May 3, 2012
Despite popular assertions to the contrary, science tells us that money can buy happiness. To a point.
Recent research has begun to distinguish two aspects of subjective well-being. Emotional well-being refers to the emotional quality of an individual's everyday experience — the frequency and intensity of experiences of joy, stress, sadness, anger, and affection that make one's life pleasant or unpleasant. Life evaluation refers to the thoughts that people have about their life when they think about it. We raise the question of whether money buys happiness, separately for these two aspects of well-being. We report an analysis of more than 450,000 responses to the Gallup-Healthways Well-Being Index, a daily survey of 1,000 US residents conducted by the Gallup Organization. […] When plotted against log income, life evaluation rises steadily. Emotional well-being also rises with log income, but there is no further progress beyond an annual income of ~$75,000.
For reference, the federal poverty level for a family of four is currently $23,050. Once you reach a little over 3 times the poverty level in income, you've achieved peak happiness, as least far as money alone can reasonably get you.
This is something I've seen echoed in a number of studies. Once you have "enough" money to satisfy the basic items at the foot of the Maslow's Hierarchy of Needs pyramid – that is, you no longer have to worry about food, shelter, security, and perhaps having a bit of extra discretionary money for the unknown – stacking even more money up doesn't do much, if anything, to help you scale the top of the pyramid.
But even if you're fortunate enough to have a good income, how you spend your money has a strong influence on how happy – or unhappy – it will make you. And, again, there's science behind this. The relevant research is summarized in If money doesn't make you happy, then you probably aren't spending it right (pdf).
Most people don't know the basic scientific facts about happiness — about what brings it and what sustains it — and so they don't know how to use their money to acquire it. It is not surprising when wealthy people who know nothing about wine end up with cellars that aren't that much better stocked than their neighbors', and it should not be surprising when wealthy people who know nothing about happiness end up with lives that aren't that much happier than anyone else's. Money is an opportunity for happiness, but it is an opportunity that people routinely squander because the things they think will make them happy often don't.
You may also recognize some of the authors on this paper, in particular Dan Gilbert, who also wrote the excellent book Stumbling on Happiness that touched on many of the same themes.
What is, then, the science of happiness? I'll summarize the basic eight points as best I can, but read the actual paper (pdf) to obtain the citations and details on the underlying studies underpinning each of these principles.
1. Buy experiences instead of things
Things get old. Things become ordinary. Things stay the same. Things wear out. Things are difficult to share. But experiences are totally unique; they shine like diamonds in your memory, often more brightly every year, and they can be shared forever. Whenever possible, spend money on experiences such as taking your family to Disney World, rather than things like a new television.
2. Help others instead of yourself
Human beings are intensely social animals. Anything we can do with money to create deeper connections with other human beings tends to tighten our social connections and reinforce positive feelings about ourselves and others. Imagine ways you can spend some part of your money to help others – even in a very small way – and integrate that into your regular spending habits.
3. Buy many small pleasures instead of few big ones
Because we adapt so readily to change, the most effective use of your money is to bring frequent change, not just "big bang" changes that you will quickly grow acclimated to. Break up large purchases, when possible, into smaller ones over time so that you can savor the entire experience. When it comes to happiness, frequency is more important than intensity. Embrace the idea that lots of small, pleasurable purchases are actually more effective than a single giant one.
4. Buy less insurance
Humans adapt readily to both positive and negative change. Extended warranties and insurance prey on your impulse for loss aversion, but because we are so adaptable, people experience far less regret than they anticipate when their purchases don't work out. Furthermore, having the easy "out" of insurance or a generous return policy can paradoxically lead to even more angst and unhappiness because people deprived themselves of the emotional benefit of full commitment. Thus, avoid buying insurance, and don't seek out generous return policies.
5. Pay now and consume later
Immediate gratification can lead you to make purchases you can't afford, or may not even truly want. Impulse buying also deprives you of the distance necessary to make reasoned decisions. It eliminates any sense of anticipation, which is a strong source of happiness. For maximum happiness, savor (maybe even prolong!) the uncertainty of deciding whether to buy, what to buy, and the time waiting for the object of your desire to arrive.
6. Think about what you're not thinking about
We tend to gloss over details when considering future purchases, but research shows that our happiness (or unhappiness) largely lies in exactly those tiny details we aren't thinking about. Before making a major purchase, consider the mechanics and logistics of owning this thing, and where your actual time will be spent once you own it. Try to imagine a typical day in your life, in some detail, hour by hour: how will it be affected by this purchase?
7. Beware of comparison shopping
Comparison shopping focuses us on attributes of products that arbitrarily distinguish one product from another, but have nothing to do with how much we'll enjoy the purchase. They emphasize characteristics we care about while shopping, but not necessarily what we'll care about when actually using or consuming what we just bought. In other words, getting a great deal on cheap chocolate for $2 may not matter if it's not pleasurable to eat. Don't get tricked into comparing for the sake of comparison; try to weight only those criteria that actually matter to your enjoyment or the experience.
8. Follow the herd instead of your head
Don't overestimate your ability to independently predict how much you'll enjoy something. We are, scientifically speaking, very bad at this. But if something reliably makes others happy, it's likely to make you happy, too. Weight other people's opinions and user reviews heavily in your purchasing decisions.
Happiness is a lot harder to come by than money. So when you do spend money, keep these eight lessons in mind to maximize whatever happiness it can buy for you. And remember: it's science!
Posted by Jeff Atwood
Every time I go with #8, I get severely disappointed. I vowed to never do it again after I bought a Drobo. Which if I had done a little more comparison shopping (#7) I probably shouldn't have bought it to begin with.
The rest are all pretty good.
Of course money can't buy happiness! Money is happiness!
On a serious note, I recently moved to a different continent so I'm in the process of buying a new everything. I think these tips are pretty much what I normally try to do, but I'll try to keep them in mind as they're extremely relevant at this moment.
I'm actually surprised at how many of those points I arrived at of my own accord. While I don't necessarily practice all of them, I do know that metering out purchases feels better, I try to weigh the pros and cons of a purchase when I buy something, though it doesn't always work out. I rarely get buyers remorse, probably a side-effect of my packrat nature, everything could be useful, so nothing is a poor purchase.
I tend to buy things to facilitate purchases. As in, I want to have the experience of building a quadcopter, so I buy all the materials. Or I want the experience of working to perfect my home network, so I buy the equipment I need for that.
I always enjoy reading the life-lessons posts.
Money doesn't always buy happiness, but putting thought into how we spend it can!
Thanks for the reminder.
This study seems to make no mention of debt -- worry about debt is a significant factor in happiness. I realize it doesn't mention a bunch of other important things also, but debt is so directly related with income that I am surprised it wasn't called out...
The other benefit of following the herd is that you will probably enjoy something more if you think you'll enjoy it. And by reading the reviews or whatnot, you'll set that expectation.
The plural of "anecdote" is "data": I read the Yelp reviews for a diner and they called out the bacon. I don't know if the bacon was really all that (it's hard to go wrong with bacon) but I am pretty sure I enjoyed that bacon more than I would have if I hadn't known that others thought it exceptional.
#7 Comparison shopping: There's a risk/reward here. You can spend forever comparing things and get what you think is the best and it's actually awful and you'll feel awful. But if you do get the best and for cheaper than if you'd just splurged without thinking, then you can feel good about yourself for being so wise.
#1 Some things can be experiences. Sometimes I get great joy out of simply using things that are well made.
It's better to do things than to buy stuff.
I figured this out about five years ago and it's tremendously enriched my life ever since. I still buy stuff, but I generally try to only buy stuff that will enable me to do something that I'm really interested in.
Two quick points. First off, happiness is 1/3rd off now, at $50K per year: http://www.forbes.com/sites/learnvest/2012/04/24/the-salary-that-will-make-you-happy-hint-its-less-than-75000/
Secondly, to point #5: I have two Lego architecture sets I got for Christmas that I'm really enjoying not assembling yet. A cheap way to get your buy-now-consumer-later fix is to grab yourself an iTunes gift card, or credit with another shop where you can get a number of things for $15 (Amazon Kindle store, maybe?) The browsing knowing you can spend the money satisfies the shopping habit.
1) Get a bike, get a skateboard, get a snowboard, buy things that provide ongoing experiences. Why apps or sites that catalogue them are also popular...
2) Why donation screens at supermarkets and retailers are so successful. "Click here to donate 1 additional collar to cancer research." Instant feel good button
3) Why 50% of my paycheck goes toward good food....
4) Thank you. Convince retailers of this.. but then assurance would be missed at their reduced margins
5) Saving for an experience is worth it.
6) Why smartphones are purchased so often.. Look the salesman listens to music, compares in-store prices to the internet, and can take pictures! I'll buy all this stuff at retail price RIGHT now so I can too...
8) Nice wrap up
11 comments and nobody has mention the girlfriend experience? (that'd be the kind of experience I'd like to buy).
I'm not so sure about 3). I recall watching a program on TV about parenting and how you should teach your kids to save for a bigger payout.
Also, I don't think 8) is my cup of tea, feels to Apple fanboy for my taste.
One thing that is not mentioned here is that income is often correlated with status and people with higher status are often happier than those without.
Actually, I have no data for this, and it may actually be a very wrong assumption, but it is a common one. Money is correlated with things that make people happy.
I buy insurance on certain things and you should too... Got it on my monitor. One month in, line of dead pixels. Get it replaced, cost me 80 at purchase and I still have nearly four years. Headphones. Always, always get the replacement plan. SSDs... For 20-50 dollars I can get it replaced when I inevitably burn it out.
It's interesting recommending experiences instead of things. I can see some of the wisdom of that, as I have a small collection of cherished memories of random, unique, highly memorable stuff I did. It's a very small but dear collection.
In practice, traveling to go do stuff is the one thing I have all but never actually done. Even now, thinking about how nice it might be to collect some new memories, I just can't justify pissing away that much money on something so ephemeral. Every time I price out a trip somewhere, I run away screaming.
Maybe memories really are worth buying, but if so, I still can't afford them.
I hate how snarky this is going to sound but: is this the new direction of your blog or just a temporary diversion? The last 2 posts have been the kind of pop-psychology articles I can find anywhere. I've been following this blog for ~6 years for your tech insight. If this new direction is temporary, I'll stick around. If it's here to stay, it's not the feed I signed up for.
Your blog is turning into self help pretty rapidly, personally I prefer your more techy posts. Although I guess your posts are just a reflection of what you find interesting at the time.
The last two detours to philosophy are quite revealing. I come from a Biblical perspective and find the posts completely missing the point. The nature of man revealed in the Bible squares with the lying and groping for happiness in wrong places perfectly. You should study the NT sometime.
Weird Al said it very well in the song "This Is the Life" from Johnny Dangerously. "If money can't buy happiness, I guess I'll have to rent it."
No matter how you go about it, the most pleasure I get from money is when I give it up.
Spending it on loved ones is the most rewarding and long lasting pleasure I can ever get from it.
9. Get a life insurance and sign up for cryonics. If you have extra money, the chance to get a "1-UP mushroom" when you die is definitely worth it.
This stuff is always interesting, but some of the conclusions the researchers or (more likely) other people draw amount to "oh, we'll just take everything above $XX,000; it's not like you'll miss it anyway." That's probably just my paranoia kicking in :)
Also, you (or the article) didn't mention the relationship between income and the second kind of happiness, the "life evaluation." IIRC, your emotional well-being takes a huge hit when you have kids, so there's clearly something big missing there or else all parents are fools.
Finally, as a comedian (Louis CK, I think) once said, "it's hard to be unhappy on a jet ski."
Maslow's heirarchy, like most psychological concepts, is based on psychological studies of students of psychology.
The idea that psychology students wouldn't be representative of the general population would be obvious to anyone other than a psychologist, but to a psychologist they all seem normal.
The search for "self-actualization", as the highest goal, is true only for a set of personality types that represent a fairly small proportion of the population that also happen to represent the majority of psychology students.
So when you go asking an ESFJ about "self-actualization" or an INTP about "esteem", their lack of interest does not indicate that they're stuck on lower levels, as Maslow would suggest. It simply means that different people have different values and different goals.
The insurance conclusion is really interesting, but also seems terribly dangerous. Losing something and not having insurance or the means to replace it certainly repositions your emotions/attitude, but I'd be hard pressed to say it would certainly be a good change. I feel pretty guilty of the comparison shopping though, much appreciated.
Blog about whatever you want and I'm sure I'll be interested :) Keep it coming!
About #5, I disagree.
In the past, I would wait to buy a product till I "think" I have enough knowledge about the product. However, the downside is that if you delay your purchase to decide if you truly want the product, you will end up "thinking" about the product each passing day until you have bought it. You wouldn't have to do this "thinking", if you purchased it right away or with little deliberation.
There are two ways to satisfy an urge to experience a "want". One is to get it right away or the ignore (not suppress) it. Ignoring is quite difficult, right-away execution is much easier ;-)
I haven't read these papers, so maybe I'm missing something, but this seems at first glance to be (yet another) misunderstanding of correlation v. causation. Maybe happy people are more likely to have the energy/enthusiasm to try new experiences; maybe happy people are less likely to succumb to impulse buying and generally spend their money more wisely; maybe they're less phased by the loss of something uninsured, etc.
An 8-step program to happiness sounds overly simplistic to me.
This is incredibly fascinating to me, especially given that I've convinced myself that I need to make a significant amount of money more than I do right now, mainly due to my perception that more money equals more autonomy.
Reputation attracts up-votes, which is why I don't particularly like point #8, about "follow the herd". If there are 10 competing products and the first 5 people prefer product A, subsequent shoppers will lean towards it simply for that reason, even though products B, C, and D might be just as good, or for that INDIVIDUAL, even better! Weigh what they say, and see if what mattered to them even matters to you.
Shame on you for referring to the unscientific, oversimplified bullshit that is Maslow's hierarchy of needs.
To properly evaluate some of the 8 points you need to read the paper. For example, "follow the herd" doesn't mean to do so blindly, but that there is value in listening to what your peers say. When I look for a new place to eat I have no problem using Chowhound or eGullet recommendations.
Similarly the insurance point: make sure your necessities are covered. I am pretty sure the authors of the paper don't mean to not have life, medical, car, and home insurance, for instance. But beyond the necessities (including work-related ones) optional insurance packages represent an inferior bang-for-the-buck most of the time.
Near the self actualization image of the Maslow's Hierarchy of Needs pyramid, what is the "W" icon sign signify? The other icons are twitter, facebook and linkedin but cannot figure the "W" icon.
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w the herd". If there are 10 competing products and the first 5 people prefer product A, subsequent shoppers will lean towards cheap online auto insurance