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  • Dillon Dhanecha

[PROVEN] Money Buys Happiness

Updated: May 8, 2019


How do you feel when you spend money?


Is it a pleasurable, displeasurable, indifferent or wildly varying experience?


Experiments in the fields of Behavioural Economics and Behavioural Science show that being conscious about how you feel before, during and after spending money is a great way to navigate yourself to greater happiness


Yep. You heard it. Money DOES buy happiness… but not as you might think...


The many experiments and consequent findings suggest that making a link between your psychological wellbeingand your economic activityallows you to consciously choose “better feeling” forms of spending and, over time, to replace bad feeling spending with better feeling spending; thereby creating greater levels of happiness


Underlying these experiments is the hypothesis that says its not the “act” of spending that creates happiness/unhappiness in and of itself, but how you spend, what you spend on, why you spend and who you spend on


In this piece, we’ll take a look at three specific experiments that highlight some really interesting ways in which you can use money as a tool to buy greater happiness, or at least use it in ways that does not cause you personal anxiety


First: Size Does Matter!


If given the option of one long massage, or two shorter massages, what do you think you would prefer? If you think “one long massage”, you’re not alone!


When booking spa days, I immediately go for the longest massage available; it’s my opportunity to forceably switch off for an extended period of time


My wife on the other hand prefers multiple shorter treatments; which I’ve never really been attracted to


Researchers in this experiment were testing the idea of “diminishing marginal return”; the idea that an experience that is twice as long does not provide twice the pleasure… something I wish I’d known as a 16-year old anxious first-timer 😉


Pre-treatment, researchers were told by participants that one longer treatment would be “superior” in bringing happiness to two shorter treatments of a similar or shorter time


Very surprisingly however, post-treatment, people reported that two shorter treatments were actually superior, even though in some cases they added up to less time than one longer treatment


This is interesting as it shows that happiness is impacted by diminishing marginal returns

Intuitively, you may already have witnessed this feeling; an 8-day City break feels like pulling teeth whereas a 4-day break is absolute bliss


So… as you decide on your next “big” treat, be sure to consider the impact that many small treats could have on your wellbeing and happiness; one long holiday, or multiple shorter breaks?

Second: Experience of a Lifetime


Boven and Gilovich conducted an experiment designed to help understand which type of purchases made people happier; material items or experiences


First, participants were asked to recall a material purchase, then one experiential purchase


Next, they were asked to simply consider this:


“Which purchase brings more happiness”


The results were overwhelmingly clear; only 34% of participants said that the material purchase brought more happiness with 57% responding that the experience was more happiness-bringing, leaving 9% either unsure or equal


This may not come as much of a surprise since we’ve all seen the once-coveted item gathering dust in the corner of a room or pushed to the back of a cupboard


But why?


It could be down to the idea that we “adapt” more quickly to material purchases; they become a part of normallife much quicker than experiences which remain out of the ordinary for much longer


Also, as I write this, it dawns on my that it could also be that we see material items for “what they really are”; the new MacBook Pro has flaws, the Range Rover is a little “boaty”, the handbag gets scuffed… 


In my experience (pardon the pun!)... with memories of experiences, it is possible over time to only revisit the best parts of a 3-month trip to Australia or forget about the fact that there was no wi-fi on the beach in Cayman and even to block out certain “bad” experiences altogether; although this final point is my own personal conjecture only


As you create your wish list (or bucket list) take a look at the ratio between material and experiential desires…


More immediately, begin to notice which part of your spending creates more lasting happiness; is it the experiences or the things?

Third: Not all gifts are bought equal


As a Venture Philanthropist committed to supporting strangers, this one made me think…


Intuitively we know that giving to others promotes wellbeing for the recipient, the giver and, according to some psychologists, onlookers also


But this experiment showed that not all gifts are boought equal…


A team of American psychologists gave participants either $5 or $20 and then split the group in to two


Group 1 were told to spend the money on themselves whilst Group 2 were told to spend the money on someone else


At the end of the day, when asked to gauge their happiness, it became clear that the amount of money being spent had much less bearing on happiness than who the money was spent on


It turned out that the group who spent on others were happier


However, whilst the amount given was of little or no relevance to happiness, it turns out that who the gift was given to does matter; spending on close family and friends outweighed spending on others when measured on the happiness gauge


So next time you decide to get your Legacy Makers M.A.D Millionaire groove on, understand who you are giving too and why you are giving…


It may just be that you need to go an make friends with that charity you give to every month or spend a day at the Food Bank so that you get to meet the person who takes your jar of pasta sauce home



As a trader since 1999 and trader-trainer since 2013, I have seen cognitive biases played out at the frontline of all financial decision-making; the point of placing a trade


Behavioural Economics, a field of study that seeks to evaluate the influence of irrational and impulsive human behaviour, has fascinated me for nearly a decade and has played a large part in my refining the OpFX trading strategy that is successfully removing the opportunity its for cognitive bias to realise a 98% win-rate for even first-time traders


This strategy is the keystone to our mission at Legacy Makers to create 10,000 M.A.D Millionaires over the next 20 years and re-distribute £1b in capital from our trading profits to UN Sustainable Development Goal related causes


If you’ve ever thought about trading the markets for capital growth and social impact, I’d love to see you at the next (free) online M.A.D Millionaire Method this Monday at 8pm; save your spot at


www.MadMillionaireMethod.com

© 2018 Legacy Makers

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