We are always making decisions about how to spend our money, even though many times we are not conscious of those choices and how they affect our emotions.
Sometimes we feel happy about the way we spent our money, and sometimes we look back at our spending choices with remorse, guilt or shame.
Yet, we rarely take time to make sure that we can put our money where our smile is. Think about the last time you spent money on something that made you happy. What was it and what about it brought you satisfaction?
Now flip the coin and think about the last time you spent money in ways that elicited negative emotions. What did you buy, and why did it give you buyer’s remorse?
Busting your budget can make you feel unhappy because it causes you stress.
Taking care of your essential bills, and buying things that save you time and generate you income help you feel like you have a handle on your finances, and give you peace of mind. Beyond that, you also need to allocate your money to experiences that bring joy.
Study after study has found that what we choose to spend our money on determines our happiness.
One definitive study titled ‘If money doesn’t make you happy, then you probably aren’t spending it right’ has formed the basis of understanding the link between money and happiness. In the 2011 study, published in the Journal of Consumer Psychology, American researchers argued that people don’t know how to spend money in ways that make them happy. One of the researchers, Elizabeth Dunn, went on to co-author Happy Money: The Science of Happier Spending with social scientist Michael Norton.
In this book, they suggest that before you spend any money, you should ask yourself: “Is this happy money? Am I spending this money in the way that will give me the biggest happiness bang for my buck?”
THE MAGIC FIVE
To wring the most happiness out of every shilling, Dunn and Norton have a list of five spending choices that have been scientifically proven to boost happiness.
First, spend money on experiences that will build fond and lasting memories, rather than material possessions which produce happiness that only lasts as long as it takes to get accustomed to them.
Secondly, turn your favourite things into treats; you will appreciate your purchase more if you are not accustomed to it.
Thirdly, buy time; outsource unpleasant chores to get more time to spend on activities that make you happier.
Fourthly, delay consumption. Paying for something that you will enjoy in future, such as a vacation, makes the entire process sweeter as you anticipate finally getting to enjoy your purchase. Lastly, invest in other people: this will give you the biggest happiness boost.
YOUR MONEY MINDSET
Being deliberate about where our money goes is one thing, but our beliefs about money also influence how we feel when we spend it.
For instance, someone who is overly frugal will feel guilty about any spending on anything but bargain deals.
Get to know your money mindset and see if it stands in the way of deriving joy from your financial resources. Remember that money is a tool to help you live your best life.
Another important thing to look at is whether your spending choices match your values. How do your purchases affect your day-to-day life?
A purchase that makes life less of a hassle in the long run will most likely leave you content, as compared to a purchase that gives you short-term pleasure.
Make a list of things you enjoy spending money on and those you don’t, and start choosing better, bearing in mind that you don’t have to spend a lot of money to be happy.
Lastly, in as much as our spending influences our emotions, our emotions also influence our spending. For instance, when you feel sad, you might indulge in some retail therapy to give you what is often a temporary mood boost.
This type of spending will often be followed by feelings of remorse. Be alert for those times when you might make counteractive spending choices based on your feelings at that time.
Felista runs the money management group 52-Week Savings Challenge Kenya on Facebook. You can email her on [email protected]