Hundreds of philosophers, psychologists, and religious leaders have offered commentary on the proverbial pursuit of happiness throughout the centuries. Happiness can seem like an elusive idea, the dynamics of which are difficult to pinpoint. Even more difficult to pin down is the relationship between money and happiness. What exactly is the connection between cash and contentment?
The Beatles said money can’t buy love.
Well, there is a lot of research that says money can’t buy happiness either. Studies show that happiness comes not with the acquisition of new material things, but rather with experiences. Material items give temporary boosts in happiness, but they don’t give us a variety of continued, novel, positive experiences. They diminish over time, and eventually we return to that set level of happiness.
Yet, the relationship between money and happiness is a little bit more complex. Psychologist and Harvard Business School Professor Michael Norton says, “If you think money can’t buy happiness, you’re probably not spending it right.” He doesn’t advocate buying a certain product or service, though. What he says is this: money can buy happiness when people spend it on others instead of themselves.
Norton conducted an experiment at the University of British Columbia in which he gave students envelopes with either $5 or $20 inside. He told some students to spend the money on themselves and some to spend the money on other people.
He found that the students who used the money to buy things for other people (gifts for family, money to homeless people) experienced an increase in happiness, while the students who spent money on themselves stayed stable in terms of happiness (no decrease, but also no increase). One of the most interesting findings is that the amount of money had no impact on happiness. To the students, $20 seemed a lot better than $5, but more money did not equate to more happiness. Again, the key is whom you spend it on.
The connection between money and happiness is a popular, well-researched topic. But, what are the real-world applications of these research findings? Can the psychology of happiness and money be applied to everyday life in a way that will lead to a boost in well-being?
Research by positive psychologist Sonja Lyubomirsky indicates that 50% of happiness is genetic, 10% is based on life circumstance, and 40% is in our control. While genetics and personality variables may largely explain our “set level” of happiness, we don’t have to be resigned to it. Keep Norton’s findings in mind—money spent on others is an investment in personal well-being. And, when we do spend money on ourselves, experiences are better than material things in terms of generating positive emotions (think a vacation or a day spent at a spa with a friend.)
There’s more than one way to funnel money into a strong sense of well-being—it’s all in how you spend.