“There’s nothing in the world so demoralizing as money,” a character proclaims gloomily in Antigone, but maybe he didn’t know how to use his cash. If we spend it right, research suggests, money can, in fact, buy happiness.
According to one oft-repeated rule of thumb, spending on experiences rather than objects makes us happiest. When asked to reflect on a purchase, people who described experiential ones—travel, say, or concerts—were much happier than those who described material ones. [1] Psychologists believe the “hedonic treadmill”—our tendency to eventually revert to our original level of happiness following a change—operates more swiftly after material purchases than after experiential ones: A new table is easier to get used to than a trip to Chile. They also say we are better at making peace with bad experiences (“It brought us closer together”) than with regrettable objects. [2]
Not all experiences are equally worthwhile, however. In one study, when experiential purchases were categorized as either solitary or social in nature, social expenses brought more happiness. People who spent on solitary experiences valued them no more in hindsight than they valued possessions.[3] It’s not so much that doing things makes us happier than having things—it’s that we like doing things with people. This is particularly true for extroverts: In one study, they got significantly happier after shopping with others, no matter what they bought. [4]
University of Cambridge researchers joined with a bank to analyze the relationship between customers’ spending habits, personality, and happiness. They found that the “Big Five” personality traits—extroversion, openness to experience, conscientiousness, agreeableness, and neuroticism—predicted spending. Outgoing people splurged on restaurants and entertainment, while self-controlled, conscientious types shelled out for fitness and insurance. And those whose spending fit their personality were happier than those who spent against type. In one case, extroverts and introverts received vouchers for either a bar or a bookstore. Extroverts were happier when forced to spend money at the bar, while introverts were happier spending at the bookstore. [5]
But before you go on a spending spree, a caution: More than income, investments, or debt, the amount of cash in one’s checking account correlates with life satisfaction. [6] That doesn’t mean you should be stingy, though: When people were assigned to buy goodies for either a hospitalized child or themselves, those who bought treats for a sick child reported more positive feelings. [7] The effect was the same in a rich country (Canada) as in a poor one (South Africa). Spending on friends and family likewise gives us a boost because—unsurprisingly—it brings us closer to them. [8]
So how do you turn cash into fun? First, figure out whether you’re an extrovert or an introvert. Then, head to a bar, bookstore, or hospital, with a Canadian in tow. There must be a joke in there somewhere.
The Studies:
[1] Van Boven and Gilovich, “To Do or to Have? That Is the Question” (Journal of Personality and Social Psychology, Dec. 2003)
[2] Gilovich et al., “A Wonderful Life” (Journal of Consumer Psychology, Jan. 2015)
[3] Caprariello and Reis, “To Do, to Have, or to Share?” (Journal of Personality and Social Psychology, Feb. 2013)
[4] Goldsmith, “The Big Five, Happiness and Shopping” (Journal of Retailing and Consumer Services, July 2016)
[5] Matz et al., “Money Buys Happiness When Spending Fits Our Personality” (Psychological Science, May 2016)
[6] Ruberton, “How Your Bank Balance Buys Happiness” (Emotion, Aug. 2016)
[7] Aknin, “Prosocial Spending and Well-Being” (Journal of Personality and Social Psychology, April 2013)
[8] Yamaguchi et al., “Experiential Purchases and Prosocial Spending Promote Happiness by Enhancing Social Relationships” (The Journal of Positive Psychology, Sept. 2016)