2944: According to Science, Spending Your Money in These 6 Ways Can Make You Happier by Charlie Brown

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[00:01:00] [SPEAKER_01]: This is Optimal Finance Daily. According to Science, spending your money in these 6 ways can make you happier. By Charlie Brown of simpleandstraightforward.substack.com.

[00:01:14] [SPEAKER_01]: Happiness is a slippery little bugger. It doesn't help that modern society makes the pursuit of it rather bloody difficult.

[00:01:23] [SPEAKER_01]: Apparently, you can only find it in the bottom of a pot of gold that's been used to buy the biggest possible car or house or insert item here.

[00:01:33] [SPEAKER_01]: Not an easy feat for most people. It's completely baloney anyway. It's well documented that more money doesn't necessarily equal more happiness.

[00:01:44] [SPEAKER_01]: So what should you be spending your money on in order to be happier? For the answer, I turn to science.

[00:01:51] [SPEAKER_01]: What does the research say about the link between money and happiness?

[00:01:55] [SPEAKER_01]: Are there ways to spend money that will result in happier humans?

[00:02:00] [SPEAKER_01]: Yep, there absolutely are.

[00:02:03] [SPEAKER_01]: Number one. Spend money in a way that fits your personality.

[00:02:08] [SPEAKER_01]: Here's the research.

[00:02:10] [SPEAKER_01]: In a field study using more than 76,000 bank transaction records, we found that individuals spend more on products that match their personality, and that people whose purchases better match their personality report higher levels of life satisfaction.

[00:02:28] [SPEAKER_01]: End quote.

[00:02:29] [SPEAKER_01]: And that's from an article titled, Money Buys Happiness, When Spending Fits Our Personality.

[00:02:36] [SPEAKER_01]: So people who know themselves and adjust their spending habits to fit will be happier than those that go with the flow.

[00:02:44] [SPEAKER_01]: Even better, this research claims that spending to match your personality has a bigger impact on your happiness than how much you earn or spend.

[00:02:52] [SPEAKER_01]: I agree.

[00:02:54] [SPEAKER_01]: I've written many times before about my eight years in suburbia, buying a house because it's what you do, even though it made me miserable.

[00:03:03] [SPEAKER_01]: It was a lifestyle that didn't fit my personality at all.

[00:03:07] [SPEAKER_01]: Once I sold the thing and started to spend money on what I love, namely travel and freedom, my happiness levels exploded.

[00:03:16] [SPEAKER_01]: I'm all for people exploring who they really are, and it turns out that science backs me up on this.

[00:03:22] [SPEAKER_01]: The better you know yourself, the better you'll know where and how to spend your money.

[00:03:27] [SPEAKER_01]: Number two, frequent small treats will make you happier than big splurges.

[00:03:33] [SPEAKER_01]: According to research by Harvard University, there are many reasons why treating yourself little and often will result in higher happiness levels than investing in one big purchase.

[00:03:45] [SPEAKER_01]: A. We are less likely to adapt to small experiences.

[00:03:49] [SPEAKER_01]: As the paper says, going for a beer with friends after work will be different every time.

[00:03:55] [SPEAKER_01]: There will be different people at the table, different conversations, different locations.

[00:04:00] [SPEAKER_01]: But instead, if you buy an expensive dining room table for your home, it's the same table day after day.

[00:04:07] [SPEAKER_01]: B. If we spend on big purchases, we come to rely on them for our happiness.

[00:04:13] [SPEAKER_01]: Thus, our ability to enjoy small everyday experiences is diminished.

[00:04:18] [SPEAKER_01]: The paper claims wealthy people are much less likely to enjoy everyday pleasures.

[00:04:23] [SPEAKER_01]: And C. Humans like to break up their pleasurable experiences.

[00:04:29] [SPEAKER_01]: For instance, research says that people are much happier when they experience two lottery wins,

[00:04:34] [SPEAKER_01]: say one of $25 and one of $50, rather than one $75 win.

[00:04:40] [SPEAKER_01]: Thus, if you spend small amounts of money on frequent experiences, you'll be happier than infrequently splurging.

[00:04:48] [SPEAKER_01]: That daily coffee could actually increase your happiness levels much more than a fancy two-week holiday.

[00:04:55] [SPEAKER_01]: And it's much cheaper to boot.

[00:04:58] [SPEAKER_01]: Number three.

[00:04:59] [SPEAKER_01]: Buy experiences, not things.

[00:05:02] [SPEAKER_01]: A well-touted phrase that turns out to be rooted in science and psychology.

[00:05:07] [SPEAKER_01]: In one survey, over a thousand Americans were asked to think of an experiential and a material purchase they had made

[00:05:14] [SPEAKER_01]: with the express intention of increasing their own happiness.

[00:05:18] [SPEAKER_01]: 57% of respondents said the experience was the better choice,

[00:05:22] [SPEAKER_01]: whereas only 34% claimed it was the material good that worked for them.

[00:05:27] [SPEAKER_01]: Although humans adapt very quickly to new experiences and information,

[00:05:32] [SPEAKER_01]: we are slower to adapt to experiences than we are to material goods.

[00:05:37] [SPEAKER_01]: The pleasure of buying a fancy sofa or bigger house will diminish much quicker

[00:05:43] [SPEAKER_01]: than the memory of that great day you spent at the beach.

[00:05:46] [SPEAKER_01]: Why?

[00:05:47] [SPEAKER_01]: Because humans adapt the quickest to things that don't change.

[00:05:52] [SPEAKER_01]: Experiences are novel, and no two are the same.

[00:05:55] [SPEAKER_01]: And let's face it, they're more fun anyway.

[00:05:59] [SPEAKER_01]: Number four.

[00:06:00] [SPEAKER_01]: Spend less on distractions and more on ways to make you focused.

[00:06:06] [SPEAKER_01]: Humans love flow states.

[00:06:08] [SPEAKER_01]: So much so that it turns out it doesn't particularly matter what we're focused on,

[00:06:13] [SPEAKER_01]: as long as we're focused.

[00:06:15] [SPEAKER_01]: One study asked people to rate their happiness levels against the current focus of their thoughts.

[00:06:20] [SPEAKER_01]: People reported the highest levels of happiness when they were focused on what they were doing,

[00:06:25] [SPEAKER_01]: rather than when their minds were wandering.

[00:06:28] [SPEAKER_01]: As a society, we're addicted to items that have been specifically designed to distract us.

[00:06:34] [SPEAKER_01]: Phones.

[00:06:35] [SPEAKER_01]: TV.

[00:06:36] [SPEAKER_01]: Internet.

[00:06:37] [SPEAKER_01]: We are pulled in millions of different directions, and it's making us miserable.

[00:06:43] [SPEAKER_01]: Instead of spending money on distractions, we should spend it more in areas that give us the best chance

[00:06:49] [SPEAKER_01]: of getting into flow states, where we can be completely absorbed in the activity in front of us.

[00:06:55] [SPEAKER_01]: Maybe a pair of noise-canceling headphones, or a babysitter for the kids.

[00:06:59] [SPEAKER_01]: Or even free tools like an internet blocker.

[00:07:03] [SPEAKER_01]: Happily, flow states don't have to cost you much, if anything.

[00:07:07] [SPEAKER_01]: Number 5.

[00:07:09] [SPEAKER_01]: Spend your money on other people.

[00:07:11] [SPEAKER_01]: Studies have shown that humans think they will be happiest if they spend their money on themselves,

[00:07:17] [SPEAKER_01]: when in reality, the opposite is true.

[00:07:20] [SPEAKER_01]: Why?

[00:07:21] [SPEAKER_01]: Because giving makes us feel good.

[00:07:23] [SPEAKER_01]: It also cements ties with people around us.

[00:07:26] [SPEAKER_01]: And science suggests that people with stronger social connections make for happier humans.

[00:07:32] [SPEAKER_01]: My best friends just had a baby.

[00:07:34] [SPEAKER_01]: Yesterday, I sent them a voucher for their favorite lunch spot for when they're ready to go out into the world again.

[00:07:40] [SPEAKER_01]: Not only did it make them happy, but their happiness made me feel all warm and fuzzy inside.

[00:07:45] [SPEAKER_01]: It was the best $50 I've spent all week.

[00:07:49] [SPEAKER_01]: Spending money on other people may feel counterintuitive to happiness,

[00:07:53] [SPEAKER_01]: especially if you don't earn a lot.

[00:07:55] [SPEAKER_01]: But even a small contribution can make you feel awesome, and do good for others too.

[00:07:59] [SPEAKER_01]: And number 6.

[00:08:02] [SPEAKER_01]: Spend on experiences that come with added anticipation.

[00:08:07] [SPEAKER_01]: Anticipation is what scientists call free happiness.

[00:08:11] [SPEAKER_01]: Anticipating a dinner out with friends, or even a quick drink after work,

[00:08:15] [SPEAKER_01]: gives us purpose, direction, and something to look forward to.

[00:08:19] [SPEAKER_01]: Science says the emotion of anticipation is even stronger than being in the moment,

[00:08:24] [SPEAKER_01]: or remembering past pleasures.

[00:08:26] [SPEAKER_01]: Thus, if we spend our money on experiences that come with added anticipation,

[00:08:31] [SPEAKER_01]: our happiness levels can rocket off the charts.

[00:08:34] [SPEAKER_01]: Or put another way, the Amazon one-click button linked to your credit card is the antithesis of happiness.

[00:08:43] [SPEAKER_01]: Buy now, pay later schemes might give us a quick dopamine hit,

[00:08:47] [SPEAKER_01]: but it eliminates any anticipation.

[00:08:50] [SPEAKER_01]: What's more, research says that impatient people are less wealthy people.

[00:08:55] [SPEAKER_01]: Companies know that removing friction can make you spend more impulsively and frequently,

[00:09:00] [SPEAKER_01]: which is exactly why they do it.

[00:09:02] [SPEAKER_01]: But that same-day delivery for an impulse purchase is actually undermining your well-being.

[00:09:08] [SPEAKER_01]: Not only because you're all the poorer for it,

[00:09:11] [SPEAKER_01]: but because you've eliminated any sense of anticipation.

[00:09:14] [SPEAKER_01]: Do your happiness levels a favor,

[00:09:17] [SPEAKER_01]: and next time you have an impulse to buy an item or experience, wait a little.

[00:09:21] [SPEAKER_01]: After all, a week's worth of waiting is a week's worth of free happiness.

[00:09:30] [SPEAKER_01]: You just listened to the post titled,

[00:09:32] [SPEAKER_01]: According to Science, Spending Your Money in These Six Ways Can Make You Happier,

[00:09:37] [SPEAKER_01]: by Charlie Brown of simpleandstraightforward.substack.com.

[00:09:42] [SPEAKER_01]: And I'll be right back with my commentary.

[00:09:45] [SPEAKER_01]: I thought this was great guidance on how we can extract more happiness out of the ways we spend money.

[00:09:51] [SPEAKER_01]: I found for myself that if I can be really efficient on the big three,

[00:09:56] [SPEAKER_01]: which is housing, transportation, and food,

[00:09:58] [SPEAKER_01]: I have a lot more flexibility for spending in other areas.

[00:10:02] [SPEAKER_01]: And when your fixed costs are relatively low compared to your income,

[00:10:06] [SPEAKER_01]: you have a lot of bandwidth to experiment on your discretionary spending.

[00:10:10] [SPEAKER_01]: You can test out the advice in this article and see if it's true for you.

[00:10:15] [SPEAKER_01]: Not all spending is created equal.

[00:10:18] [SPEAKER_01]: And I have many moments where it's not clear if I'm going to get an adequate amount of value out of my spending until after the fact.

[00:10:26] [SPEAKER_01]: That can be annoying.

[00:10:27] [SPEAKER_01]: Like the time we spent $400 on a fancy steak dinner and it simply wasn't worth it.

[00:10:33] [SPEAKER_01]: Or even our honeymoon, we spent thousands of dollars on an all-inclusive resort

[00:10:39] [SPEAKER_01]: just to discover that we aren't all-inclusive resort people.

[00:10:43] [SPEAKER_01]: However, I also spent thousands of dollars taking my stepson to Yellowstone this summer.

[00:10:48] [SPEAKER_01]: And that was 1,000% worth it.

[00:10:51] [SPEAKER_01]: The point is, we should be thoughtful and intentional about spending.

[00:10:56] [SPEAKER_01]: We should ponder the things outlined in this article today.

[00:10:59] [SPEAKER_01]: But we should also be aware that we aren't always going to get it right.

[00:11:03] [SPEAKER_01]: And that's okay too.

[00:11:05] [SPEAKER_01]: But that will do it for today.

[00:11:07] [SPEAKER_01]: Have a great day and start to your weekend.

[00:11:09] [SPEAKER_01]: And I'll be back here tomorrow as usual, where your optimal life awaits.