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Welcome back everyone. In the sixth and final part of my blog series, I want to discuss something that affects all of our financial journeys: Superannuation. Perhaps you’re concerned about your retirement savings? Or maybe uncertain about how to make the most .....
Wealth - 4 min read
While having lots of money can help you to avoid the anxiety and problems associated with poverty, the money itself doesn't seem to be what leads to happiness. In fact, having lots of money can also lead to anxiety if it's not managed well.
No, it's not the money itself that determines whether or not you're happy; it's what you do with the money that counts.
Ryan Howell, a professor at San Francisco State University, put this theory to the test. He wanted to see if people find more satisfaction in their material purchases or their experiential purchases. He found that people think they'll get more long-term value from their material purchases. After all, if you spend your money on new furniture, you'll be able to sit on it for years, whereas if you spent the money on vacation, you'll only get to enjoy it for a week.
He found that although people think they're going to get the most value out of material goods, they actually received the most long-term value out of experiences. In other words, they bought happiness when they spent their money on experiences instead of on tangible goods.
Let's say you buy the latest gadget. It will arrive in the mail in a few days. You wait impatiently for it, and soon you have the shiny item in your hand. It's temporarily exhilarating. It's the latest and the greatest. It's better than your friends' gadgets, so everyone oohs and aahs over it. Until one of your friends gets a newer one. Or you drop it and the screen cracks. Or it slows down or the speaker phone stops working.
Then it's back to the treadmill. You need a new gadget, and this time you need one that won't be so confounded slow.
You can only get on this treadmill by spending money, but the treadmill doesn't slow down. It just seems to move faster and faster. And although the temporary highs are very satisfying, they're fleeting. What else is there?
As mentioned previously, studies have shown that people actually gain more long-term value experiential purchases: concert tickets, trips, events with friends. This may be partially because they are often shared experiences with friends and family. It may also be because these experiences broaden our horizons and expand our identities.
Experiential happiness doesn't necessarily have to be bought. Instead of going out and buying something, you can do something instead. The memories of your experiences will stay with you long after your latest gadget is mouldering in a landfill.
Another professor, Elizabeth Dunn of the University of British Columbia, gave cash to students as part of an experiment; she told some students to spend the money on themselves, and she told other students to spend the money on others.
The students who spent the money on other people were happier than those who spent it on themselves. It's an interesting paradox. We work hard to earn money, but then we're happier when we spend it on other people.
Outsourcing tasks you don't like is another way to increase happiness, Prof. Dunn found in her studies. It's possible to "buy time" by hiring out work that you don't like to do. How much happiness you experience depends on how you use the time you "bought." If you take the time for granted, you won't gain much benefit. If you treat it as a windfall by using the time to pursue an interest or do something you love to do, you will indeed have bought happiness.
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