Can Money Buy Happiness? Yes (when spent correctly).

Every day more and more people are trying to understand the relationship between money and happiness. Although everyone desires to be happy, the pathways people choose are varied (and not always successful). People frequently believe that making more money will increase their happiness. However, although the United States economy has grown steadily since the 1950’s, happiness levels of Americans have not increased (Diener & Seligman, 2004). Also, after a person’s basic needs have been met (food, shelter, etc.), the relationship between income and happiness is quite small (Howell & Howell, 2008). This leads to a simple, yet important question: if materialistic pursuits, those that are embodied by the American Dream, are not making people happier, then are the hours we spend pursuing better careers, nicer homes, and faster cars, in vain? The problem is that people are simply spending their money on the wrong things (literally). People can spend their money in ways which will make them, and others around them, happier—by focusing their expenditures on activities that satisfy their basic psychological needs. Recently, research has begun to support this recommendation.

Based on one of the most prominent theories of motivation and well-being, Self-Determination Theory (SDT; Ryan & Deci, 2000), researchers have begun exploring the types of consumer choices that will satisfy a person’s psychological needs. SDT predicts that a person will be happiest when three basic psychological needs are satisfied: autonomy, competence, and relatedness. A person feels autonomous when his or her actions are freely chosen, self-guided, and internally (as opposed to externally) motivated. A person feels competence when they use their talents and abilities to master a skill or learn a new task. A person feels relatedness and connected to other people when their activities develop supportive relationships and when a person feels understood by others.

Also, and very important, literally thousands of studies demonstrate the positive effect of psychological need satisfaction on happiness. In one recent study, we asked people to track their activities hour-by-hour for three days. Additionally, we asked them to report how much psychological need satisfaction and happiness they experienced during each activity. The amount of happiness people experienced each hour was directly related to the degree to which the activity was autonomous and increased their relatedness with others (Howell et al., 2011).

Thus, because of the connection between activities that satisfy psychological needs and momentary happiness, we examined whether expenditures that satisfy higher level needs (as proposed by SDT) would make people happier. Specifically, we tested if money spent on life experiences (e.g. concerts, vacations, dining experiences), as opposed to material objects (e.g. clothing, jewelry, electronics), would better satisfy the psychological needs of autonomy, competence, and relatedness, and in turn increase happiness (Howell & Hill, 2009). To test our hypothesis, we asked people to write about a recent life experience or a material object they had purchased and report the degree to which the purchase made them happy and made others happy. They also rated the degree to which their purchase satisfied their psychological needs. As we expected, when compared to material items, life experiences were found to make the buyer and others happier. The reason for the increased happiness from life experiences was that these purchases, first, satisfied the need for relatedness and this increased relatedness resulted in people feeling more alive. Life experiences were also less likely to be socially compared (a tendency which can undermine happiness).

At BeyondThePurchase.Org we help people understand the relationship between money and happiness. To better understand the benefits of specific consumer choices, we continue to investigate the relationships between consumer preferences, psychological needs, happiness, and values at our website by allowing people to take tests on personality. To learn about what might be influencing how you think about and spend your money, register with Beyond The Purchase, then take a few of our personality quizzes:

How do you find happiness? Take our happiness quiz and find out your happiness score.

Some people are gadget heads and some are foodies. Which do you spend your money on? The Experiential Buying Scale provides you with personalized feedback to learn what kind of things you tend to acquire.

How materialistic are you? Find out by taking the Materialistic Values Scale.

Are you a compulsive buyer? Take the Compulsive Buying Scale and learn about your spending habits.

In what ways do you hope your purchases will transform your life? The Transformation Expectations Questionnaire will tell you about what you expect from your next big purchase.

Diener, E., & Seligman, M.E.P. (2004). Beyond money. Toward an economy of well-being. Psychological Science in the Public Interest, 5(1), 1–31.

Howell, R.T., Chenot, D., Hill, G., & Howell, C.J. (2011). Momentary happiness: The role of psychological need satisfaction. Journal of Happiness Studies, 12(1), 1–15.

Howell, R.T., & Hill, G. (2009). The mediators of experiential purchases: Determining the impact of psychological needs satisfaction and social comparison. The Journal of Positive Psychology, 4, 511–522.

Howell, R.T., & Howell, C.J. (2008). The relation of economic status to subjective well-being in developing countries: A meta-analysis. Psychological Bulletin, 134, 536–560.

Ryan, R., & Deci, E.L. (2000). Self-determination theory and the facilitation of intrinsic motivation, social development, and well-being. American Psychologist, 55(1), 68–78.

 

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  • MARLON AVARRO

    I joined on to this site because I got a divorce recently, and ended up willingly giving everything I had built up during my entire life. I was happy and at peace until I lost my beloved sports car. I kept trying to assure myself I did not need it – I live in the city with no point in owning a car. I thought I was going to be okay, but I grew angry about it once I lost it. I am a very materialistic person at heart. My mother asked me whether I had any happy memories whilst I was married. I could not think of one – only with the person I had an affair with (we went on holidays, went out to restaurants, clubs, etc.). Basically all the things I had never done with my marriage partner. It then made me think. What am I without money – what am I without my job (the place where I stayed late so as to avoid going home before the affair) ? A look back over my life has made me realize I have in actual fact NEVER been truly happy. I spent the vast majority of my life spending my money on material things. They brought me pleasure for a while. Until I got bored. Sometimes I don’t even know why I bought some things (clothes I had never even removed tags from). I accumulated debts as well, but rather than focusing on getting rid of the debts, I preferred spending my money on material things.

    Through the help of this site – and surveys, I was able to take a step back. Live in the moment for a change. I am feeling a sense of going cold turkey having not focused on material spending for a good three weeks. Today, I bought a suit for the first time in a while (a few months). It was a suit I saw in the shop two weeks ago. Instead of buying it there and then, I reflected on it for the time being. And instead of treating the experience as ‘normal’, I somehow felt nervous and very guilty about spending the money. I am starting to feel a change already coming about. First stage was acceptance (anger, feeling unsettled), the next stage I went through was resistance and avoidance in spending money (the cold turkey phase). During this time, I decided to get rid of some clothes because I ran out of space. Having made a purchase for the first time in a while, even though I made space for it, I feel a sense of guilt. I guess the phrase is if it’s not hurting, it’s not working….

    This site is full of the most amazing relevant and good advice. Thank you so much. This is a journey for me, and it is only the start!