Money Can Buy Happiness, But Only if Spent Right

Money can’t buy happiness, so the saying goes. In general, psychological research agrees, especially if the money is spent on material things. Spending on life experiences is more likely to reap a happiness dividend, but it’s not a sure bet either.

Now a new study sheds light on what may be the deciding factor: You’re more likely to get lasting joy from your spare cash if you spend it on experiences shared with others.

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Spend on Shared Experiences

The study, published online by the Journal of Personality and Social Psychology, included a series of four experiments. Each looked at how the inclusion of others affected the happiness people derived from money. Researchers Peter Caprariello, PhD, of Stony Brook University and Harry Reis, PhD, of the University of Rochester were interested in discretionary spending—money spent for fun rather than for basic necessities, such as rent, utilities, and groceries.

Across the four experiments, a pattern emerged: Money spent on experiences shared with others—for example, a family vacation or a night out with friends—was valued more highly than money spent on either solo experiences or material possessions.

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Think About Your Own Pattern

In one experiment, participants were given these instructions: “Take a minute to think back to the last time you spent between $10 and $10,000 of discretionary money to further your happiness. On what did you spend your money? Why?” Participants were asked what the purchase or activity had been, who else (if anyone) was involved, and how it affected their happiness.

To try this by yourself, think about not only the last time you spent discretionary money, but also the four or five times before that. Then look for patterns. Did certain types of purchases or activities affect your happiness more positively than others?

There are no right or wrong answers to that question. In the study, however, people reported getting more joy from social purchases than solitary ones.

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More Spending Tips

Here are more science-based tips on how to wring the most joy from your spending:

  • Tell the story after you’ve enjoyed a memorable experience. Research suggests that one reason experiences are valued more highly than objects is because they’re more fun to talk about. It’s a lot easier to spin an exciting yarn about your recent vacation than about your new couch, for example. Every time you recount your adventure, the enthusiastic response you get validates what a terrific experience it really was.
  • Treat your buddy when you can afford to. In one study, volunteers were given up to $20 in the morning and asked to spend it by 5:00 p.m. that day. Some were instructed to spend the money on a personal expense or gift for themselves, and others were told to spend it on a charitable donation or gift for someone else. Those in the latter group got more of a happiness boost than those who spent the money on themselves.

Invite a friend for coffee and pick up the tab, and you could be getting the best of both worlds.

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