How to Buy Happiness

How you spend affects your well-being.

Research from psychologists suggests material goods — a new TV, that Apple Watch you’ve been eyeing — have less of an effect of overall happiness and life satisfaction than many might expect.

An income that provides basic necessities is key to happiness, research suggests. But increases in income and possessions beyond the median in the United States have little effect on overall happiness, according to a study from professors Elizabeth Dunn and Lara Aknin of the University of British Columbia and Michael Norton of the Harvard Business School.

In the recent study, Dunn, Aknin, and Norton found those making $25,000 a year believed their happiness would double if they made twice that income. However, people making $50,000 were only slightly happier than those making half as much, as measured by psychological testing. What’s more, beyond the median U.S. income of about $60,000, additional income had no further effect on overall life satisfaction.

How could that be? The problem is that we live on a “hedonic treadmill,” according to Sonja Lyubomirsky, a professor of psychology at the University of California, Riverside, who studies well-being. We take the new TV for granted after a few months. Then, it’s human nature to want something else — a nicer car, a better couch. The cycle is never-ending unless we consciously choose to short-circuit it (Lyubomirsky suggests cultivating gratitude for what we have).

If wealth and possessions don’t ensure happiness, researchers have clues about what will. In “Happy Money: The Science of Smarter Spending,” Dunn and Norton suggest five financial guidelines to follow for greater well-being:

Buy experiences

“In study after study, people are in a better mood when they reflect on their experiential purchases, which they describe as ‘money well spent,’” Dunn and Norton write. So the next time you’re tempted by a shiny new gadget, consider whether an experience might not offer a better happiness return. Whether it’s learning quilting, diving with dolphins, or traveling to Costa Rica, rich life experiences are likely to give you more satisfaction over time than a material purchase.
Make it a treat

Limiting access to valued goods helps us appreciate them more, Dunn and Norton have found. Make an afternoon latte or new sweater an occasional indulgence, rather than a habit.

Buy time

Before you buy a good or service, consider whether it will improve how you’re able to use time, Dunn and Norton suggest. In a 2004 study, commuters experienced lower overall well-being than people in similar circumstances without long commute times. “Use money to buy yourself better time,” Dunn told the Wall Street Journal. “Don’t buy a slightly fancier car so that you have heated seats during your two-hour commute. Buy a place close to work, so that you can use that final hour of daylight to kick a ball around in the park with your kids.”

Pay now, consume later

Anticipation is often the sweeter part of consumption, Dunn and Norton write. Waiting even a moment for something increases the pleasure we feel when we do finally get it, their research shows. Vacations, for example, provide the most happiness before they happen, in looking forward to them. You can tweak this principle by paying for purchases in advance. The silver lining is that you’re likely to spend less by paying up front, which could help you pay down debt — a major life stressor, Dunn and Norton say.

Invest in others

Another counterintuitive, no-fail technique: give to others. Surprisingly, the happiness boost that comes from giving to others is greater than doing something for ourselves. In studies at the Harvard Business School, those who spent $20 on someone else were measurably happier than those who spent it on themselves. You can volunteer for a cause you care about, donate to your alma mater or another organization close to your heart, or simply make it a habit to give away $5 a week however you choose. It’s smart to give in ways that are proportional to your income, but in studies, even those who were struggling to make ends meet experienced a happiness boost after helping others.

Ultimately, the emerging science of well-being suggests happiness isn’t about the things you have, but about how you feel day to day. Are you pursuing pleasurable activities that provide feelings like joy, connection, and gratitude? According to Dunn and Norton, those are the experiences that are most likely to stick with you and provide genuine happiness over time.