TIME Smart Spending

Here’s How to Spend Your Way to Euphoria

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Happiness research has been in vogue since the recession and supplies much needed answers as to how we should spend our money.

What makes you happy? It’s a fun question because many people don’t understand the surprisingly small role that having a lot of money plays, or how acquiring material things can still leave a person feeling empty. Shopping for something you don’t need brings only a short-lived high, research shows.

We’ve known this for a long time. But the science of happiness has enjoyed resurgence since the Great Recession, when people began to turn away from the vacations and homes they couldn’t afford and focus instead on relationships and experiences. This was partly out of need. Still, many discovered higher levels of happiness in tough times—after scaling back their lifestyle not worrying so much about how they measured up against their neighbors.

Global happiness readings routinely show that the richest countries are not the happiest and, in fact, some poor ones land near the top. So countries like Costa Rica and Vietnam outscore Japan and the U.S. These surveys are imperfect; others closely link peace and general prosperity with happiness, giving nations like Denmark and Norway a top rank. But the U.S., Germany and other rich nations still fall far down the list.

Money plays a role in happiness, for sure. But after a person has enough income to meet basic needs additional income seems to have little impact. In the U.S., the magic income is $75,000 a year, reports the well-being website Happify, drawing on research conducted over the past decade. Happiness generally rises with income to that level, the firm says. But beyond this threshold there is little effect on day-to-day happiness, though overall life satisfaction continues to rise with income.

Among the reasons that more money does not equate with greater happiness is that we quickly get used to a higher income, we end up wanting even more things than we already have, and we still compare ourselves to others who have more. This jibes with lots of other research that shows the main drivers of happiness are genes (you are born that way), recent events (like a birth or wedding) and a combination of faith, family, community and work (which provide friendships and meaning). The four values may be the most critical aspect of happiness because you cannot do anything about your genetics and recent events, like a spree at the mall, have only fleeting value in overall happiness.

According to Happify, 57% of Americans say experiences make them happiest, especially those that bring them together with family and friends, provide a memorable story, are linked to their personal values, and are unusual. Spending on a TV or home do not make us happier while spending on leisure does wonders for our disposition by reducing loneliness and boosting optimism.

Finally, there is one way that more money makes us happier: spending it on others. Giving provides innate pleasure, as shown in one study where two-year-olds were happier giving away Goldfish from their own stash than from someone else’s pile.




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