This post continues our series focused on the psychology of money. In our last post, we discussed the importance of automating your savings.
By automating your savings, you remove the need to decide to save over and over. You make the decision once (by setting up that automated transfer) and therefore make it much easier on yourself to establish a savings habit.
If you haven’t read it yet, I recommend starting with this post first. Once you catch up, head back here to continue the conversation.
Today, let’s look at Principles 2 and 3 from Happy Money authors Elizabeth Dunn and Michael Norton. If you understand and use these principles in your day-to-day life -- and in your bigger-picture, long-term financial planning -- you can enjoy a greater degree happiness when you spend.
In order to achieve this for yourself, you need to Make It a Treat and Buy Time. Here’s what these principles can look like in action.
Make Your Spending a Treat
In Happy Money, Dunn and Norton note that “abundance is the enemy of appreciation.” We get used to what we already have -- and it becomes harder to appreciate things when we have more than we actually need.
Most of us want to have more because we usually equate that with some form of “better.” When we have more money, we’ll have a better life. When we have a bigger house, we’ll be more comfortable. When we have a nicer car, we’ll feel more confident.
But our enjoyment of things tends to go on the decline once we actually have those things we’ve spent so much time wishing to own. A study of students and chocolate consumption highlights this human tendency.
When We Have More, We Might Enjoy Less
Researchers gave chocolate samples to two groups of students. They asked each group to rate how much they enjoyed the samples -- and then they told the first group to give up chocolate for a week after enjoying their first piece. The second group, meanwhile, received a 2-pound bag of chocolate to take home with instructions to enjoy as much of it as they wanted.
After a week ended, the researchers gave both groups another sample of chocolate and again asked them to rate their enjoyment. The second group rated their enjoyment as much lower.
“These simple findings depict a powerful barrier to human happiness,” the researchers wrote in their study. “The appreciation and delight we derive from a positive experience may quickly fade when that experience is repeated.”
Using the principle of “making it a treat” means instead of constantly seeking more, try a different approach. Consider what you really enjoy -- and temporarily give it up.
This isn’t about depriving yourself. It’s just about making sure that thing you love doesn’t become your new normal. If it does, then like the participants in the chocolate experiment found, you might not enjoy as much as you would if it was a once-in-a-while treat.
Or, as the researchers in the study put it, consider reducing your consumption because “frequently indulging in common forms of pleasure may come at a cost to our wallets or our waistlines.”
Don’t do the same thing all the time; introduce novelty if you want to enjoy your spending more -- or, save your spending for special occasions so that its more memorable instead of just more of the norm.
Use the Second Principle to Buy More Time
In addition to changing your consumption patterns to get more satisfaction from the money you spend, you should consider changing what you’re actually buying. Instead of buying more stuff, consider buying more time.
As someone who moved away from the rat race of NYC, this really hit home for me. Even if you don’t live in a big city now (or never did), you can probably relate to feeling like you don’t have enough time… or that you don’t get to use your time the way you want.
According to the U.S. Census Bureau, Americans spend more than 2 weeks of the year commuting. That’s more than the average annual vacation time! When you’re living like that, it’s easy to feel like you just don’t have the time for the things that make you truly happy -- regardless of how much you make.
Keep that in mind when you consider the big picture. A job that allows you to earn more but takes up a significant amount of your time like this won’t necessarily lead to happiness. You may be better off making a little less and having more freedom over your time.
(Not convinced? A German study showed that “taking a job that requires an hour-long commute each way has a negative effect on happiness similar in magnitude to not having a job at all.”)
How to Buy Back Your Time
A shorter commute is probably a good start -- but that can require a drastic change in your life, and getting more happiness from the money doesn’t always have to be so complex.
Use your money to buy time for doing things that make you happy. For example, instead of buying a $200 watch, spend $200 to buy back hours of your time by hiring a housecleaner -- and using those hours to spend time with your family or to spend more time outside.
Outsourcing tasks is a great way to get more happiness from the dollars that you spend. But more importantly, pay attention to what’s actually going on here when you do this: you value time more than you value money (if not more so).
In Happy Money, Dunn and Norton stress that “seeing time and money as interchangeable resources is wise from an economic perspective. It is counterproductive from a happiness perspective.”
In other words, if you want to increase your happiness, you might want to put time higher on the priority list than money. It might be okay to spend a little, especially if it means buying yourself more time.