This is the view of Dr Michael Norton from Harvard Business School. Michael’s research indicates that money can indeed make you happy if you use it to buy experiences, time, or invest in others.
Buying experiences – when we buy experiences, we don’t just buy the duration of that experience. Michael’s team’s research found that we’re happiest the day before leaving for a holiday–the anticipation is just as valuable. Furthermore, we experience positivity bias when we remember a holiday. And the more time spent in an experience the better it gets in our memory.
Buying time – when we buy big houses, they tend to be further from where we work. So while our big house doesn’t make us more or less happy, the commute is longer. We spend more time away from our families, and less time doing the things we enjoy or that are good for us, like exercise. This makes us less happy. If we can use our money to buy things that save us from time spent on mundane experiences like vacuuming or commuting, we’re happier overall.
Investing in others – Michael’s team undertook a study instructing some people to spend money on others, and some to spend it on themselves. It found those who spent money on others experienced an increase in happiness by the end of the day, while those who spent it on themselves did not. Interestingly, the study also found minimal difference in happiness levels between those who were able impact another person’s life significantly, and those whose good deeds were more trivial.
We spoke to Michael further about the findings of his research.
Is there any difference in the level of happiness when people are using their own money compared to ‘free money’ such as lottery winnings?
Turns out that spending free cash on yourself–like winning the lottery–does nothing to affect your overall happiness. However, spending free cash on others makes you happier, and spending your own money on others makes you the happiest. But it’s not a huge difference between spending free cash and spending your own.
The problem is that more people are likely to give away free money, than their own, so on balance there’s more happiness created by the free money.
What about when you spend money on yourself: is there a difference in happiness levels when you’re spending money that you’ve earned?
There doesn’t seem to be, actually. We tried to find ways where spending your own money on yourself does make you happy, and we thought that it might when you’re treating yourself with your own money – say, when you’ve had a hard week. In the moment it does, but it does nothing to affect lasting happiness.
© AMP Life Limited. First published 2017
If you’re interested in learning more about how money can buy happiness, watch Michael’s highly informative presentation from the 2017 AMP Amplify festival
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