The Beatles had it figured out in 1964. When the group released Can’t Buy Me Love, they told adoring fans around the world that money wasn’t everything.
That grain of truth has been the lifework of Dr. Elizabeth Dunn. She literally wrote the book on money and happiness. And what she discovered is what The Beatles knew all along. Fortunately, Dr. Dunn’s research also shed light on practical ways to use money for maximum satisfaction.
Dr. Dunn measured happiness of individuals across the full spectrum of income and wealth. She found that rich people are generally happier than poor people, but not by as much as many would expect.
Her research demonstrated that happiness increases in lock step with increases in pay – to a point. Once an individual’s income rises to $75,000 a year, additional income ceases to have any bearing on how often people laugh or smile in a given day.
The same goes for wealth. Dr. Dunn found no measurable difference in the happiness of people who had a net worth of $1 million versus those with up to $5 million. Her research revealed people with $10 million in net worth are generally happier than those with less wealth, but again, not by much.
Importantly, Dr. Dunn learned that money can be used to increase happiness. The key is using it in the right way.
She prescribed five ways to boost money’s impact on happiness. For the sake of time and space, I will cover two of Dr. Dunn’s recommendations. Perhaps we can explore her other recommendations in a future article.
The first way to increase happiness with your money is to buy experiences. Vacations, concerts, and dinner with friends produced more long-lasting happiness than buying material things.
To prove this, Dr. Dunn measured the happiness of people at Christmas. She separated gift receivers into two groups: those who received a material gift and those who received an experiential gift. The people who received a material gift – a toy, electronics, or a game – reported subtle bursts of happiness on Christmas day. Those bursts occurred each time a new gift was unwrapped. But those receiving experiential gifts reported more intense happiness.
Dr. Dunn then followed up with the same individuals six weeks after Christmas. She was curious to know if their levels of happiness with their gifts had changed in any way. Those who received material gifts reported no additional happiness. However, those who received experiential gifts demonstrated even more happiness than they felt on Christmas day.
The research is clear. Buy experiences, not things.
The second way to increase happiness with your money is to spend it on helping others. Americans have this figured out. We are some of the most giving people in the world.
In order to prove the link between helping others and happiness, Dr. Dunn conducted an experiment where she gave people money randomly. Some were told to spend it on themselves. Others were told to spend it on anyone but themselves. A while later, Dr. Dunn and her researchers followed up with the study participants. She found the people who spent the free money on others expressed greater happiness.
The research is clear. Use your money to help others.
The Beatles proclaimed, “Tell me that you want the kind of things that money just can't buy. I don't care too much for money. Money can't buy me love.”
They were right. Money can’t buy love, but it can produce happiness. It is all about how you use it.