Achieving both short- and long-term happiness might sound like a paradox: what feels good in the short-term may not necessarily sustain our well-being for the long haul. Strategic consideration around how money is spent can help reconcile the tension. It is up to us to determine how we can maximize money’s utility to help us achieve happiness.
An influential study on happiness suggests that, “Money is an opportunity for happiness, but it is an opportunity that people routinely squander because the things they think will make them happy often don’t.” (pdf pg. 2) If spent in a way that speaks to our core values and needs, money can be a conduit for happiness. Purchases made for the sake of competing with one’s peers, or “keeping up,” however, can leave the spender feeling unfulfilled.
Mounting research points to spending on experiences, like a vacation with friends, as a better investment in our happiness. Good memories that remain from positive experiences offer a wellspring of sustained happiness upon which we may mentally draw for years after. The investment in experiences also provides us with renewed novelty. We tend to adapt to our material possessions quickly because they are static by nature. By learning how to recognize what will make us sustainably happy and what won’t, we hone our ability to overcome the temptation to spend on things that will give us only fleeting happiness or thrill, as aptly demonstrated in the renowned marshmallow experiment.
Exceptions to this are material possessions that can be part of an experience. A shiny new smartphone may appeal to our short-term impulses, and make us feel good temporarily, but the thrill will soon wear off. Yet, it can also be used for meaningful experiences, like communicating with loved ones or using self-improvement apps, which can provide long-term happiness.
We can achieve optimal happiness if we assess our purchases’ potential to contribute to experiences. It is also true that smaller, more frequent pleasures (daily cappuccinos or weekly movie tickets, for instance) may do more for our happiness than one big splurge.
Prosocial spending can make us happier
When our money is directly linked to factors that enhance our emotional well-being, we feel good when we spend. Such is the case of prosocial spending (pdf)—giving money for social good and to benefit others. Prosocial spending can make us feel happy, generous, and even wealthy.
In a 2014 study, a group of researchers examined why prosocial spending makes us feel good (pdf), and argued that prosocial spending is tied to all three intrinsic human needs: competence, relatedness, and autonomy. Prosocial spending demonstrates having achieved financial competence, which is why it can make us feel generous and wealthy. It also satisfies a need for relatedness because it connects us to the beneficiaries.
The autonomy element requires an additional step: In one study highlighted by the researchers, participants felt happier the more money they gave, but only if they had a choice in the matter. The researchers concluded that when people give to others freely, without coercion, it satisfies the need for autonomy.
Looking further at how autonomy contributes to our well-being, research shows that directing our money towards making more of our time can also contribute to happiness. This can mean trading work hours for a smaller salary, if the option is available. According to Sonja Lyubomirsky (The Myths of Happiness), this gives us time to spend with friends or family, learn a new language, or volunteer at a local community center. “If we spend our money to open up more ‘free’ hours in the day, we can spend our time enjoying the things in life that both empirical and anecdotal evidence suggests make us happy” she says.
Of course, there are ways that we can work towards happiness without considering money. Research shows that a regular religious practice or exercise routine could affect and raise well-being over the long-term. Ultimately, though, when we consider our money, the choice is ours to see it as a means to a happier life. This requires not only an honest look at our spending and sound judgement in our expenditures, but also a desire for happiness itself.
This article is part of a series which examines the relationship of happiness to income and work. Learn how self-reliance is critical for financial well-being, and about managing your wealth for the long term.
This article was produced on behalf of Prudential by Quartz Creative and not by the Quartz editorial staff.