The connection between money and happiness

Research can help savers and spenders make decisions with limited financial resources to positively impact their overall happiness.

The age-old questions exists: can money buy happiness? The media often implies that it can, showing images of the financially wealthy driving fancy cars, having large homes and expensive gadgets. However, recent research demonstrates that what you are spending your money on makes the difference in the happiness you experience when it comes to money. With the limited resources of money, research suggests there might be better ways to spend money than on material items.

The study focused on the difference in happiness for individuals after purchasing material items, such as jewelry or a computer, compared to experiences such as taking a trip, signing up for a cooking class or going to a museum.

For material items, such as a TV, car or DVD, the human tendency is to adapt to the material item. It becomes part of our normal, everyday life over time. As the item stops being the latest and greatest, the individual compares him or herself to others with the newest item. Though the item lasts, the happiness wanes.

On the other hand, experiences create less of an opportunity for comparison and more of a chance for connection. People bond over shared experiences or stories over those experiences. The memory of the experience fosters positive emotions and keeps the happiness lasting longer over time.

What does this research mean for your spending and saving behaviors? Michigan State University Extension has a few considerations related to this research to help you as you make financial decisions:

  • Consider the fact that material items are a necessity in many aspects of life, but are not, as research shows, a means to happiness. This contributes to the idea of needs and wants. Clothes are a need, but designer clothes are a want. Could you spend less on the material needs and save for the experiences in life?
  • In making choices for spending, ask yourself if you would be happier, in the long run, going to a concert or playing a game of golf, for instance, versus having the most current gadget on the market? Which one will enrich your life more? It could be the material item, but many times might be that experience or opportunity.
  • Avoid comparing. It is very easy to look at items and things others have and feel a sense of want – that jealousy that someone has something better than you do. Reframe this thinking to focus on the relationships, rewarding experiences and neat places and people you have seen in the world.
  • Clutter can often be a sense of stress and frustration. Paying for experiences will lead to a cleaner and more stream-lined life which enhances your happiness on another level.
  • Financial education can help you look at your spending and consider if your values align to how you spend and save. MSU Extension 4-H Youth Development has many resources to help youth with money management decisions and information. MiMoneyHealth also provides helpful tools to support a journey towards sound financial practices.

In summary, money can buy happiness, but not in the way most of us think. Your life can be rich in experiences and happiness can follow!

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