In July 2005, when Elizabeth Dunn landed her first job as an assistant professor of psychology at the University of British Columbia, she did what any responsible researcher to gain full-time employment did: she started researching how to use her salary to bring her maximum happiness.
“Being a nerdy doctorate type, I turned to the research literature and was quite surprised to see there really wasn’t much research on that topic,” she says. So she and collaborator Mike Norton, an associate professor of business administration at Harvard University, pooled their energy.
The result is a new book Happy Money, The Science of Smarter Spending, in which the two examine research from more than 100 countries of varied economic levels.
And what did they discover? “Much to my surprise we’ve found the same basic effect all around the world in poor and rich countries alike, even when countries are struggling to meet their own basic needs,” says Dunn. “And that is: people get more happiness from using their money to benefit other people rather than themselves.”
In the book, Dunn and Norton boil the concept down to these five principles to use your money to create more happiness:
1. Buy experiences: “People can consistently get more happiness from buying experiences — trips, concerts, special meals — rather than stuff like sofas, high heels, flat-screen TVs,” notes Dunn.
2. Make it a treat: “It seems like life would be perfect if we could have our favourite things all the time,” she says. “But it turns out that taking breaks from our favourite things enhances our ability to appreciate them.”
3. Buy time: “The idea here is that before spending money on anything, you should pause to ask yourself — how will this purchase affect the way I use my time? Many of the things we spend money on have no bearing on how we spend our time on a day to day basis. And what really matters is the happiness and what we’re doing with the minutes and hours of our days and so using money to actually benefit our time, that either save or change the way we use our time will be the beneficial of happiness,” she says. (Think: a cleaning company to do a monthly clean of your house.)
4. Pay now, consume later: “Pretty much everything in our society pushes us towards consuming right away and paying for it quite a bit later and we argue that people should do the opposite,” Dunn notes.
5. Invest in others: “People will get more happiness when they use their money to help others rather than themselves,” Dunn adds.
Inspired? If you want to get started on implementing this money/happiness concept right away, Dunn suggests working on the ‘pay now, consume later’ idea. “It’s the beginning of summer and so you can start paying now to ‘consume’ a vacation later this year,’” she says. “If you start planning and setting aside money for it now, you get the pleasure of anticipation all summer. You can look forward to this trip and enjoy that trip more by having paid for it up front.”
Don’t mind if we do…