You thought that old “money can’t buy happiness” maxim was BS. Turns out there’s some truth to it. A new study from Michigan State University found people who make more money experience less “daily sadness” than their poorer pals … but not more happiness.
Study author Nathan Hudson, Ph.D., says his research follows up on a 2015 experiment that came to the same conclusion: Money wards off sadness, but it doesn’t create happiness. A related Princeton University study found income can predict “well-being,” but only up to a point. Once you make $75,000, earning more doesn’t correlate with more happiness.
At the same time, lots of researchers—particularly a University of British Columbia psychologist named Elizabeth Dunn—have started to tease out the spending habits that foster positive emotions and outcomes. What she and others have discovered proves most of us are spending money on the wrong stuff.
If you want to be happier, here’s your research-backed shopping list—plus how not to spend your cash.
BUY EXPERIENCES, NOT STUFF
The pleasure you derive from new possessions—say, a cool case for your phone, or new sneakers—tends to wear off in a matter of days, Dunn’s research shows. But experiences are different. Dunn has found that spending money on a trip to a new country or city, or signing up for a rock-climbing class, creates memories that enrich life and continue to make you happy for years to come.
Think about it this way: When you step back and look at your life, you’re not going to smile at the memory of that TV you bought back in 2011. But if you’d spent that money on a weekend trip to Yellowstone? Or a cooking class with a girlfriend? Your memory of those experiences has durable value.
SPEND MONEY ON OTHER PEOPLE
Spending cash on other people—whether it’s buying a round for buddies or donating to charity—will make you happier, more research shows.
In her book Happy Money, Dunn points out that human beings are easily the most social creatures on the planet. And our “hypersociality” drives feelings of pleasure when we spend money on others.
SPEND MONEY ON SMALL PLEASURES, NOT BIG LUXURIES
Here’s a trap a lot of us fall into: We pinch pennies on day-to-day purchases—only ordering the beer that’s on special, for example, or taking the flight with two connections to save $50. But we open our wallets when we make big purchases, like tacking on $1,000 to our new car’s price tag for flashier hubcaps and wood trim.
This is exactly the wrong way to approach purchases if you want to be happy, Dunn’s research suggests.
While that extra thousand for car upgrades may not seem like much when it’s added to a $30,000 new-vehicle payment, it could have paid for a full year of morning coffees from your favorite corner spot, or dozens of evenings out for drinks with friends. Also, as the last section pointed out, you’re not going to get much enjoyment from those car upgrades after the initial purchase high wears off.
DON’T DENY YOURSELF PURCHASE ANTICIPATION
A chunk of the pleasure you get from going on vacation or attending a baseball game stems from the anticipation that builds as you look forward to the event, research shows. Also, if you paid for a part of the purchase ahead of time—like booking a flight and hotel weeks before your trip—you’ll stress less about money and enjoy your time more when the trip actually takes place, studies have found.
Basically, there’s an added benefit to purchases that require upfront spending followed by some waiting time, Dunn writes.
But most of us are attracted to purchases that flip this timetable on its head. We want the item or benefit now, and we want to pay for it later. These sorts of nothing-down, pay-later purchases are happiness killers, research shows. By the time the bill arrives, the gratification you felt from your purchase has faded away.
All this research suggests you’re better off spending your money on things you can look forward to, rather than impulse buys that will require payments down the road.
Start shifting your spending habits, and you’ll be amazed at how much happier your money makes you—despite the old “can’t buy happiness” advice.