Optimize Your Spending
What if you could increase your level of happiness by what you buy? You may think that is an easy question to answer by saying, “yes, if I could buy anything I wanted I would be happier.” However, what if research showed that once you obtained a certain income level, say $75,000 your level of happiness would not change that much because of what you already owned or by what you could buy?
You have likely heard the expression, spend money on experiences and not things. As more research is done on the correlation between what we buy and how happy it makes us, the data points to this statement being very factual.
I see this often as my 5 and 3-year-old children play with their toys. Within the first 30 minutes of playing with something new, they are ready to move onto something else. What is really interesting is when we are about ready to donate toys is when at least one kid suddenly takes an interest in it again. I don’t think that adults are that much different when it comes to this aspect of ownership.
There is a romance of ownership that is likely higher than actually owning the item itself. The new house, car, or clothes lose their luster sometimes within 3 to 6 months of ownership. For a new house or car that can be a very expensive feeling.
To take this spending conversation further, what if I told you that you were a millionaire but that you lived around people who had many more millions than you did. How do you believe that would affect your spending patterns and habits? In absolute terms you would be in the top 1% but in relative terms you may feel like you are in the bottom 1%. This could lead you into the classic “keeping up with the Jones’ effect”. Thus driving bad spending habits as you acquire the newest goods but become less happy in the process.
So how can we optimize our spending to help us increase our happiness?
- Don’t just spend your money on things or experiences, but instead spend your money on what creates or helps support what you personally value most in your life. This could mean spending it on people, causes or charities, or building something that you want in your life for a long period of time.
- Money can help you design the life that you want. Setting aside quality time to give real thought to what you want your life to be is actually a critical step in someone’s spending habits. Having life goals whether they are financial or not, can help you resist those spontaneous purchases that can act as a quick adrenaline rush but will likely make you unhappier in the long run.
- Fight the “keeping up with the Jones’ effect” by…. you guessed it, maintaining a meaningful life and financial plan that is customized for what you what to achieve. Again this has a direct correlation between taking the time to really derive what brings purpose and meaning within your life and what you spend your money on.
When we mismanage our money and/or our spending patterns go awry, we can generally feel sick and broke. How you spend your money, the money you have already accumulated, and your actual health all intersect with each other. When you spend money in a way that serves the purposes that you intend it for, that can create happiness which in turn can have lasting positive health impacts not to mention financial stability.