Consumer Reports

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In their fascinating paper, "If money doesn't make you happy, then you probably aren't spending it right", researchers Elizabeth W. Dunn, Daniel T. Gilbert and Timothy D. Wilson culled current research to investigate the relationship between how we spend and our happiness. They distilled their findings into eight suggestions about how to spend in ways that actually increase our happiness.

1.  "Buy experiences instead of things"

According to the authors, research has shown that people derive more pleasure from spending on experiences that they do on objects. The reasons for this are several.

First, we adapt quickly to possessions, and consequently the pleasure of acquisition is short-lived.

Second, studies show that we are most happy when focused on what we are doing at the moment, and experiences provide just that focus. Think, for example, about riding a roller coaster; your mind is locked into the thrill (and perhaps terror).

Third, the memory of the experience allows you to derive additional pleasure. Think back on the greatest joys in your life to date; were they objects or experiences?

In fact, the authors explain that experiences help us define who we are, and wouldn't you rather define yourself as the person who climbed Everest than the person who owns a riding mower?

2. "Help others instead of yourself"

The authors point out that research has shown that, as social animals, our happiness is closely tied to the amount of our social interactions. Spending on others, whether as gifts or charity, tends to strengthen social ties, and well as enhancing our self-image.

3. "Buy many small pleasures instead of few big ones"

Again, our ability to adapt even to the greatest possessions means that the pleasure we derive from that new Corvette or front-loading washer diminishes quickly. Given this, one might find a great deal more pleasure in buying new outfits frequently that splurging the same amount of money on a one-time purchase of a Mercedes.

Also, pleasure doesn't necessarily increase in lockstep with the amount spent. While a Mercedes may cost 500 times more than a new pair of Manolo Blahniks, it probably doesn't provide 500 times the pleasure.

4. "Buy less insurance"

Why do we buy extended warranties and other types of insurance? Because we anticipate that a loss is going to make us quite unhappy. However, according to the authors, humans have a great wellspring of emotional protection; that is, we have the capacity to handle loss much better than we anticipate we will.  One way we commonly do this is by transferring blame.

Warranties and generous return policies can actually serve to increase our discontent, the authors state, because if we know we're stuck with an item we find a way to appreciate it; if we know we can take it back, this appreciation never takes place.

5. "Pay now and consume later"

Anticipation of a purchase is often better than owning the purchase. Most of us have experienced this phenomena when dating, when the promise of the evening was much better than the reality of that evening. The authors put it this way; "anticipation is the Batman to the Robin of reminiscence."

Buying on credit, buying on impulse, robs us of this delicious anticipation.

There is another effect at work here, too. When we buy on impulse, the authors state, we tend to buy to suit our vices, while when we plan and anticipate a purchase, we tend to buy for our virtues, which are more likely to be more long-term satisfying.

6. "Think about what you're not thinking about"

When we envision something that will make our lives better, a new house perhaps, we think about the big picture, perhaps the family gathered around the fireplace at Christmas. However, as the authors point out, our happiness is likely to be more determined by the many small things that happen to us day to day; work troubles, car problems, teenager problems, our weight, the weather, our backswing. Money spent to improve those small things could have a greater impact on our happiness.

7. "Beware of comparison shopping"

When you go car shopping, perhaps you're one of those that compares potential purchases detail by detail, or only buys items at the top of the Consumer Reports ratings. This could be a threat to your happiness. Why?

Because the attributes that will affect your happiness may not be included in those numbers. Perhaps the esthetics of the car mean more to you that its horsepower or number of cup holders. Perhaps Consumer Reports doesn't rate an Apple MacBook Air as a best buy, but if it's what you really want, buying something else just won't bring you as much pleasure.

8. "Follow the herd instead of your head"

Most of us like to feel that we are independent enough to make our own best decisions about what to buy based on our own tastes. Wrong.  According to the authors, "Research suggests that the best way to predict how much we will enjoy an experience is to see how much someone else enjoyed it."

This is a good defense for sites such as Yelp and Amazon, that allow you to use the experience of others as a barometer for how much you might enjoy a restaurant, a nightclub, a movie or a book.

Despite the bromide to the contrary, many of us still believe that money can bring happiness. The authors of this study show that how and what we purchase can have a large impact on our happiness. This blueprint helps show us the way to get the most out of our money.