Thursday, October 31, 2013

Money Can’t Buy Happiness: True or False?

As the Beatles famously sang, “Money can’t buy me love,” but can it buy happiness?  The answer we’ve all heard for years has been a decided no, but a new book argues otherwise. Happy Money: The Science of Smarter Spending argues that if you spend your money right, it can buy you happiness.

I read about this book in Michelle Singletary’s Color of Money column, one I look forward to every weekend in the Sunday paper.  Quite often the column covers the basic tenets of healthy money management—saving, spending within your means, budgeting—but I sometimes pick up tips and concepts I haven’t previously heard or considered.

Over the past few years, beginning with the economic decline that ushered in 2009, I’ve read more and more articles praising the value of buying experiences rather than things.  That, of course, is the point of MasterCard’s Priceless ad campaign. The thing will eventually be forgotten, wear out, or even break, but the experience can be a treasured memory that lasts a lifetime.
The authors of Happy Money take that advice a few steps further and point out that “Shifting from buying stuff to buying experiences, and from spending on yourself to spending on others, can have a dramatic impact on happiness.” Their research shows that buying more or better stuff doesn’t increase long-term happiness. 
I don’t know that I’ve ever declared my personal spending philosophy, but theirs dovetails with how my husband and I live our lives. While we do occasionally engage in retail therapy, all in all, we’re pretty darned frugal—so much so that our relatives, who shall remain unnamed, have at times called us cheap. I suspect that those who know I drive a 1998 Acura Integra might agree. So be it.
On the other hand, I love the latest fashions and am better able to buy what I really want because we don’t have car payments.  Even on those things, I rarely go over the top.  I also enjoy vacations and get five weeks a year.  Lately, we’ve taken the experience adage to heart and have started taking cycling vacations to Europe.  I’d been waiting for when I retired and had more time, but think about it.  Seriously?  When I do stop working, cash won’t be as ready and by then, we may not be physically able to enjoy these trips as much as we do today. Why not go for it now?  And, rest assured, no matter how much we may want the experience, we are not robbing our retirement to pay for it.
What are their other principles for happy spending—beyond buy experience?
·         Make it a special treat. If you indulge in something all the time--say massages, manicures, Starbucks--the impact lessens over time.

·         Buy time: If you wish you had more free time, maybe it makes sense to hire someone to do the yard work or clean the house.  I vote for both.

·         Pay now, consume later: I hadn’t thought of this one, but paying for a big vacation in advance allows more time to happily anticipate it.

·         Invest in others: This goes beyond giving to the United Way or non-profits.  They believe that spending any amount of money on others, big or small, can increase your happiness level.
I especially like this advice:
“Before you spend $5 as you usually would, stop to ask yourself:  Is this happy money?  Am I spending this money in the way that will give me the biggest happiness bang for my buck?”
PS. In a strange coincidence, while I was writing this blog, my financial planner was writing a very similar one, so I've added a link. Check out Does Money Buy Happiness?