once your basic living needs are met, the next dollar above that loses its marginal appeal.

As one client said to me recently, “I want to buy experiences, not more stuff.”  She hit the nail on the head.  However, we often think that buying stuff – a bigger house, a new electronic gadget, a fancy car – stays with us longer since it’s tangible, so therefore we derive more happiness from it.  This is not necessarily true.  A study in The Journal of Positive Psychology shows that we have a tendency to underestimate the value we get from our experiences:

The Lasting Benefits of Experiential Purchases:

When asked, “Did you feel your money will be/was well spent?” (1 = not at all; 7 = very much)

Kansas City

Source: Wall Street Journal, citing Journal of Positive Psychology

So how we spend our money, such as using it for experiences or for helping others, provide greater happiness than buying material goods.  This makes sense.  When you plan a vacation, the joy is threefold – there is excitement in anticipating the trip, there is the actual experience that most often is shared with others you care about, and lastly you have the memories of the trip that stay with you.

We tend to spend a lot of time in determining how much we can spend in our annual budgets.  But perhaps we should be concentrating just as much in what we are spending our money on and if it is providing us a sense of happiness.

In their book, Happy Money: The Science of Happier Spending, Elizabeth Dunn and Michael Norton list five ways that money can “buy” happiness:

  • Buy Experience, not Stuff
  • Make It A Treat
  • Buy Time
  • Buy Now, Enjoy Later
  • Spend on Others
  • Make it a Treat – we sometimes encourage clients who receive a large bonus or cash windfall to treat themselves, and then save the rest. One of the challenges in buying stuff is that we as humans eventually become familiar with it, so we no longer place much value on it.  That new car is no longer new in a couple months.  Perhaps spend it on an indulgence – something you wouldn’t normally do.  Oops, there’s that word again – “do” rather than “stuff.”   It might lead to more happiness if you treat yourself to an experience – a massage, a fancy dinner, or tickets to a concert.
  • Buy Time – given our 24/7 connected life, demanding careers and busy schedules, time is our most precious commodity. I believe that buying time is one of the best ways to spend money and increase happiness.  It’s best when you consciously use that time to do something fun, rather than just work more.  I have outsourced cutting my lawn and cleaning my house for years, as I know this frees me up on weekends to play golf, go cycling, spend time with family and friends and do other fun activities that make me happy.   I’d rather keep an old area rug that probably needs to be replaced than cut back on free time.  These fun times are way more important to me.  How about you?
  • Buy Now, Enjoy later – this is similar to buying trips/vacations; with the anticipation part of the happiness effect. We find this one a little harder in our instant gratification society.   Basically, if you bought something positive, the anticipation will often increase the overall positive emotion once you “get it.”  I know when I’ve waited for a large purchase and the delivery – most recently was my Sleep Number bed I bought last year – I was mighty giddy when it showed up.  And I remain so.  How much is due to the anticipation versus the nightly “sinking in” feeling that reinforces the purchase, I don’t know.  But I do know I was very happy when the bed arrived!
  • Spend on Others – (see recent blog post regarding 10 ways to do good). This makes intuitive sense to me.  As adults, we derive happiness when we help others.  It’s more fun to find a truly unique gift for a loved one than the gift you receive.  At KHC, we work with our clients on their charitable plans and for many, this is a key component of their financial plan.  We also see clients who spend much of their money on adult children, or support siblings or parents. This is very important to them and often they will alter their lifestyle to help others.  Research suggests they are happier for that trade-off.

As we enter a new year, I encourage all of you to focus more on how you spend your money and ask yourself if the way you are spending is creating happiness for you.

For help building a financial plan, schedule a meeting by clicking below, contact Joni Lindquist –, or call (913) 345-1881.

Photo credit: PC – My Shots@Photography / / CC BY-NC-ND