Dorval & Chorne Financial Advisors Quarterly Book Blog – 4th Quarter 2016
Happy Money, The Science of Happier Spending by Elizabeth Dunn & Michael Norton
Overview: Money can buy us happiness, if we spend it right. This book examines the spending principles that new research suggests makes people happier.
Each quarter I will be writing a blog on a financial book. My hope is to summarize each book with a couple of ideas people can implement into their own financial lives. The focus of the blog will be to highlight behaviors, principles and processes that can improve our financial well-being and help us reach our most important financial goals. My first book blog covers a topic that applies to all of us: spending (and how to do it wisely).
Happy Money looks at the latest research on spending and how it affects people’s quality of life. With this research, the book offers five principles we can use when it comes to spending money to help bring more happiness into our lives. The following are the principles with a brief description of each one:
Principle 1: Buy Experiences
Experiential purchases bring us more happiness than material purchases according to research. The experiences that bring the most joy will typically be spent with others, have a memorable story to share for years, have a strong link to your values and be unique.
Principle 2: Make It a Treat
Repetition and abundance tend to reduce appreciation. A lack of appreciation reduces the joy we feel in our lives. We can help to make sure the things we enjoy in life do not lose their appeal by making them a treat, not turning them into a routine. One suggestion in the book is to rotate the pleasures of life to prevent them from becoming commonplace. One week we might go to a movie (loading up on popcorn, of course), the following week a latte at our favorite coffee shop with a close friend, the next week a massage, and so on.
Principle 3: Buy Time
People who feel they have enough time tend to be happier. Money spent in ways that can buy us time can significantly increase our happiness, especially if we are being freed up from things we do not enjoy doing. Suggestions in the book to buy time include moving close to work to reduce commutes, buying a Roomba for those who do not enjoy vacuuming and utilizing a grocery delivery service for those who do not enjoy grocery shopping. Ellen recently started using Walmart’s online grocery ordering and loves the time she saves by placing her grocery order online and having her groceries delivered right to her car door!
Principle 4: Pay Now, Consume Later
Consuming later, while going against our instincts and hardly promoted by society at large, can be one of the most rewarding changes we can make in our lives. The anticipation of a purchase can often provide more enjoyment and fulfillment than the purchase itself. This applies to material and experiential purchases.
Principle 5: Invest in Others
Giving to charity and helping others brings us happiness. Giving can also make us healthier and feel wealthier. Even small amounts given can bring these benefits. Research suggests we receive the most benefits of giving when the giving feels like a choice, it connects us to others and it makes a clear impact to a cause that is important to us.
We hear from many of our clients the joys using these principles can bring into their lives. We have one client who has planned for trips (Buy Experiences) with each of her grandchildren once they reach a certain age (Make It a Treat) that is planned and paid for in advance (Pay Now, Consume Later). We talk about these trips with the client every year, whether they have already taken place or are still upcoming. The happiness these trips have brought and will continue to bring into this client’s life is obvious. We are certain they have done the same for the grandchildren.
Happy Money and the principles outlined in the book discuss how to spend discretionary income to add more happiness to our lives. Of course, this requires us to have discretionary income in the first place. Many of the discussions and recommendations we have about cash flow with people we meet revolve around ways to create and increase discretionary income. We believe one of the biggest keys to creating a successful spending plan is awareness. If we take the time to think about how we spend our money and know where our money is going, we are more apt to make wiser spending choices. This awareness will likely result in more of our money going to areas that are most important to us and reflect our values, thereby increasing our happiness. Happy Money shares ideas on how to rethink and restructure our spending habits in ways that can significantly add to the quality of our lives. I think many of you would find the book interesting with ideas to incorporate into your own spending plans. If you read the book or simply implement any of the principles discussed in this blog, we would enjoy hearing any feedback you are willing to share.