We live in America with two bits of contradictory received wisdom — that you’d be a lot better off if you made more money, and that money can’t buy you happiness. Now two scholars suggest another way of thinking about the relationship between cash and joy: To a large degree, how you spend is just as important as how much you spend. Michael Norton, an associate professor at Harvard Business School and coauthor – with Elizabeth Dunn – of Happy Money: The Science of Smarter Spending, answered questions from Mind Matters editor Gareth Cook.
Gareth Cook: What is the biggest misconception people have about the relationship between money and happiness?
Michael Norton: One of the things that my coauthor Liz Dunn and I hear again and again when we ask people about money and happiness is a simple phrase: more is better. In general, we all believe that having more money is going to make us happier. And, while it’s true that having more money doesn’t usually make us less happy, it’s also true that simply having more money doesn’t guarantee happiness. After all, most of us have a friend, family member, or coworker who is relatively wealthy who certainly doesn’t strike us as particularly happy.
We suggest that people should stop thinking exclusively about how to get more money, and instead focus more on whether they are getting the most happiness out of the money they already have.
Cook: You write that people should “buy experiences.” Why do you say that?
Norton: When we ask people to list all of their expenses in a given month, and then categorize them, it is always striking how much of their budget goes toward buying what we call—using the scientific term—stuff. Gadgets, music, books, lattes, and so on. As it turns out, buying stuff is not bad for our happiness—buying coffees and cars and even houses don’t make us unhappy—but stuff also doesn’t make us any happier.
Buying experiences, in comparison, does seem to create more happiness for every dollar spent. Why? Consider the difference between buying a TV and buying a vacation. TV is great, sure, but the experience of watching TV pales in comparison to the experience of going to a special meal once a week with a partner or friend. A $4,000 high-end TV may seem like a great purchase, but taking that chunk of cash and devoting it to buying experiences (say, 40 wonderful meals that cost $100 each) creates much more happiness. And what’s more, we watch TV alone, but we eat dinner with others. The increase in social interaction—a key predictor of people’s happiness—means that experiences generally offer greater happiness bang for the buck than material goods.
Cook: What advice do you have for people planning a summer vacation? What can they do to get the most happiness out of it for the money?
Norton: There’s a funny thing about vacations: we often experience one of the biggest increases in happiness in the weeks before the vacation begins. This seems odd—after all, the purpose of a vacation is to go away and be happy—but it speaks to the power of anticipation. Yes, it can be hard to wait for things (think of children in the days leading up to Christmas) but research shows that anticipation is a huge and often untapped source of happiness. Vacations are great, but looking forward to that sunny beach while trapped in an office cubicle can be nearly as exciting and interesting as the beach itself.