Spend on experiences.
Although a new iPhone will last longer than a summer concert series, behavioral science studies show that you’ll derive more happiness from spending money on experiences, like those concerts, vacations and sporting events. Why? You usually go on trips, concerts, and other excursions with friends, colleagues, and family. By enjoying these experiences together, you make lasting memories that you’ll often reminisce about for years to come. And, even if you had vacation mishaps, like a car breaking down in the middle of nowhere, aggravating events often become laughable moments with loved ones. In fact, you may have enjoyed your vacation with friends so much that you decide to repeat the bonding experience in the future. On the other hand, buying a material thing like a phone or new outfit may give you an initial burst of happiness, yet over time you no longer get that same happy feeling when you pick up your expensive phone or put on that pantsuit.
Spend on others.
In a study conducted by Harvard’s Michael Norton, along with Elizabeth Dunn and Lara Aknin of the University of British Columbia, it was revealed that you’ll generally be happier spending money on other people instead of yourself. Even though you may need to first prioritize covering your daily expenses, if you spend even $5 in a given day on another person, your happiness level rises. So, why don’t most people spend small amounts on others regularly? When researchers asked study participants what would make them happiest, the majority incorrectly stated that they thought personal spending would make them more content than spending on others. There you have it: It’s time to pay it forward. Perhaps you should buy a cup of coffee for your boss or co-worker. Or, maybe even the stranger behind you in line at Starbucks. Your happiness will thank you and so will that colleague or stranger.
Spend on little things.
You’ve probably heard the saying “it’s the little things that matter most” or simply, “it’s the little things.” Well, when it comes to spending money, this is often true. Studies show that after you make a big purchase, you often experience a letdown as that initial excitement fades away. In fact, according to studies by Marsha Richins of the University of Missouri, after purchases were made, there was a “hedonic decline” and happy feelings soon dissipated. To avoid this, try saving up for a future purchase, like a house or a new blender. Regardless of whether a purchase is big or small, the anticipation leads to positive emotions, according to Richins’ research published in The Atlantic. Another interesting insight: People who anticipate an expenditure are more likely to think that the upcoming purchase will have a positive effect on their lives, relationships, and self-esteem. Talking about little things, meeting up with friends once a week for a latte may make you just as happy as splurging on a new refrigerator or car. Actually, those weekly fancy coffee drinks may make you happier than buying that fridge, especially if that appliance purchase ate into your emergency fund.
Spend on time.
This concept takes the old adage “time is money” to a whole new level. Here’s why: Thinking in terms of spending money to free up your time actually gives you more available hours to enjoy your hobbies and hang out with friends, according to research by Jennifer Aaker and Melanie Rudd at Stanford University and Cassie Mogilner at the University of Pennsylvania. For example, if doing yard work eats up entire weekends, maybe it’s time to hire a lawn care company. Or, perhaps hiring a cleaning person twice a month will help lighten your load. If you have roommates, you can even discuss splitting this cost. Here’s yet another way to look at how much you value your time: If you take the train instead of driving to visit a friend, it may cost you more but you’ll arrive at your destination faster with no traffic to contend with. Not only will you gain more time with your friend, but you’ll have free time on the train to read a book or even take a nap.
Time is money rose to the occasion at my house last weekend when our toilet broke. My husband is the consummate DIYer, yet with a weekend packed with activities, we opted to forego the project and hire a plumber instead. The plumber arrived promptly Monday morning and fixed the toilet in 30 minutes. My husband’s new mantra: “Remind me never to waste time fixing plumbing again. It would have taken me at least half a day to fix. Paying the plumber was worth every penny.”
So, what if you can’t afford to spend money to increase your time? Try focusing on all that you really have: the present moment. Once a day, take five minutes to practice mindfulness by sitting quietly and slowing down your breath. By doing this “free” activity, you will in effect be spending your time in a more meaningful way, according to the Stanford and University of Pennsylvania study, also published in the Journal of Consumer Psychology.
As you can see, your spending choices can indeed lead to warm and fuzzy feelings. With all the right moves, you just might feel rich without winning the lottery or working 80-plus hours a week. Uh-oh. Time is money. Sorry to end this story but gotta head out for a latte. Care to join me?
This page is for informational purposes only. Chime does not provide financial, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal and accounting advisors before engaging in any transaction.