There is a lot of truth in the old saying that money—at least by itself—doesn’t buy happiness. “At a certain point, what really matters is not how much you have, but what you do with it,” says Michael Norton, co-author with Elizabeth Dunn of Happy Money: The Science of Happier Spending.
Of course, it’s important to have your basic retirement needs covered. But beyond that, you’ll find more satisfaction from using disposable income to pay for memorable experiences—such as travel and nights out—rather than buying fancy cars and luxury goods, the authors contend. It helps even more if your spending experiences promote social connections.
Using your money for the benefit of others helps as well, “particularly spending on children and grandchildren,” says Norton, associate professor of marketing at Harvard Business School. “Spending money on stuff for ourselves just doesn’t do much for happiness.” It helps if you have a strong connection with a charity or individual, he says. A good example is contributing to your grandchildren’s education. “Education is one of those sweet spots where giving is very connected and high-impact.”
One of the authors’ spending tips is to “make it a treat.” You generally don’t derive much happiness from routinely spending on things like lattes and restaurant meals, says Norton. You get more benefit if you buy these things as an occasional treat, particularly if it’s with someone else. “The beauty of the ‘make it a treat’ principle is you’re also spending less money, so you get to save money while absolutely getting more enjoyment out of the spending you do.”
Anticipating and savouring your experiences tends to enhance enjoyment, the authors found. When planning for retirement, it helps to focus on the many fulfilling things you’d like to see and do, rather than just concentrating on the financial realities. “The phrase we like to use is, rather than desperation, think about aspiration.” That will help motivate you to save as well as give you more satisfaction from spending, he says.