University News

How to Happily Spend Your Money

by James E. Maddux, Ph.D, CWB Senior Scholar

“Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.” – Will Rogers 

In my previous column on money and well-being I noted that the problem is not money itself but our motives for making it – and spending it. I also noted that the research strongly indicates that making and spending money on expensive consumer goods for the purpose of impressing other people or trying to boost one’s social status and self-esteem not only does not enhance well-being but actually diminishes it. This finding leads to another important question: What can you spend your money on that might enhance your well-being?

Considerable research has shown that regardless of how much money you make and spend, you can maximize the happiness and satisfaction you get from your money by spending it in a number of ways:

Delay spending. Save and pay for items and experiences ahead of time instead of going into debt to purchase them. As I noted in my previous column, debt can have a negative impact on both psychological and physical well-being. Most non-emergency purchases can be delayed until you have saved enough money for them. Saving ahead of time and having or experiencing later also allows you to savor the pleasure of anticipation, in addition to the eventual pleasure of having something or doing something. In fact, people often find greater pleasure in anticipating something (such as a vacation) than actually having it or doing it.

Buy experiences, not things. Several studies have shown that experiential purchases(activities) are typically anticipated with greater pleasure and remembered with greater pleasure than are material purchases (consumer goods). A more recent study also found that at the moment of purchase, experiential purchases bring more momentary pleasure and happiness than do material purchases. Experiences that evoke laughter are even better because research indicates that laughter can improve not only your subjective well-being but also your physical well-being. Experiences that get you out in nature can also improve your sense of well-being. Experiences that involve exercise can also enhance both your psychological and physical well-being. Finally, doing any of these things with other people will give you an additional well-being boost.

Buy time. It usually takes a little more time and effort to have lunch with a friend (an experiential purchase) than buy a new TV on Amazon (a material purchase), so if you plan to make the shift from fewer material purchases to more experiential purchases, you may need to create a little more extra time in your weekly schedule. This may be one reason why buying time (for example, by purchasing services that free up your time for experiences), is one spending strategy that may increase your well-being and life satisfaction. Hate housework? If you can afford it, pay someone to clean your house or apartment once a month. Or clean less often and learn to tolerate a little dust and grime. Hate doing laundry? Take your clothes to a laundromat that will wash, dry, and fold your clothes for you. I did this as a poor graduate student because I had better things to do with my time (such as write my dissertation proposal) than to sit around a laundromat waiting for my clothes to wash and dry.

The same goes for yard work, grocery shopping, automobile maintenance, and other chores. If you enjoy doing any of these things, then by all means keep doing them. I actually enjoy cleaning house and washing dishes, so paying someone else to do these things might diminish rather than enhance my well-being. However, I don’t especially enjoy shopping in stores, so I buy more and more basic consumer goods such as clothing, shoes, office supplies, art supplies, and non-perishable food online. I probably pay a little more than I would if I shopped in person at an actual store, but buying online frees up a tremendous amount of time for activities that I find more satisfying than walking around supermarkets and department stores – such as writing articles about well-being, or cleaning house and washing the dishes!

Simply freeing up your time, almost regardless of what you do with it, can enhance your sense of well-being because it can lead to a sense of time affluence (feeling “time rich” or “time wealthy”), which can enhance well-being. Just as people are usually happier when they believe they have enough money to do what’s important to them, people also are usually happier when they believe they have the time to do what’s important to them. In fact, when given a choice between having more time or more money, although most people choose more money, those who choose more time report more happiness.

Buy many small pleasures rather than fewer larger ones. Research suggests that the frequency of the experience of positive emotions is a greater contributor to well-being than the intensity of experiences of positive emotion. On a day-to-day basis, frequent “small bursts” of feeling good (hearing a favorite song, eating a favorite food, having a brief but pleasant conversation with a neighbor or even a stranger) have a greater impact on well-being than do infrequent “big bursts” of feeling good (winning the lottery, getting married). For this reason, given a specific sum of money, your well-being will be more greatly enhanced by spending that money on many small pleasures distributed over time than a single big splurge (such as a new television or a grand vacation).

Spend money on other people. Why do ultra-rich people like Bill and Melinda Gates, Warren Buffet, and Michael Bloomberg give away such much of their money? And what is the appeal of a growing organization called Resource Generation whose mission is to “organize[s] young people with wealth and class privilege in the U.S. to become transformative leaders working towards the equitable distribution of wealth, land and power”? One reason is that is these people probably get a lot of satisfaction, pleasure, and well-being enhancement from doing good for others, a motive often referred to as altruism. Indeed, research suggests that most people get more satisfaction from spending money to benefit other people than when spending it on themselves. But this is not true for everyone, as we will learn below.

Spend in ways that match your personality. Research suggests that people usually spend in ways that match their personalities, and that people can actually increase their well-being by increasing the amount of spending that matches their personalities. This is one reason why the finding that spending on others increases well-being does not apply to everyone, as noted above. People differ in the amount of satisfaction they get from helping other people. This is also true of the difference between material purchases and experiential purchases. A more introverted person, for example,  may be more likely to derive satisfaction from buying a book (both a material good and, if read, an experience) than from buying an experience that involves other people, such as meeting friends at a bar. One suggestion is to begin paying attention to how your spending habits may be consistent or not with your personality and try to get them better into alignment.

This is not an exhaustive list, but the suggestions here have considerable support from research and are relatively easy to begin implementing. As I noted in my previous column, desiring money alone is not the problem; the problems may lie in your motives for making money and spending it. Likewise, the relationship between money and well-being seems to depend less on how much money you spend and more on how you spend it.

Further reading:

Bernstein, E. E., & McNally, R. J., (2018). Exercise as a buffer against difficulties with emotion regulation: A pathway to emotional wellbeing.  Behavior Research and Therapy, 109, 20-36.

Cimons, M. (2019) Laughter really is the best medicine? In many ways, that’s no joke.  Washington Post, June 15, 2019.

Dunn, E. W., Gilbert, D. T., & Wilson, T. D. (2011). If money doesn’t make you happy, then you probably aren’t spending it right.  Journal of Consumer Psychology, 21, 115 – 125.

Hershfield, H. E., Mogilner, C., & Barnea, U. (2016). People who choose money over time are happier.  Social Psychological and Personality Science, 7, 697-706.

Kasser, T., & Sheldon, K. M. (2009). Time affluence as a path toward personal happiness and ethical business practice: Evidence from four studies.  Journal of Business Ethics, 84, 243-255.

Kumar, A., Killingsworth, M. A., & Gilovich, T.  (2019). Spending on doing promotes more moment-to-moment happiness than spending on having.  Journal of Experimental Social Psychology.

Kuykendall, L., Tay, L., & Ng V. Leisure engagement and subjective well-being: A meta-analysis. Psychological Bulletin, 141, 364-403.

Matz, S. C., Gladstone, J. J., & Stillwell, D. (2016). Money buys happiness when spending fits our personality. Psychological Science, vol. 27(5).

Milner, C. (2010). The pursuit of happiness: Time, money, and social connection. Psychological Science, vol. 21 (9).

Whillans, A.V., Dunn, E. W., Smeets, P., Bekkers, R., & Norton, M. I. (2017). Buying time promotes happiness. PNAS (Proceedings of the National Academy of Sciences of the United States), vol. 114 (32).

White, M. P., Alcock, I., Grellier, J., Wheeler, B. W., Hartig, T., Warber, S. L., Bone, A., Depledge, M. H., & Fleming. L. E. (2019). Spending at least 120 minutes a week in nature is associated with good health and well-being. Nature: Scientific Reports.