Maximizing the Emotional Return on Your Money

Elizabeth Dunn, a Canadian author and University of British Columbia psychology professor, says, “Money can both aid and impede the pursuit of happiness.”  Dunn found that people with higher incomes experience less sadness than those with lower incomes. No surprise there. But, in an interesting twist, higher earners do not report greater day-to-day happiness. In her book, Happy Money: The Science of Happier Spending (Simon & Schuster, 2014), Dunn and co-author, Harvard Business School professor Michael Norton revealed that wealthier people report a reduced ability to savour the little pleasures of daily life.

Take a Break

In one experiment, people were asked to imagine encountering a beautiful waterfall while on a hike. “The more money people had, the less likely they were to say they would jump in, shout for joy or even stand back and appreciate the beauty of the moment,” said Dunn. This may be due to the psychological process called “hedonic adaptation” where the initial delight of a luxury item diminishes over time. That’s why it’s likely that the mom scrambling to pack school lunches on an Eero Saarinen marble table does not reap greater pleasure than the mom scrambling to pack school lunches on a formica table.

One way to get the happy back, is to take a break from the good times. In one study, Dunn had participants eat a piece of chocolate. Then, one group abstained from chocolate for a week. Participants in the other group got a 2-lb bag of chocolate and were asked to eat as much of it as possible during the week. Afterward, both groups returned to the lab for one final bite. The “abstainers” reported enjoying the chocolate as much as they had the first time compared to the “gorgers” who enjoyed the chocolate less.

Get Social

Dunn and Norton gave test subjects various amounts of cash and directed them to either spend it on themselves, or on other people. Those who spent on others overwhelmingly reported feelings of happiness. Those who spent on themselves reported no emotional change. The amount of money was irrelevant. “In almost every country in the world where we have this data, people who give money to charity are happier than people who don’t,” said Norton.

Great expectations

A group of British neuroscientists at University College London have concluded that happiness is not based on how things are in the moment but on “whether things are going better or worse than you had expected they would”. The trick is to enjoy anticipating positive outcomes without becoming emotionally attached to them.

Can happiness be bought? The answer is a qualified “yes”. As Dunn says in Happy Money, “If you think money can’t buy happiness, you’re not spending it right.”

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