YANSS Podcast – Episode Six – Happy Money

The Topic: Spending Money

The Guest: Elizabeth Dunn

The Episode: Download – iTunes – Stitcher – RSS – Soundcloud

Which would you rather have, a mansion the likes of Jay Gatsby, fully decorated and furnished or the memories of a month spent on the International Space Station? Would you rather own the kind of car they photograph for wall posters with doors that open in an unusual manner or spend a year practicing guitar for a chance to play a single show with the Red Hot Chili Peppers? How about $1,000 cash or a gourmet meal for you and your friends cooked by and enjoyed in the company of Gordon Ramsay? Assuming in each of these scenarios you can only have one and never have the other, which would you pick?

When asked similar questions, most people choose the tangible things over the experiences. The material items just seem more valuable in the long run, and cash always seems more practical than a fleeting indulgence. Yet the research says if you are seeking long-term happiness, nothing compares to unique experiences, even short experiences, even bad experiences. Over time, things lose their luster, but memories do not. Memories grow and spread inside your mind like a tree that can always be harvested of its fruit. They become a part of you, increasing in value as you age and continuously providing stories and smiles long after a nice car becomes just a way to get to Taco Bell or a nice house becomes the place where you watch Breaking Bad before going to bed.

It’s peculiar, your inability to predict what will make you happy, and that inability leads you to do stupid things with your money. Once you get a decent job that allows you to buy new shoes on a whim, you start accumulating stuff, and the psychological research into happiness says that stuff is a crappy source of lasting joy.

That’s just a small part of the book by this episode’s guest, psychologist Elizabeth Dunn. Happy Money, which she cowrote with marketing expert Michael Norton, is about the psychology of spending. They pored over the research into the relationship between money and happiness and came to the conclusion that if you want to be happy you should buy experiences. To maximize your happiness, make those experiences treats instead of routines, share them with others, buy them as far in advance of when you will enjoy them as you can, and avoid wasting money on objects that won’t affect how you will spend your time on the typical Tuesday.

They also point out that money itself loses its power to enhance your satisfaction with life once you reach a certain income level. Beyond $75,000 a year, in the United States, higher incomes only add very, very tiny bumps to overall happiness. The evidence suggests that the average millionaire CEO and her lawyer’s paralegal’s accountant’s dental hygienist are within a smidge of being equally happy day-to-day. If you make enough money to buy new tires when you need them, then you are probably not poor, and the research tells us that pretty much all versions of being not poor are basically equal, even being insanely rich.

Worse than all of this, if you do manage to become wealthy, they say you’ll take a hit to your overall happiness by losing the ability to enjoy simple pleasures. At least, that’s what happens on average, again, according to the research. The wealthier the person, the less likely he or she reports a desire to pause and enjoy the serenity of a waterfall, or the desire to go on a hike. That’s time that could be spent doing something that only the super-rich could do. Consider this: If you show one group of people a photo of a pile of cash and another group of people an interesting painting and then give both groups quality chocolates, the group primed to put money on their minds will enjoy the chocolate less than the other group. Who wants to be so rich that chocolate is no longer delicious?

We talk about all of this and hear her suggestions on how to pursue happiness using evidence-based spending advice in the interview. This is information that’s definitely worth your time to absorb.

After the interview, as in every episode, I read a bit of self delusion news and taste a cookie baked from a recipe sent in by a listener/reader. That listener/reader wins a signed copy of the new book, You Are Now Less Dumb, and I post the recipe on the YANSS Pinterest page. This episode’s winner is Mariam who submitted a recipe for chewy toffee apple cookies. Send your own recipes to david {at} youarenotsosmart.com.