Smart spending buys happiness
Beach chair and piggy bank
TEXT OF INTERVIEW
Tess Vigeland: Elizabeth Dunn takes a different perspective on money and happiness. She says, it's not about the size of your bank account, but rather how you spend what's in it and who you spend it on. She's an assistant professor of psychology at the University of British Columbia. And her research suggests that people are often happier when they spend their money on experiences rather than things.
Professor Dunn, welcome to the program.
Elizabeth Dunn:Thank you.
VIGELAND: Let's go with the title of your paper first, and it says, "If Money Doesn't Make You Happy, Then You Probably Aren't Spending It Right." So tell us what we're doing wrong.
DUNN: Well, I think one problem is that people may be attracted to making major material purchases -- buying fancy cars and big houses -- that I don't think we can actually expect to provide all that much in the way of lasting happiness.
VIGELAND: So how do you know then what is too big to provide happiness and what isn't? How do you define what those purchases are?
DUNN: There isn't a sort of strict dividing line. The key thing is thinking about, perhaps, opportunity costs. Let's say that I've purchased a really expensive new sound system. Depending on my income, that might perhaps reduce my ability to purchase some cool new song that comes out on iTunes that I'd like to buy; maybe I might think twice if I'd just emptied my bank account buying a big sound system. What I would suggest is that we might actually be better off treating ourselves to those great new songs that come out rather than investing all our money in some extremely expensive sound system.
VIGELAND: That's so interesting, because, you know, I think that goes against some of the personal finance conventional wisdom that is out there: This notion that if you want to save money, cut out the $3 run to Starbucks everyday, or bring your lunch to work. But what you're really saying here is that the little things do make a difference for us.
DUNN: Exactly. It seems that taking the time to enjoy the small pleasures of daily life is really important for our happiness. And in fact, one reason why having a lot of money doesn't seem to provide as much as happiness as we might expect, is that having tons of money can actually get in the way of our capacity to appreciate those little joys of daily life.
VIGELAND: How so?
DUNN: Well, I remember when I was a graduate student, I had no money, and so once in a while, I would treat myself to a $10 plate of pad thai, which was like a big indulgence at the time. And I would enjoy it so much! And now as a professor, obviously, I know professors are considered wealthy, but you're past the $75,000 point, so at this point I'll just choke down a plate of pad thai without necessarily appreciating it, 'cause I know I can get it whenever I want.
VIGELAND: I guess I have to ask if the theory is that if money doesn't buy you happiness, then you're buying the wrong things, then how do we know what will make us happy?
DUNN: Obviously, it's going to be a bit different for different people, but I think there are some useful guidelines. So one thing is, try and consider how is this purchase going to affect the way you use your time -- how is it going to affect your daily life? So something like a sweater is probably not going to influence your daily life, which suggests that it's probably not going to have much of an impact on your happiness. Something like a lakeside cottage might have actually have some downsides for your daily life, and I think that's really important to consider when we contemplate our purchases.
VIGELAND: So what was the last thing you bought that made you happy?
DUNN: I spent money this past weekend going on a surfing trip with some of my friends, and that made me very happy. We were camping, which was not exactly luxurious or expensive, but the one thing that we did was each day we went out for a really nice lunch after surfing.
VIGELAND: A lot of the examples that you're giving are very experiential. They're not things, they're experiences.
DUNN: Exactly. I think that one of the most interesting findings to emerge from psychological research has been that spending money on experiences can really be a lot better than spending money on material things.
VIGELAND: This research really seems to subvert a saying that we always hear, which is that money can't buy you happiness. So do you have a more appropriate saying for us?
DUNN: I would say that money doesn't usually buy happiness, but maybe it can buy us more, if we spend it right.
VIGELAND: OK, we'll start using that one. Elizabeth Dunn is an assistant professor at the University of British Columbia, and a co-author of a study called, "If Money Doesn't Make You Happy, Then You Probably Aren't Spending It Right." Thanks so much for your time.
DUNN: Thank you.