"Money can't buy happiness," the old adage goes. But these days, co-authors Elizabeth Dunn and Michael Norton want to add "if you don't spend it wisely" to the saying. The two writers have collaborated to produce the book titled Happy Money: "The Science of Smarter Spending," a publication that offers five economic principles that can be useful for not only people to live by, but also for companies who desire happier employees as well.
In general, the book acts as a guide that directs readers to using money as a means for fulfilling experiences. One author, Elizabeth Dunn, recently spoke to Forbes contributor Richard Eisenberg to explain more about how people can attain financial peace.
Dunn, who is a professor as the University of British Columbia in Vancouver, says that one key to finding happiness with our money is to use it in a way that includes others.
"Research suggests that a lot of spending choices people typically make are not providing much in the way of lasting happiness," the author told Forbes. "The combination of using time and money to engage with somebody else is the magic formula for happiness."
Here Dunn gives a hint of what is, essentially, the mantra of the book she has co-authored, which is experiences over stuff. It's the type of motto that she suggests spenders should take into when they're deciding what to use that latest paycheck on.
"A compelling body of research shows that people get more happiness from buying things like trips, concerts and special meals out than from material things like sofas, flat screen TVs and houses," she said.
It's all about picking fulfillment over consumption, using your money to give you long-term happiness, memories and lingering feelings of joy. These days however, it's not uncommon to hear that spending money has done the exact opposite to people, especially when purchases of the past come back to haunt and stress buyers.
"If there’s one thing you could do to improve your happiness through money, it’s to get out of debt and avoid debt," Dunn says. "Not necessarily all debt – if you can pay your mortgage every month without a problem, that’s OK. But many people have credit card debt hanging over their heads and that can make them miserable."
It may go without saying, but regardless of whether you use them for "experiences" or "stuff," it's important to consider your ability to pay back when using credit to make your purchases. Sure, next month's paycheck may be enough to cover your latest expense, but what happens when an unexpected necessity (or, real life) needs attending to? You might just end up paying for both, which could lead you into a misery-inducing spiral of debt.
Perhaps you can opt for using credit on what you know you already have. Want to buy that new Xbox? Well, make sure you have Xbox money in a savings account that you can easily dip into just to pay your next credit card bill. That way, you can still bill credit by being an active card user without having to deal with the mental strains that dark-cloud-over-your-head type debt can give you.
Dunn advises that we use similar types of strategies to engage in happier spending.
"So many things in society push us to consume things right away and pay for them much later – like with a credit card. In our book, we’re arguing that people should do the opposite," she states. "For example, if you’ll be going on vacation on Labor Day, you should pay for it now. Then, you’ll enjoy the pleasure of anticipation all summer."
Amongst other strategies, the professor also suggests that we purchase things that have a sense of novelty to them. In this way, things can become a "treat" to us and bring added happiness.
"Once you get used to something, you don’t get the same degree of pleasure from it as you once did."