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How money really can buy you happiness
Friday - 8/13/2010, 10:31am EDT
Federal News Radio
People work for a lot of reasons.
Fulfillment. Pride. Feeding and sheltering themselves and their families. Most federal workers have a little money left over after the basics are met. They buy things. And things often beget more things.
So the question comes up, can money equate with happiness?
Arthur Stein, a certified financial planner with SPC Financial, says there is evidence that money can actually buy some happiness. The trick is to spend it the right way.
"A recent article in the New York Times . . . [is about] the latest round of research on something called 'emotional efficiency', which means getting the most happiness for each dollar you spend. Academic studies are showing now that people are happier when they spend money on experiences instead of material objects."
So, when one actually thinks about what he or she wants to buy and quits trying to outdo the Jonses, he or she is more satisfied with the overall purchasing experience. Buying things like trips, concerts, sports events and other family activities make for a happier spender.
"One of the reasons is that spending on leisure strengthens social bonds, strengthens relationships and creates relationships and that helps increase happiness."
A lot of studies also show that control is a big factor. The definition of overspending has to do with one spending more than he or she earns, while failing to save and invest. Stein explains that this can lead to an out-of-control feeling, which causes anxiety.
"When people feel in control of their lives, they're much happier than when they don't. There's nothing that will make you feel less in control than being in debt, spending more than you make, [and] having to worry about how you spend each dollar."
Getting that big raise is one thing, but Stien says there is also something to be said for having too much wealth. Apparently, studies show, having an unlimited source of income has its downside, as well.
"Too much wealth reduces your ability to enjoy life's smaller pleasures. Wealthier people frequently do fall into the trap of trying to outdo other wealthier people, and then they never have enough money."
All of this is well and good, but how can you use this knowledge to your advantage when it comes to investing? Stein says it's actually pretty simple.
"The more you invest, the more you're going to feel in control of your life, but this is more about budget strategy. Try and spend more money on experiences -- trips, entertainment, family events -- and less money on fancy clothes, new cars that you don't need, the latest shoes, luggage or handbags, or whatever. That's really never going to end up in happiness."