Spend money on what makes you and others truly happy
Millennials are often criticised for spending too much on frills, from fancy coffee to new mobile phones. In reality, millennials are more careful than many people think, even though there is still a tendency for them to follow the crowd.
Millennials are often criticised for spending too much on frills, from fancy coffee to new mobile phones.
In reality, millennials are more careful than many people think, even though there is still a tendency for them to follow the crowd.
What’s important is spending wisely on experiences that bring long-lasting enjoyment.
When we think about spending wisely, managing editor Kira Newman at the Greater Good Science Center in the University of California Berkeley explains that we usually focus on getting the best value for the lowest price: “We comparison-shop and download apps to find the latest discounts and deals; we’re seduced by the daily special or the limited-time offer.”
Budgeting and spending well is indeed important.
Whether we’re paying rent, buying groceries and insurance, or commuting to work, we need to use our money effectively.
Beyond purchases of daily necessities such as food and transport, though, making better choices can play a big part in how happy we are.
When he surveyed people to find out how they spend their money, Harvard Business School’s Professor Michael Norton said he found that their purchase histories were littered with material good after material good, from TVs to cars to houses. His research also showed, however, that simply buying “stuff” generally has no effect on increasing happiness.
Another piece of research, a landmark study done more than a decade ago by professor Leaf Van Boven of the University of Colorado Boulder in the United States, showed that what does make a difference is buying experiences such as watching a Broadway play or going for coffee with a friend.
These experiences improve our well-being more than buying possessions. More studies since then have confirmed the findings.
For instance, research led by Professor Thomas Gilovich of Cornell University in the US found that people's material purchase decisions are more likely to generate buyer's remorse and that their experiential purchase decisions will likely lead to regrets only if they miss opportunities.
Any way that we spend money that might save us time also has positive effects on happiness, Professor Ashley Williams from Harvard Business School found.
A survey of nearly 4,500 people in the US, Canada, Denmark and the Netherlands on the “time famine of modern life” found that people who spend US$80 to US$99 (S$110 to S$135) a month on outsourcing chores report higher life satisfaction.
Going further, Assistant Professor Peter Caprariello of Stony Brook University in the US found that spending money on socially shared experiences brings more happiness than spending money on experiences people do alone or on buying material possessions.
Spending on dinner or travelling or watching a movie with friends, then, makes you happier than doing the same things by yourself.
“We encourage people to quit buying stuff,” Professor Norton said, “and start spending their money in happier ways, from buying experiences to buying themselves better time to investing in other people.”
MAKING THE RIGHT CHOICES
It’s clear, then, that buying experiences makes us happier than buying things. The next step is to translate that into how we spend money in our everyday lives so that we are happier.
One part is hiring people to do tasks you dread.
Dr Elizabeth Dunn, a psychology professor from the University of British Columbia in Canada, told CNBC: “If you have a lot of money and a lot of nice stuff, but you’re spending your time doing things that you dislike, then your minute-to-minute happiness and overall happiness is likely to be pretty low.”
“It’s about taking small actions,” Professor Williams from Harvard Business School explained, “just sitting down and thinking about whether there’s anything you can outsource that you really don’t like, that stresses you out a lot, that you can afford.”
If there is anything where the answer to that question is “yes” — you should try it.
You may be happier if you occasionally order food deliveries, take taxis, shop online or hire someone to clean your home.
You can also buy things that are made for you to have experiences.
Psychologists Darwin Guevarra and Ryan Howell suggested thinking of purchases such as music, a television set or sports gear as “experiences” that give you time with family rather than as objects, and it can make you happier.
Instead of assuming a flat-screen television is a fancy piece of technology, you might enjoy it more and be happier if you think of it as a prop for cosy evenings with your partner.
Saving money by spending less on small purchases can also help give you the money for experiences that bring greater happiness, observed Adjunct Assistant Professor Matt Goren from the University of Georgia in US.
He suggested reducing your spending on cable television, the daily latte or other fixed expenses, and you’ll free up thousands of dollars every year.
In his case, buying juice concentrate at the supermarket rather than bottles of juice saved him US$400 a year — a small change that gave him more money for things which were better at increasing quality of life and happiness.
He went on vacations from the US to Mexico for 10 days, for example, and to Canada for 10 days. “Both those trips cost about the same amount as a year of cable TV.”
While it’s easy to continue paying for digital subscriptions that we don’t really use or making small everyday purchases without thinking, being more thoughtful and spending on experiences rather than things can make us far happier.