Years of behavioral and psychological research have given us insight into how to splurge optimally.
So does money bring us happiness, or is it the root of our misery? It’s complicated. Financial security certainly influences our well-being when it comes to satisfying our basic needs and standard of living, but in general, research shows affluence is a weak predictor of happiness. Today, the average American family spends about 50 percent of their income on necessities like food and shelter, compared to almost 80 percent in 1901.
What most experts can agree on is this: there are ways to spend our money that are more likely to elicit joy. So next time a commercial has you itching to pull out your wallet, hit pause and consider these three tips on where to invest your cash.
Time is precious—buy yourself some more of it
Invest in experiences
Spend on others
Focus on human connection
So is shifting our spending habits away from material things the key to bliss? Despite a sea of research, there’s still no tidy answer. Happiness is notoriously difficult to study; it’s subjective, unstable, and intangible. But one common thread consistently comes up in the research: the power of human connection to elicit joy.
“Purchases that help to foster our social relationships—those are the purchases that are most likely to bring us longer-lasting, more enduring happiness,” Kumar says.
But that doesn’t necessarily mean spending all your money on family vacations: sometimes material purchases are vehicles for social connection. The idea is to invest more in experiences than in possessions, Gilovich explains, but sometimes the latter can facilitate the former. “There are things sort of in the middle,” he says. “You buy a new bike, you get together with a bunch of cyclists, and you cycle regularly.” His advice: when you’re buying something, ask yourself how likely you are to use it with other people.
Kumar agrees. “One of the mistakes that people can make is that they think that material goods are a better financial investment, that they’ll last,” he says. But the material goods that pack the biggest punch are the ones that beget social experiences.
For him, the recipe for better spending is simple: “Positive social relationships are essential to human happiness—spend money in ways that advance your social relationships [and try to] minimize making comparisons to other people.”
