“Money is of no value; it cannot spend itself. All depends on the skill of the spender.”

Ralph Waldo Emerson


“Whoever said money can’t buy happiness didn’t know where to shop.”

Gertrude Stein


Money may buy happiness according to growing evidence done in recent years. These results say that it is up to you.

That is good news! I grew up on the notion that an excess of money may lead to feeling miserable. However, wealth alone is not a guarantee of a good life. It can help you with your goals, make relationships easier, and give you an opportunity to be happy.

5 Ways How Money Can Buy Happiness:


#1 A Certain Income Level May Do The Trick

A 2010 study by Princeton University researchers Angus Deaton and Daniel Kahneman found a $75,000 salary to be an optimum level for two types of happiness: day-to-day emotional mood and a deeper life satisfaction.

Their work was based on 450,000 Americans polled over two years by Gallup and Healthways. Respondents were questioned on their satisfaction, income, and adversities like lower income, divorce, and health issues. The more that income fell below the $75,000 benchmark, the unhappier people felt. However, those who made more than that amount did not report a greater amount of happiness.

Another study at Purdue University and the University of Virginia found $95,000 to be an ideal salary for life evaluation or satisfaction and $60,000-$75,000 associated with emotional well being. Their research was based on an audience of 1.7 million people in 164 countries in a Global Gallup Poll.

Income Levels By Standard Of Living

Income levels varied by each country’s standard of living. Northern America (Canada and the US) required a higher level of $105,000.

The Purdue study found that earnings above the ideal threshold tended to coincide with a lower level of happiness. This suggests the more you make, the more you tend to spend. As such, this results in higher costs that often accompany higher income leads to lifestyle inflation.

Andrew Jebb, the lead author of the study,  pointed to a degree of happiness through the fulfillment of both basic needs and increasing material needs. Evaluations tend to be more influenced by people comparing themselves to other people. This adds to the old adage “Keeping Up With The Jones’.”

related post: 9 Ways To Avoid Lifestyle Inflation With A Savings Plan

#2 You May Not Be Spending Your Money The Right Way

Consumers can realize more happiness if they spend their money according to core principles as recommended by psychologists Elizabeth Dunn, Daniel Gilbert, and Timothy D. Wilson. Their work was published in the Journal of Consumer Psychology.

Dunn and her colleagues have been proponents of the relationship between money and happiness so long as you adhere to the following eight tenets that I find particularly resonating for consumers:

Buy More Experiences

For some of us, spending money on a new dress, a purse, gadgets, or other material goods can make us feel good. The question is what produces longer lasting benefits: material or experiential purchases?

An experience can be a walk on the beach, an exotic or family vacation. True, not all experiences are good. The benefit of a great experience may allow for revisiting that happy memory. When my children were younger, we often picked pumpkins at a farm, had apple cider, and visited the animals that lived there. We all remember the fun we had. I’m pretty sure we bought our kids souvenir t-shirts, lanterns, and hats but don’t recall those items being used.

Giving to Others

Ever feel a high from helping someone in need? I have and I am sure I am not alone.

The smallest gesture can mean so much to another that we are sometimes embarrassed that we didn’t act sooner. Making donations to your favorite charities feels good. Slipping a small bill to someone on the street provides us with an even greater satisfaction because it is an intimate form of giving.

This is called “prosocial spending.”  There is a positive impact on our social relationships when we practice this type of giving. Giving a friend a book you enjoyed or a tasty treat improves our bond with that person.

Treat Yourself To Small Pleasures

When we make small purchases we are treating ourselves with relatively inexpensive pleasures. Happiness is closely associated with the frequency of these treats. As financial resources are relatively finite, we are better off making smaller purchases.

Hedonic Buys

Dunn and her colleagues point to the lesser likelihood of adapting to this lesser and more limited spending. On the other hand, we adapt more quickly to the more expensive purchases if habitual. These are referred to as “hedonic buys”  that are consumed for luxury purposes.

Let’s say you buy high-end specialty coffee drinks like cardamom lattes at $9 a pop on a daily basis from Starbuck’s Reserve Roastery. Over a short period, you may get accustomed to this rather expensive habit and it is no longer special.

When we buy showy sportscars or a bigger house, it may be consistent with our spending habits. We may not even enjoy these consistent expensive purchases as much because we are so used to these luxury goods.  This is classic lifestyle inflation, with more spending “required” to feed your happiness.

Related Post: 9 Ways To Avoid Lifestyle Inflation

Buy Less “Overpriced” Insurance

Extended warranties can be a waste of money for consumers. From appliances to electronics, extended warranties may cost up to 50% of the product cost. From the retailers’ point of view, the margins for this kind of insurance tend to be very high. This practice explains the heavy-handed sales pitches we receive at the counter. Extended warranties, often unnecessary, add juicy commissions to the sales ticket. Consumer Reports recommends that you should research the manufacturer’s initial warranty which often covers the product for at least 90 days.

Pay Now, Consume Later

In our credit card-oriented society, we are conditioned to spending consumption and pay our bills later. We get immediate gratification from our purchase which often doesn’t last as long as the bill on our card balances. Delaying gratification may sometimes allow us to feel the pleasure longer.

When booking a vacation, pay for it in advance, rather than purchase it on your credit card. Your enjoyment may last longer.

Think About What You’re Not Thinking About: Remember The Details

This is psychology at its best. We often focus on the best qualities of a purchase. By doing that, we minimize or ignore other features that may be critical. I know I have experienced this in some of our biggest purchases only to regret it later.

Let’s say you want to buy a vacation home. You may be drawn to a cottage for its location and its charm, ignoring some of its downsides. Having a limited budget for your second home, you need to understand potential costs. Buying this cottage may require a lot of updating inside and outside of the building. Had you considered those costs, it may have helped you to negotiate the price down.

Related Post: How To Overcome Biases In Financial Situations

Beware Of Comparison Shopping

Searching for a certain product that is available through different brands, we may use several websites like BizRate and Shopping.com that may help us compare them. Retailers know comparison shoppers are ideal audiences for promotions because they have high-intent to purchase.

The authors say these sites may offer comparisons based on available options rather than the attributes buyers are seeking. They may be purposely distracting you from what you really are specifically looking for.

Follow The Herd Instead Of Your Head

The authors say you should read reviews available and pick your movies, reading, and restaurants based on better customer ratings. By paying close attention to the happiness of others, you may better glean what you prefer.

I have found some reviews can be helpful though artificial intelligence though at times they be faulty. Netflix recommends the next film we should watch. However, after I watched a murder mystery, Netflix recommended I watch Chitty Chitty Bang Bang. Hmmm.

#3  Buy What Fits Your Personality

A Cambridge University study in 2016 looked at how spending increased happiness when the purchases were for goods and services that matched the consumers’ personalities.

This ambitious research by psychologists Sandra Matz, Joe Gladstone, and David Stillwell reviewed 76,000 UK-based bank transaction records of customer purchases of 112 categories. Their study focused on Big Five personality traits: Openness to Experience, Conscientiousness, Extraversion, Agreeableness, and Neuroticism.

The study proved that money can buy happiness if spent according to the right psychological fit. Our personalities influence our spending for experiential purchases, material goods or to buy for others.

This is similar to how we choose people to spend time with. We often pick our friends or close colleagues because our psychological fit matches with theirs. We are also happy to spend money individually according to our psychological makeup.

#4 Trade-Offs Between Time And Money

The relationship between time and money is well established. An old proverb “time is money” equates the two variables. However, we put different values on time and money. Time is a limited resource. Whether it refers to 24 hours per day or a lifetime, time is finite and money is less so.

Saving money versus saving time was the theme of the Harvard Business School 2017 study by Ashley V. Whillans. Rising incomes around the globe have often been met with stresses of time. More than 6,200 adults were surveyed in the US, Canada, Denmark, and The Netherlands.

Buying Some Time

This study set out to examine how to reduce stressful feelings of time scarcity. The growth of the sharing economy has made time-saving services for household chores increasingly available Those surveyed allocated discretionary income at $80-$99 per month to buy time-saving services such as meal delivery, house-cleaning, and lawn services.

Their study found people realized greater life satisfaction when linked to spending money for these time-savers by reducing their stress.

Marital Bliss

In a 2018 Harvard Business School study led by Whillans, over 4,000 cohabitating adults (ie. committed adults) extended the above research. Disagreements about household chores are a primary source of relationship conflict. 30% of the respondents cited disagreements over household chores as the number one reason for divorce.

Here, it was found that time saving purchases promoted relationship satisfaction, based on bought “marital bliss.”

There is a Chinese proverb:

“If you want happiness for an hour, take a nap. If you want happiness for a day, go fishing. If you want happiness, get married. If you want happiness for a year, inherit a fortune. If you want happiness for a lifetime, help somebody.”

#5 I would note a few other ways that  money can make us happy for a lifetime:

  • Spend less than you make.
  • Don’t spend to impress others.
  • Create an emergency fund for times of unforeseen circumstances.
  • Minimize debt by paying your credit card balances in full or reduce spending.
  • Save diligently and deploy into retirement and investment accounts.
  • Invest early with diversification minimizes risk and long term strategies.

Related Posts:

Why You Need An Emergency Fund (And How To Invest It)

10 Ways To Better Manage Your Spending

10 Tips To Diversify Your Portfolio

Thank you for reading!

What makes you happy? How does money affect your satisfaction levels? Do you use time-saving services to smooth stress levels?













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