How to spend your money and increase your happiness

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Can money actually buy you happiness? Well, not exactly.

According to one study, once you hit the magic number of $75,000 a year, more money won’t increase life satisfaction and buying expensive stuff doesn’t always make you happier. Take a luxury car, for example. Researchers found no link between the enjoyment of driving and the model or year of car that people drove. Some science has even shown that when we boost materialism in our lives, we decrease our well-being. All of the stuff we buy loses its lustre and the novelty wears off. 

We spend money to chase happiness, but there are more efficient ways to do this, according to financial expert Melissa Leong. See her tips below on how we should be spending our money to make us happier.

OTHERS
There is a clear link between giving to others and happiness. Whether you’re rich or poor, worldwide surveys show that donating to charity makes you feel more satisfied with life and it makes you feel wealthier. Giving to loved ones can strengthen your relationships which makes you feel amazing—that’s why you’re willing to pay more for an item as a gift than you would if you were buying it for yourself. Giving makes you feel connected to others, even strangers, and when you feel like your money has had a clear impact on the world, on someone else’s life, that’s priceless. 

EXPERIENCES
Research shows that experiences make us happier than material goods because experiences make us feel more connected to others. You’ll also get more bang for buck because experiences increase in value over time—while the thrill of a new pair of shoes can fade, the memories from an awesome concert with your girlfriends can last a lifetime. 

Also, let’s say you spend $250 on a new dress. Sure, you look good, but it’s probably better to feel good. $250 could have bought you a bunch of yoga or dance classes, which would fill your body with happy endorphins. That money might have been better invested in helping you learn a new skill, like creative writing or photography. By expanding your horizons, you’re expanding the ways in which you can experience joy. 

TIME SAVERS
People who value time over happiness tend to be happier people, so spend money on the things that will give you the gift of time. Try hiring someone to clean your house twice a month or paying someone to do your taxes. 

If you’re doing something to save money but it takes a lot of time, it might not be worth it when it comes to happiness. For example, driving around looking to save a few cents on gas or waiting in line for 20 minutes at a festival to get a free popsicle won’t add up when you put a value on your time. 

Finally, when you take a job that makes you more money, think about the time commitment involved and/or the commute. Taking a job with an hour-long commute each way has a negative effect on happiness, similar to not having a job at all, one researcher says. 

ANTICIPATION
Remember how excited you were as a kid to count down to Christmas? In one study, vacationers were happier before their trip than in the weeks following. Another study showed that people were willing to pay way more to kiss a movie star of their choice in three days versus an immediate kiss, or a kiss in three hours or a day. If you can spend your money today on things for the future, it will provide a bigger boost to your happiness. It’s the opposite of what a lot of us are doing now which is buying something immediately on our credit card and then paying for it afterwards. 

Ways to do this include purchasing a future spa retreat or putting money aside for a purchase that you’ve always wanted. Have a goal chart that counts down to that purchase or that vacation. 

PROTECTION
Buy insurance and build an emergency fund because bad stuff happens. You need to bulletproof your happiness by devoting money to potential worse case scenarios. What happens if you get injured and can no longer work? How long could you cover your bills without income? Disability insurance, for example, could help you cover your bills, pay your mortgage, and support your family.

You’ll be grateful if you have a stash of cash for when the furnace randomly breaks or if you lose your job or your cat needs surgery. Put aside three to six months worth of living expenses as an emergency fund.

PAY DOWN DEBT
Debt is a dark cloud that hands over your head. In a study of life’s most stressful experiences, out of 56 events, getting into debt beyond means of repayment was ranked number five. It’s more stressful than your spouse cheating on you and more stressful that a period of homelessness. Getting rid of your debt will absolutely make you happier. It will improve your relationships because more debt is correlated with a higher likelihood for divorce. Once the debt is cleared, you’ll feel so proud and have more freedom to pursue other goals. 

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