If you spend it right, that is.
We all know the adage that money can’t buy happiness. But is it really true?
A recent study from Yale University and the University of Cambridge found that it is possible to get a bigger bang for your “happiness” buck than we once thought. It’s all about how you spend your resources.
Researchers analyzed 76,000 bank transaction records, examining what people spent their money on — either material objects or experiences. Then the study rated the participants’ satisfaction with their purchases in relation to their personalities.
The study used the “Big Five” theory to determine the participants’ personalities. (For those of you wondering, the “Big Five” is based on five distinct characteristics: openness to experience, conscientiousness, extraversion, agreeableness, and neuroticism.) The researchers then analyzed if participants’ spending habits matched up with their personalities.
What they discovered may surprise you: The study found that spending money can, in fact, increase your happiness — if it’s spent in a way that jibes with your personality. In other words, consider who you are when you make a purchase, and that could make all the difference.
This makes sense to Mallory Whitmore, 30. She prefers to save her money for vacation experiences rather than for a new iPhone. Whitmore says she’ll keep the same pair of jeans for six years and shop at discount grocery stores so that she can splurge on small experiential luxuries, like a massage or trip. As is often the case, however, her husband is a different sort of spender. His personality is oriented towards everyday, practical considerations. Whitmore reports that he would rather spend money on a new car that will be used for commuting rather than on a jaunt to Mexico.
It makes sense that our spending habits are influenced by our personalities. In the case of my husband and me, neither of us are risk takers. In fact, we’re risk averse, so we tend to spend money on what we believe will last — for example, equity in our house or deposits to our 401(k) accounts. We like to play it safe, and our personalities and our savings accounts reflect this preference.
But there is one area where my husband and I splurge: education. Whether it’s paying down student loans or shelling out for our children’s school, a huge chunk of our budget is spent on education. Last year, we spent more than $26,000 on education alone.
So how can you incorporate these research findings into your life? Consider these tips:
Resist the Urge to Conform
Don’t let other people pressure you into spending on something that won’t really fulfill you. If a family member wants to plunk down a big chunk of change for a luxury apartment in Maui but you’d rather stay off the beaten path in Costa Rica, it’s better to speak up beforehand.
Try to find a compromise between your personalities before the situation becomes an unhappy one.
Giving Is Spending, Too
Abby Reed, 26, is a fiction author who takes great pleasure in buying special gifts for others. She enjoys having enough money to purchase presents — especially if she can cover a friend’s meal at a nice restaurant or buy that perfect-for-them item.
Mara Olivo, a human resources professional, 29, tells a similar story. Olivo bought her dad a baseball autographed by Bernie Williams of the Yankees from when he was a rookie, knowing that her father would be thrilled.
“It’s like a high for me,” Olivo says. She’s not alone. Research shows that spending money on other people will make you happier than spending just on yourself.
Pause Before You Purchase
Lastly, take a moment to consider your personality before you buy. Weigh your options. Are you the type of person who gets joy out of travel experiences or a secure savings account?
Once you’ve established spending patterns that align with your personality and goals, take the time to savor your experiences and purchases. If you’re an introvert, don’t feel bad when you spend a few bucks on some books. Buy that latte you crave to secure some alone time each day. Or pay for your own rental car on a family trip.
If you’re an extrovert: go to a concert or attend that charity gala. Let loose and pay for a trip to the Caribbean to see your friends from college.
Most of all, take a deep breath and remember to relish whatever you spend your money on.