Most people believe that the more money they earn, the happier they’ll be. After all, with a lot of money, you can buy a big house, a cool car, fancy clothes, and luxurious vacations. And those are the things in life that lead to happiness, right?
Not really, says Elizabeth Dunn, an Associate Professor of Psychology at the University of British Columbia and the author of “Happy Spending: The Science of Smarter Spending.”
Dunn and her co-researcher, Dr. Michael Norton, surveyed thousands of people and found that making and spending a lot of money doesn’t necessarily make people happy. Here, Dunn tell us what her research about the link between happiness and money does show:
High-paying jobs don’t necessarily lead to happiness. Jobs that allow you free time do.
Whenever we consider a new job or new career, the first thing we wonder is, “How much does it pay?”
To some degree, salary does matter: we all need to pay for food, shelter and clothing. Without those things, life is miserable.
But don’t assume that earning more money, so you can buy more of those things, and better things, will make you even happier.
Dunn found that having a job that gives one enough time to spend with family and friends actually makes people happier than having a job that provides a big paycheck, but little free time.
“In our 20s, we’re trying to decide what career is best for us and how much we should prioritize money in that decision,” Dunn says. “Always remember that when people choose careers that pay tons but don’t provide a lot of free time, like a lot of finance jobs, it’s a bad trade-off in terms of happiness.”
That said, don’t assume you’ll be happiest if you’re a starving artist. Dunn says Americans are happiest when they earn $75,000 per year. After that, money ceases to be a factor in life satisfaction.
“What matters most, when it comes to careers and happiness, is having enough free time to do what you care about, and see people you love,” she says.
Spending money on others makes people happier than spending money on yourself.
Say what? We experience a deeper and longer-lasting sense of happiness when they make a financial investment in others instead of in ourselves, according to Dunn.
This principle holds true whether you’re doing something to financially and materially benefit someone you know, like buying a nephew a gift, or whether you’re helping out people you don’t know, like donating to a Haitian relief charity.
“People are happiest when they can see the effects of their contribution,” Dunn says. “It’s easy to see the impact when you’re giving to someone you know. Or you can find charities, like Donor’s Choose, that send you follow-up photos or notes so you can see where your money went.”
Obviously, don’t start giving all your money away because you think it’ll make you so happy you’ll finally be able to throw away your antidepressants. “There’s no magic dollar figure for how much you should give away,” Dunn says. “Instead, look at what you give now, and try to give away a little more to buy a little more happiness.”
And don’t try to use the excuse that you’re too broke to spend money on anyone but yourself. “Even people in Africa who are on extremely limited incomes get a happiness boost if they give away a little money,” she says.
Buying “stuff” doesn’t make people happy. Buying experiences — ones that you anticipate — does.
We’ve all felt the rush that occurs after you buy something really cool, whether that’s a $50 shirt, or a $50,000 car. But those feel-good brain chemicals fade fast, often leaving people with buyer’s remorse.
Dunn found that the types of purchases that lead to longer lasting happiness are “experiential” ones like concerts, movies, dinner with friends or vacation.
If you want to be even happier, try to plan these events a little bit in advance. Dunn found that anticipating spending money is a huge source of happiness.
“Booking a vacation a year in advance might be a little too far away, but give yourself some time between buying and consuming,” she says.
Do you agree with Dunn’s findings? Think the jobs that make you the happiest are the ones that give you the power to buy and save? Do you think buying products makes you just as happy as buying experiences? And what about spending on others – are you happier spending on yourself? Sound off below.
Earn and save more with our free course:
Join over 15,537 other young professionals. Get our best money hacks to get out of debt by 30, increase your income this year and invest for financial freedom.
100% free! I will NOT spam you and I will NOT share your email.