Money Can Buy Happiness

Marcia Fiamengo paid $200,000 to spend six minutes in sub-orbital spaceflight aboard Richard Branson’s Virgin Galactic. In another instance, an anonymous donor paid for the layaway orders for 50 people at a K-Mart, then handed out $50 bills while leaving the store. While some might consider such spending extravagant or wasteful, it produced lasting happiness for the individuals.

Extensive research has shown that the act of buying life experiences and giving money away can make people happier than buying material items does.

Those findings have profound implications for planners, who are increasingly called upon to advise individuals and families on how to spend their money, rather than just how to invest it. Helping clients achieve better outcomes with their spending decisions – and enabling them to live happier lives – is a vast and largely untapped opportunity for the planning profession.

Fiamengo chose to spend the insurance money from her husband’s death to honor their retirement dream of being astronauts. The death of her husband served as a catalyst and reminder to not put off amazing experiences until a better time. On a much smaller scale, the anonymous widow who generously gave away money at K-Mart was doing so to make people happy and to honor the memory of her recently deceased husband.

In Happy Money: The Science of Smarter Spending, Elizabeth Dunn and Michael Norton argue that money can buy happiness if people make a focused effort on spending differently. The authors’ research shows that people are content to rely on their intuition to decide what type of spending will make them happy. If spending decisions are even half as complicated as investment decisions, there is no reason to assume that intuition alone provides a sufficient guide. Dunn and Norton’s research shows that wealth increases fail to produce similar increases in happiness because people make flawed spending decisions. In order to increase happiness, the authors offer a more structured decision-making process with specific recommendations as to what types of spending will produce higher levels of happiness.