Why Money Really Can Buy Happiness

Rethinking your budget and attitude toward money can create a fuller, more enjoyable life.


[See The Future of Social Security.]

Could give me an example? Perhaps someone's car or house?

Yes, I think that one of the fascinating things about American life is like what I said about spending a third of our budget on housing. That is perceived as the norm across a wide range of incomes. So even if people are earning tons of money, they still do it. And so you wind up getting some pretty ostentatious houses towards the high-end when you think of it that way. Because again, we are social creatures and a big chunk of our view of ourselves comes from how we land in the heap.

But you don't have to do that. It is possible to spend more on things that are not necessarily compared, but that tend to buy you more happiness. No one knows if your marriage is better than anyone else's. No one knows if your dinner with friends was more enjoyable than someone else's potluck picnic. These things are just not easily compared. But they're also enjoyable experiences that are always slightly different, and consequently are more likely to make you happy than something you get used to, like a car.

[See 10 New Retirement Hot Spots.]

What can we learn from happy people who don't earn as much money as others?

We view our lives according to how we land in the heap. That suggests that there's a very simple way to make yourself happier, which is to change your reference group. So if you become unhappy by looking at other people, and [are] feeling poor compared to them, then look at different people. And the world is certainly not short of them. You can compare yourself to villagers in rural India and feel incomparably rich.

Anything you'd like to add?

The quickest way to buy happiness is to treat a friend to lunch. And there are a few reasons for this, especially if you plan it ahead of time. Because planning fun things ahead of time gives you kind of a triple-happiness whammy because you anticipate the experience beforehand, you enjoy it during it, and then you savor the memory afterwards.

[See 10 Essential Sources of Retirement Income.]

Spending on your social network is another source of happiness. So it's nurturing your relationship with a friend. We enjoy eating, of course. And then the final benefit is that if you treat her, so you're spending money on someone else. She will probably reciprocate. So you can have your fun twice.