Question of the Week
Focusing on Your Spending, Rather Than Your Earnings
Happy Friday, all!
Admittedly, this Five-Minute Friday is somewhat selfish. Barring any last-minute Delta variant cancellations, I’m about to use money in my vacation bucket for a two-week vacation in Germany. I’m so excited for a proper getaway and to see my family, whom I haven’t seen in person for two years.
In a conversation with fellow advisors about my trip, we discussed the importance of how you spend your money rather than how much you earn. Science seems to back this up. In their article, High Income improves Evaluation of Life but not Emotion Well-Being, Daniel Kahneman and Angus Deaton found that for a person who earns around $75,000 per year, making more money has no impact at all on their day-to-day feelings of happiness. And whether it’s happiness, comfort, safety, and security, emotion, rather than logic drives our behavior. Behavior scientists have backed this up, showing that to truly change behavior, we must focus on motivating your emotional elephant.
For that very reason, In her book, Happy Money: The Science of happier Spending, Elizabeth Dunn focuses on spending differently rather than earning more to produce more happiness. She writes, “rather than suggest that you stop trying to get more money, our goal is to help you use the money you have to get more happiness.”
Dunn suggests five fundamental principles of happy money:
- Buy experiences: buying experiences rather than material goods can inoculate you against buyer’s remorse.
- Make it a treat: When something wonderful is always available, people are less inclined to appreciate it. Limiting our access to the things we like best may help to “re-virginize” us, renewing our capacity for pleasure.
- Buy time: By permitting us to outsource our most dreaded tasks, from scrubbing toilets to cleaning gutters, money can transform the way we spend our time, freeing us to pursue our passions.
- Pay now, consume later: delaying consumption allows spenders to reap the pleasures of anticipation with the buzzkill of reality. For example, vacations provide the most happiness before they occur.
- Invest in others: new research demonstrates that spending money on others provides a more considerable happiness boost than spending money on yourself.
These principles provide an excellent foundation for making the most of your money.
Quote of the week
“Shifting from buying stuff to buying experiences, and from spending on yourself to spending on others, can have a dramatic impact on happiness.” – Dr. Elizabeth Dunn
Task of the week
Reflect the next few weeks on one way to spend your money that reflects the five fundamental principles of happy money. You won’t get any Five-Minute Fridays for the next couple of weeks, but feel free to peruse older blogs or catch up on episodes of Mission Driven Business.