I’ve written before about the disconnect between having significant means and deeper joy. That is to say, having one doesn’t always bring the other.

And wouldn’t you know, science backs me up.

I thought you’d be interested in the research I recently came across, because it’s not just an “oh, that’s interesting” kind of knowledge — but it can actually be applied to your daily life in order to maximize joy.

The findings (which I’ve summarized in my Note below) seem to run consistent with what I’ve seen to be true, and might even change how you think about spending, and money…

A La Crosse, WI Tax Preparer Opines About How To Maximize Your Happiness Quotient With Spending
Despite popular assertions to the contrary, science tells us that money can buy happiness. To a point. From a recent study (my emphasis):

This is something I’ve seen echoed in a number of studies. Once you have “enough” money to satisfy the basic items at the foot of the Maslow’s Hierarchy of Needs pyramid — that is, you no longer have to worry about food, shelter, security, and perhaps having a bit of extra discretionary money for the unknown — stacking even more money up doesn’t do much, if anything, to help you scale the top of the pyramid.

But even if you’re fortunate enough to have a good income, how you spend your money has a strong influence on how happy — or unhappy — it will make you. And, again, there’s science behind this. The relevant research is summarized in a recent study in the Journal of Consumer Psychology by a quartet of Harvard researchers: “If money doesn’t make you happy, then you probably aren’t spending it right.” (July 2011, available online at www.ScienceDirect.com)

What is, then, the science of happiness? I’ll summarize the basic seven points as best I can, but checking out the paper itself will add to it, with citations, etc.

1. Buy experiences instead of things
Things get old. Things become ordinary. But experiences are totally unique; they shine like diamonds in your memory, often more brightly every year, and they can be shared forever. Whenever possible, spend money on experiences such as taking your family to Disney World, rather than things like a new television.

2. Help others instead of yourself
Anything we can do with money to create deeper connections with others tends to tighten our social connections and reinforce positive feelings about ourselves and others. Imagine ways you can spend some part of your money to help others — even in a very small way — and integrate that into your regular spending habits.

3. Buy many small pleasures instead of a few big ones
Because we adapt so readily to change, the most effective use of your money is to bring frequent change. Break up large purchases, when possible, into smaller ones over time so that you can savor the entire experience. When it comes to happiness, frequency is more important than intensity. Embrace the idea that lots of small, pleasurable purchases are actually more effective than a single giant one.

4. Buy less insurance
Humans adapt readily to both positive and negative change. Extended warranties and insurance prey on your impulse for loss aversion, but because we are so adaptable, people experience far less regret than they anticipate when their purchases don’t work out.

Furthermore, having the easy “out” of insurance or a generous return policy can paradoxically lead to even more angst and unhappiness because people deprived themselves of the emotional benefit of full commitment. Thus, avoid buying insurance, and don’t seek out generous return policies.

5. Pay now and consume later
Immediate gratification can lead you to make purchases you can’t afford, or may not even truly want. Impulse buying also deprives you of the distance necessary to make reasoned decisions. It eliminates any sense of anticipation, which is a strong source of happiness. For maximum happiness, savor (maybe even prolong!) the uncertainty of deciding whether to buy, what to buy, and the time waiting for the object of your desire to arrive.

6. Think about what you’re not thinking about
We tend to gloss over details when considering future purchases, but research shows that our happiness (or unhappiness) largely lies in exactly those tiny details we aren’t thinking about. Before making a major purchase, consider the mechanics and logistics of owning this thing, and where your actual time will be spent once you own it. Try to imagine a typical day in your life, in some detail, hour by hour: how will it be affected by this purchase?

7. Beware of comparison shopping
Comparison shopping focuses us on attributes of products that arbitrarily distinguish one product from another, but have nothing to do with how much we’ll enjoy the purchase. They emphasize things we care about while shopping, but not necessarily what we’ll care about when actually using what we just bought. In other words, getting a great deal on cheap chocolate for $2 may not matter if it’s not fun to eat.

Happiness is a lot harder to come by than money. So when you do spend money (not forgetting to patronize our wonderful La Crosse, WI-area businesses!), keep these lessons in mind to maximize what happiness it can buy for you. And remember: it’s science!

And do let us know if there is anything we can help you with during this season. We are NOT just here to help you with your taxes — there are a whole host of things about which we regularly advise our clients. Don’t miss out!

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