Money can’t buy happiness? Guess again!

Researchers at Cambridge University studied the way in which spending behavior corresponds to happiness. They concluded that spending money can increase happiness when it is spent on goods and services that fit our personalities and therefore meet our psychological needs. For instance, people who scored high on the personality trait ‘extraversion’ tended to spend more on entertainment and travel. People who scored high on ‘conscientiousness’ tended to spend more on insurances and activities related to health and fitness. People who spent more on purchases that matched their personality were found to be happier. Spending the right way mattered MORE than their total income.

How can money buy happiness?

Harvard professor Michael Norton and Professor of Psychology Elizabeth Dunn studied this topic. They concluded that money can make you more satisfied with life. All you need to know is HOW you should spend it. You can read about their study in their book Happy Money: The Science of Smarter Spending.

Here are three of the best ways to spend your money in order to increase happiness.

1. Buy experiences

Study has shown that we feel happier after buying an experience as opposed to a material purchase. The excitement of buying a product fades quickly while the memories of experiences can last for decades.

2. Spend money on others

Norton and Dunn show in their study that spending money on others promotes happiness. Participants who were randomly assigned to spend money on others experienced greater happiness than those assigned to spend money on themselves.

“By the end of the day, individuals who spent money on others were measurably happier than those who spent money on themselves — even though there were no differences between the groups at the beginning of the day. And it turns out that the amount of money people found in their envelopes — $5 or $20 — had no effect on their happiness at the end of the day. How people spent the money mattered much more than how much of it they got.”

3. Buy time

The one thing we can not buy is time. Right? We can’t make ourselves live longer but we CAN free up our time as much as we can. By outsourcing tasks like cleaning, cooking, driving and anything else you don’t feel like doing, you win time.

Another wise way to invest in your own well-being is by spending money on learning. Learning a new skill or a new hobby can be a rewarding and fun experience and even bring new people into your life.

What will you spend your money on next?