The popular saying is that money can’t buy happiness.
The Beatles sang that they don’t care too much for money… money can’t buy them love.
I think the Beatles were mostly right about money and love. But there are ways of spending our money that can actually make us happier.
Let’s discuss an example of this…
After a few years of frugal living, Cindy and Jeff had saved enough for a down payment on a house they liked. They bought the house, and even though the mortgage payment was a bit of a challenge, they were able to manage it. For years they put all the extra money they had into the house – new appliances, furniture, decorations, repairs…
While they were doing this, they passed up several travel opportunities with friends and missed other adventures and opportunities to go out. They avoided spending any extra money on these experiences, which they saw as fleeting moments in time. Instead they focused on building their house the way they wanted and accumulating the things they thought would bring them a better quality of life.
Unfortunately, they also ended up spending more on these possessions than they had – using credit cards and a line of credit they had added to their house. This debt crept up and caught them by surprise when interest rates began to climb.
They found themselves resenting the money they were throwing away servicing this debt – as well as the large mortgage they had on their house.
They also envied the adventures their friends were having. They missed those things. They missed their friends.
And they began to wonder where they went wrong.
The key to avoiding a similar fate is knowing what sort of spending is likely to improve our lives and what sort is not.
What You Spend Your Money on Matters
Paying down debt can lower our stress levels and improve our lives. That’s especially true when it comes to high-interest debt, such as the debt we acquire through credit cards and adjustable-rate loans.
Paying off debt is also one of the best financial strategies because the costs of interest are usually far greater than the returns we can get from most investments, the benefits are tax-free, and the money this act frees up is then available for other things that we want or need.
Spending money on experiences brings much more satisfaction than spending money on things. We get used to the things we buy, and that can put us on the hedonic treadmill of wanting more things to get the same happiness we felt initially. Even buying a home isn’t the great joy that most people expect because we grow accustomed to it – so there’s little novelty and the expense is usually high.
On the other hand, experiences are – by their nature – novel. Having new experiences actually increases the neural connections in our brains and allows us to think more broadly. And through them we find different perspectives that may significantly increase our quality of life.
We also tend to have experiences with other people – and doing things with other people is one of the best things we can do for our happiness.
And speaking of other people… If we want an immediate sense of happiness, doing something kind for somebody else is one of the most effective things we can do. Spending our money on acts of kindness is one of the best sources of spending satisfaction.
Now, I’m not arguing against owning a home. There can be great satisfaction in knowing you’re established somewhere you like with good neighbors and familiar surroundings. It can be a wonderful long-term source of serenity and well-being (as long as you take all of the expenses – mortgage, insurance, taxes, repairs, utilities, etc. – into consideration).
The important thing is to maintain our perspective and consciously choose where we spend the fruits of our labor.
It’s also important to consider that the seasons of our lives also change. So we should regularly reevaluate what we’re spending our money on.
But in general, if you shift to spending less on possessions and more on experiences and other people, I think you’ll find that to whatever degree money can buy happiness, you’ll have a lot more of it over time.