Maximising the joy from every dollar

The secrets to supersizing the happiness that comes from spending your hard-earned money.

A terrible car crash leaves you a paraplegic. One year after the accident, how happy do you think you’d feel?

‘‘Absolutely miserable and drowning in self-pity’’ is unlikely to be the correct answer, unless you were already a sad-sack before the accident. Believe it or not, the research suggests your life satisfaction would return more or less to normal. If you were bouncy and outgoing, you’d regain most or all of your joie de vivre. We’ll come back to this in a second.

Last week we talked about how money is definitely linked to happiness. We saw that the relationship trails off once you’ve got the basics of life covered and some financial security.

Experts reckon it doesn’t need to – we’re just spending money on the wrong things.

Let’s say you buy a really flash TV. You’ll have it for years, so it should be a constant source of happiness, right? At the moment of purchase, it’s incredibly exciting. It’s hard to imagine that within a few months you’ll be flicking through the channels without giving it so much as a second thought.

Adaptation is a crucial survival trait for humans. It means that we can often bounce back from whatever life throws at us – even terrible car crashes. But it works against us, too. When nice things enter our life, we soon start taking them for granted.

One way of fighting adaptation is by paying for experiences, not things. All the research suggests it provides much better bang for the buck, which goes against our intuition. How could a fleeting weekend road trip with your pals be the better option, when you get to own the TV forever?

The key is that experiences are inside you, not an external object. They literally become a part of who you are. While you could argue your iPhone is basically fused with your arm, it’s not quite the same thing.

The other factor is that experiences are unique. They don’t have brand names or model numbers, so it’s easier to avoid getting bogged down in keeping up with the Joneses.

If you want to supercharge the happiness value of your spending, the experts reckon sharing an experience with a loved one is the way to go.

It doesn’t have to be a trip to Disneyland, either. It might be as simple as spending more time with your kids, your friends, or your family. You can ‘‘buy’’ this experience by foregoing other luxury spending, and thus needing to work less.

We’re obsessed with finding the best way to make money, save money, and invest money. But we don’t tend to think too hard about the best way to spend money.

The great psychologist Daniel Kahneman, one of the foremost researchers in the field of life satisfaction, has thought about it a lot. Here’s what he concluded:

‘‘It is only a slight exaggeration to say that happiness is the experience of spending time with people you love and who love you.’’

Got a money question you’ve been struggling with? Want to send a bouquet or a brickbat? Email Budget Buster at richard.meadows@thedeepdish.org, or hit him up on Twitter at @MeadowsRichard.