If money doesn’t buy happiness, you’re spending it wrong | Your Brain on Money

The idea that money can't buy happiness is a load of "beep." Money will make you happier. There are certain expenditures that have a direct link to our increased happiness, and it's ones that are spent on things that enhance our experiences. And so, understanding how to use money to enhance your happiness is very, very important.

My partner and I knew that we wanted to leave our hometown of Columbia, South Carolina. So we decided to sell 90% of our things and hit the road—and really stack up the experiences instead of buying more possessions as we lived our lives the way that we want to live them.

If you want to use money to become happier, I say all the time, "Experiences are greater than stuff." And all the research supports this.

Happiness isn't on any shelves. We can't order it online, but there are things that we want. There are goals that we have. There are things we want to see in our life that money can help us achieve.

Can the way we choose to spend or not spend our money unlock the greatest happiness in our lives? This is "Your Brain on Money."

Experiences, take one, marker.

So the saying about money and happiness, among scientists, is somewhat cynical but true— is that if money doesn't buy you happiness, you're spending it the wrong way. It could buy you happiness. It's just that right now we're spending it in a way that isn't focused on happiness. It's focused on things that we think are gonna make us happy, and are not.

Handling money creates an experience of euphoria that can last for hours. And we get stuck in this mindset of consumption; it's one of the ways that we're wired to do things wrong about money.

Spending money on gadgets and possessions can give us an immediate sense of gratification, but doesn't usually lead to long-term happiness. Why do we feel compelled to do it?

In our brain, we have mechanisms that operate very short-term. You enjoy it for the moment, and then you go back to reality.

Think back to as a child, you got a really shiny toy. You have that initial burst of joy. This is so cool and so exciting. And then pretty soon you forget about it, and it breaks. That shiny new object will lose its luster, and you will not have a long-lasting happiness associated with that. And as a matter of fact, it could backfire and make you feel worse.

You enjoy it for the moment, but then because that's all it is, is a short-lived thing, it basically fades away. You have a spike of happiness for a moment, and then you go back to reality. Now, there are ways to fix that.

Even though our brain has evolved to enjoy short-term purchases, research has shown that spending money on experiences instead of possessions can have a bigger impact on our happiness over time. What part of the brain is at work here?

So, if you have the option to buy a memory of a vacation that you can tell as a story again and again, you get to enjoy it every time you load the memory and share it and store it and share it, and store it and share it many, many times. It's a long-term investment in an experience.

So every time you connect back to that, you experience a little bit of the happiness. Versus a purchase—you buy something, and you can feel good in that moment, you might feel good when you see it, but over time, you see it over and over, that happiness diminishes. It is not the same as an experience.

There are certain expenditures that have a direct link to our increased happiness, and it's ones that are spent on things that enhance our experiences. So for example, let's say that you bought a mountain bike and now you get to go out into nature and have that experience. Well, that mountain bike will make you happier every time you're using it.

So yes, there's research that shows that if you spend money on material goods, you don't experience as much happiness or satisfaction in the long run as if you spent it on experiences like going sailing, going on a trip, spending time with family. However, I think it really depends on someone's individual, money personality. One of the ways to do it is just to really, for a week, decide, “I'm just gonna pay attention to what are the things that I absolutely love to do?” “What are the things where I lose myself in doing them, and what feels important to me?”

If you are a person that has valued saving money, great. I would also encourage you to think about how are you maybe using some of those funds to create experiences? What would it be like to do something with your family, your partner, your friends that could be a memory that you have for a lifetime?

Knowing what we do about how our brains work, how do we make the most of our time and money when we're looking for happiness? Of course, it's impossible to avoid some purchases—and some of our possessions, like owning a home, can be important for our long-term financial health and happiness. But how do we get the most happiness out of our discretionary spending?

From an early age, I learned that life is about the stories that we share. And there are very few stories that you're gonna be able to share off this coffee maker that you bought, or this car that you finally got in your driveway. So think about a concert that you've been to, whether it was now, or when you were a teenager. Think about the best dinner that you've had. The best vacation you've been on. These are experiences that pay dividends time and time again.

So when I'm talking about things like spending money on vacation or spending money to get the car of your dreams—that's great if and when your personal finance needs are met. So, everybody is different, but in general, we want to think about making sure that you have an emergency fund available, and funded in a way that feels good for you. And we also want to think about: ‘Is this purchase, whether it's an experience or whether it's a thing, actually something that I can afford?’

So for those of you who are saying, "Great, I wanna save up my money and do an experiential trip with my family and my loved ones, but I'm not able to right now," the good news is, right now, there might be a creative way to create those types of connections that you're craving. We can connect and bond with friends and loved ones in ways that maybe don't necessarily involve spending money.

A question that I ask my clients is: 'Will this financial decision bring me closer to my wellness?' The way that you're spending your money, is it going to improve your life when it comes to your finances, your emotions, your physical health? You wanna make sure that you're bringing utility to your life—and experiences do that better than anything you can buy.