Well money definitely gives you a sense of overall satisfaction with life. It depends on you whether income effect on happiness results largely from the things money can buy or from comparing one’s income to the income of others. Despite having that income you and you find yourself not living that perfect happy life, it shows you aren’t spending your money in the right way. A vast majority of us are making incorrect predictions about how money will make us happy, so we spend it in ways that we think will make us happy, but they don’t. However, if we follow certain principles of spending, money indeed will make us very happy.
Buy Experiences Instead of Things
People Show grater happiness when they reflect on the experience purchase rather than the material purchase. The reason behind this is that, we as human get accustomed to things very quickly. The excitement on purchasing a new item last for not more than two days or so. In contrast, an experience takes us out of our everyday and leaves a lasting impression.
Go For Small Things Rather Than One Big Thing
Whether we make a small purchase or a big one, the effect we have is the same. We get accustomed to the item we buy that even if it is a big purchase it does not have long-lasting effect. Therefore we can say that the level of difference in happiness between a big purchase and a small one is nominal. We don’t need a lot of money to buy the one big thing when we can afford smaller things. The amount of money spent on the purchase affects us less than just the enjoyment of having something new.
It is noticed that people who believe spending a part of their income in “prosocial spending” were much happier. A good amount of time has been put in by researchers to prove this fact. They reported that their subjects felt happier when they reflected on a time when they had spent money on others versus a time they had spent on themselves. Because giving to others makes us feel good about ourselves. It helps promote a view of ourselves as responsible and giving people, which in turn makes us feel happy. They used the technique of MRI scanning to show that giving money away led to activation in brain areas associated with receiving rewards.
- Why Spending Money on Others Promotes Your Happiness (spring.org.uk)
- How to Determine Needs vs. Wants (bripblap.com)