8 Principles Of Spending Your Way To Happiness In 2016

Shopping Mall

Most of us think more about how to earn money than how to spend it. Implicit within this is the assumption that “the more money I earn, the happier I’ll be”. But there has been extensive research that shows that the way you spend money can make as much, if not more, difference to your happiness than how much you earn. An excellent academic paper from a few years ago summarises the findings as follows:


  1. Buy Experiences Instead Of Things.  We adapt to material goods very quickly as they are unchanging. Experiences, on the other hand, are constantly changing and unique. We also gain pleasure from mentally revisiting experiences. Finally, experiences are often shared with other people, which gives us more happiness.
  2. Use Money To Help Others Rather Than ourselves. Humans are  the most social animal around*. Anything that increases social bonds has been shown to increase happiness, including spending money on others. Ironically, we think that spending money on our ourselves will make us happier
  3. Buy Many Small Pleasures Instead Of Few Big Ones. Happiness is more linked to frequency rather than intensity, so small regular pleasures will give more overall happiness.
  4. Buy Less Insurance.  We overestimate how sad we’ll be if something bad happens, so we buy too much insurance. Humans are remarkably adaptive creatures.
  5. Pay Now, Consume Later.  The more usual consume now and pay later is the perfect recipe for racking up debts. But more importantly, by reversing the formula, we get the “free happiness” of anticipation as well as the eventual consumption of the thing.
  6. Think About What You’re Not Thinking About. We expecting a single purchase to have a lasting impact on our happiness. But our expectations will only be  realistic when we start thinking about how a typical day in our future life will look like. For example, if buying a new house, think about the commute, the room you will end up spending all your time in and wifi/cable problems.
  7. Beware Of Comparison Shopping. It makes you over-focus on the differences between the things you’re looking at, rather than their similarities. For example, you may end up buying a bigger house in the same neighbourhood as a smaller house (you’re comparing number of bedrooms). Your happiness, though, may actually derive from the neighbourhood, not the number of bedrooms. You’ve also ended up with more debt!
  8. Pay Close Attention To the Happiness Of Others. The 17th century writer François de La Rochefoucauld was correct when he wrote: “Before we set our hearts too much upon anything, let us first examine how happy those are who already possess it”

*Humans, termites, eusocial insects and naked mole rates have the most complex social networks in the animal kingdom. But humans alone include unrelated individuals in their networks.