What’s the link between money and happiness? If you watch commercials or read advertisements, you may believe that happiness depends on having that next best thing to change your disposition or status. But, according to Daniel Kahneman, founder of Behavioral Economics, that’s usually not the case. Buying a new car, clothes or any other material goods will generally not make as big of an impact on your life as you may think. It usually is a temporary feeling of bliss that feeds upon itself, creating the cycle called hedonic adaption, where you need to get bigger and better.
First, let’s clarify what we mean when talking about happiness. You can start by breaking it into two types: moment-to-moment hedonia or the longer term feeling of eudaimonia, focusing on how good your life is as a whole. The term eudaimonia also includes social aspects, such as contributing to society and feeling a part of a community.
In the World Happiness Report that ranks 158 countries based on their quality of life or eudaimonia, the U.S. is 15th on the list. The report attributes the feeling of “happiness” to six influencers: GDP per capita, social support, life expectancy, freedom to make choices, generosity and trust. According to the editor of the report, the U.S. scored lower for trust, life expectancy, social support and generosity, even though we have a high GDP. As such, Americans may need to look to other factors to increase their feeling of well-being, such as giving back to others and becoming more involved in their communities.
If buying things doesn’t bring happiness since they tend to lose their thrill, what can we do to increase our life satisfaction and joy? Researchers have found that when people buy experiences, such as trips, they are happier than when purchasing objects. In fact, just the anticipation leading up to the experience can be greater than the actual experience itself. The good news is that after it’s over, people usually remember the good things about the event, providing a longer-term residual satisfaction. The other good news is that many experiences involve others, adding to the social impact of sharing it with someone.
Besides enjoying great experiences, people’s happiness can come from giving and making a difference in the world. Happy Money: The Science of Happier Spending co-author, Elizabeth Dunn found that spending money on others does improve our health. Evidence suggests that spending on others improved high blood pressure in older adults with hypertension. The book identifies five sources that lead to happiness: buy experiences; buy time (improve how you spend time); pay now; but consume later; invest in others; and make it a treat (learn to appreciate what you have in your life). Dunn also recommends breaking away from your usual spending habits, enabling you to fully appreciate where you are in life.
Having a better understanding of the influence money has on our happiness provides you with insight into what choices will bring the most pleasure over the long run. While we constantly face societal pressures to purchase more things, we must evaluate these options in light of what will benefit our well-being and bring lasting satisfaction. Getting off the hedonic treadmill buying cycle is one of the first steps. It’s also critical to understand how your decisions today will impact your future. Financial insecurity will impact your happiness in the short- and long-run. Take the time to think about your life choices and how to ensure a durable type of happiness.