The long-standing debate over whether money can buy you happiness has largely been laid to rest. (Spoiler: Those of us who were firmly in camp “Yes!” are right—up to a certain threshold.) But how do you spend your money to maximize its effect on your overall pleasure, and at what point does more money stop making a difference?
Not surprisingly, the material things we buy bring us less joy than the experiences we spend our money on. “Once you get basic human needs met, a lot more money doesn’t make a lot more happiness,” says Dan Gilbert, a Harvard University psychology professor and author of Stumbling on Happiness. Long story short: Money can buy happiness—but only up to a certain point. What you spend your money on has a huge impact on how happy it makes you.
Buy Memories, Not Things
There are two spending strategies that will get you the most bang for your buck. You can spend your cash on memory-making activities, such as that vacation you’ve been dying to go on or those cooking classes you’ve been eyeing for months, or you can buy yourself more time.
When you spend money on experiences, the memories you create tend to be viewed through rose-colored glasses. “In your memory, you’re free to embellish and elaborate,” says Cornell University psychologist Tom Gilovich. So a vacation that may have been one huge mess with a few bright spots turns into a happy story to look back on. However, the new shoes you bought tend to lose their charm when you have to look at them every day and realize they’re not as wonderful as you initially thought. The feeling you associate with buying “stuff” is actually linked to the thrill you get from purchasing rather than the items themselves.
It is true that time is a finite resource, and we all have roughly the same amount of it. There are just 24 hours in every day, no matter who you are or how much money you do or don’t have. However, people who spend their money on time-saving services, such as housecleaning or grocery delivery, are more likely to be content with their purchases than people who spend their money on objects, such as clothes or a new car.
How Much Is Enough?
Research indicates the salary sweet spot when it comes to money equating happiness is about $75,000 a year, but experts also warn that the sweet spot is somewhat relative to your current state. As you earn more, you adjust to your new wealth. The more you make, the more you want—and the less effective material things become at making you happy. It’s a sort of a purgatorial, running-in-place state that economists have termed the “hedonic treadmill.”
To make matters more complicated, people are constantly comparing themselves to others. Of course, there’s the tinge of jealousy we feel when ogling the wealthy, but those we most frequently compare ourselves to are our peers. Experts have found that how people measure up against their peer groups has a much larger impact on sense of self than financials.
So how do we get off the hamster wheel and find a little more contentment with our financial lot in life? Realizing money is not always the answer goes a long way toward curing the human condition. But knowing money cannot be ignored altogether, we can reflect on the ways we spend it. The things that don’t last often leave the most lasting impact. Using this knowledge as a guide, we can better utilize money as a tool for improving our happiness.