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  • Writer's pictureJohn Krehbiel

Happy Money !

Updated: Apr 7, 2022

Mo’ Money, Mo’ Satisfaction:

Once people are able to meet their basic needs for food and shelter, it makes sense that they begin to spend money on the things that they believe will make them happy.  Since you’ll tend to spend money where the Happiness-gained-per-dollar-spent ratio is the highest first, it also makes sense that you need ever greater amounts of money to increase your happiness.  One study of over 100,000 people in 166 countries found that doubling your income corresponds to a 0.5 point increase in “life satisfaction” on a scale of 1 to 10 (1).  This would correspond to a Happiness vs. Income chart like the one shown here.

Happy Money, or at least Happiness vs. Income

Mo’ Money, Same Stress:

Other studies have shown that it’s not that simple.  For people with incomes above about $75,000/year in the U.S., greater income had no change on the percentage of people answering positively or negatively to questions like “did you feel sad yesterday?” or “did you feel stressed yesterday?”.  Above that income level increasing income doesn’t appear to reduce daily sadness or stress (2).

Are there ways to spend your money that will result in greater daily happiness?

Psychology researcher Elizabeth Dunn has studied the link between money and happiness and has captured 5 ways to spend your money that will tend to lead to more happiness.  They are fully explained in her entertaining book written with Michael Norton called, “Happy Money” (3). 

Dunn’s “Happier Spending” advice

(followed-by my summary of her ideas):

  1. Buy Experiences – we are happier when we have good memories than when we have “stuff” (that tends to just fill up the closets and the garage anyway!)

  2. Make it a Treat – if you buy the same thing regularly, the enjoyment of it decreases.  Stop buying it for awhile, and then it will become a treat.

  3. Buy Time – Buy services that free-up time for you.  This can lead to less stress and more time for what you enjoy.

  4. Pay Now, Consume Later – I call this the Club Med effect.  My Dad loved taking our family to Club Med resorts because he didn’t have to think about how much everything cost once we got there.  He had already paid for the “all inclusive” resort experience; this enabled him to just relax and enjoy it.

  5. Invest in Others – your money can have a positive impact on the world beyond yourself; that feels good.


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