“Those spending money is the happiness we

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“Those who think money can’t buy happiness just don’t
know where to shop.”

– Jonathan Haidt


“To give away money is an easy matter and in any man’s
power. But to decide to whom to give it and how large and when, and for what
purpose and how, is neither in every man’s power nor an easy matter.”                                                                                               ?

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The famous question, ‘Can money buy happiness?’ has
been studied by scientists for decades and the answer is: it does (Csikszentmihalyi,
1999; Dunn, Gilbert, & Wilson, 2011; Futrelle, 2006; Halpern, 2010). Numerous studies have shown a correlation, between
household income and well-being (Lara B. Aknin, Norton,
& Dunn, 2009; Diener & Biswas-Diener, 2002; Kahneman, Krueger, Schkade,
Schwarz, & Stone, 2006). People who earn more money ($50.000) are generally
twice as happy and satisfied with their lives than people that earn less money
($20.000) (Futrelle, 2006). What is interesting is that the difference in
happiness and satisfaction, between people that earn 50.000 per year and people
that earn 90.000 per year, is nearly nonexistent. This shows that earning a lot
more money does not necessarily make you happier.

There are multiple
explanations for this effect. A high paying job can lead to more stress (Futrelle, 2006), the expected happiness from the things you buy is
higher than the happiness you eventually get (Dunn et al., 2011;
Futrelle, 2006), comparing yourself to others that earn more can
influence your subjective well-being. The question now is: ‘How can money make
you happy?’. In this paper I will give a few suggestions on how to spend money
so it can make you happy.

of the mistakes made in spending money is the happiness we expect on the moment
we buy things. When we approach a novel event we make predictions about our
thoughts and emotions. This is called affective forecasting (Kurtz, 2015; Wilson & Gilbert, 2005). When making affective
forecasts, people often show the impact bias; after buying something, it turns
out we overestimated the duration and intensity of our happiness. The impact bias can be
caused by focalism. Focalism is the tendency to underestimate how much alternate
activities and events have influence on our feelings and thoughts, and overestimate
how much we will focus on and think about a particular event (Kurtz, 2015; Wilson & Gilbert, 2005). For example, when buying a new piece of clothing, you might expect to
be very happy with it for days and maybe weeks. In reality, life goes on and
you may forget about your purchase because of things like work, school, eating,
meeting people and other daily life activities.

Hedonic adaption
is another cause of the impact bias (Kurtz, 2015). People adapt to emotional events
fairly quickly. Events go to the background of our attention after repeated
exposure. In the AREA (attend, react, explain, adapt) model from Wilson and Gilbert (2008) this effect is explained in multiple processes (Kurtz, 2015; Wilson & Gilbert, 2005). During the first process, people attend an event that is emotionally
relevant. The emotional reaction that emerges from that event is the second
process. The third process is making sense of the situation and explaining the
poorly understood event. When the explaining succeeds, you will adapt in the
fourth process. The intensity of the emotional reactions will decrease and you
will attend the event less. (MEER UITLEGGEN)

Based on the affective
forecasting theory, we can make several suggestions on how to spend your money
so it will make you happy (Dunn et al., 2011; Futrelle, 2006). First, because you adapt to new events and things fairly quickly, it
would be better to buy multiple small things instead of one large purchase. The
time in which you adapt to the new item, is also the time that you are extra
happy with it. So when you have to adapt multiple times instead of once, you
will be happy longer.

Second, try to
pay your purchases upfront and consume them later. When you make your affective
forecast you expect more happiness than you will eventually have, but you will
feel the excitement from the moment you but it, until you consume your
purchase. Also, delaying your consumption may slow down the AREA processes
because it creates some uncertainty that cannot be explained until consumed (Dunn et al., 2011).  

The third
suggestion is: spend more on experiences instead of things. Looking at the
Area model from Wilson and Gilbert (2008), people adapt to things
very quickly, especially to things that do not change. For example, the table
you bought will keep the same shape, color and size through the years. But with
experiences this is different. Every week your cooking class is different,
never is a dinner with friends the same as before. Because of this, adapting to
experiences is not possible (Lyubomirsky, Sheldon, & Schkade, 2005).  Also, Lyubomirsky et al. (2005) suggest three factors influencing happiness; Set point, circumstances
and intentional activity. Intentional activity accounts for 40% of the total
influence on happiness. (MISSCHIEN MEER UITLEG) 
Van Boven and Gilovich (2003) found that people enjoy
experiences more than material goods, and looking back on experiences made
people happier than looking at the material purchases. 

            For the next suggestion we will
first look at the flow theory from Csikszentmihalyi (1997c). Flow, or autotelic
experience, is the experience you get when doing an activity, which has no
external goal or consequences, but is so enjoyable that you will do it just for
the enjoyment of the activity (Csikszentmihalyi, 1997a, 1997c, 1999; Csikszentmihalyi &
Csikszentmihalyi, 1988). Examples are playing the guitar, doing sports,
reading a book or playing videogames. There are certain key elements that every
flow experience has (Csikszentmihalyi, 1997a, 1997c, 1999; Csikszentmihalyi &
Csikszentmihalyi, 1988): we know what to do because the goals are clear, how
we are doing we know through immediate feedback, between skills and challenges
a balance exist, we do not worry about failure, our attention is only focused
on what we do and because of this our self-awareness disappears, we are totally
in control of the activity and its outcomes but we do not specifically think
about what to do,  through intense
concentration distractions are not present and we get an inaccurate sense of
time, and most important, the activity itself is the goal of doing it. During
the flow experience, feelings of happiness will not be present, but after the
experience, people report to have been in a very positive state of mind. Also,
people who experience flow often, are more likely to report high overall
happiness, and feel they have more meaningful and purposeful lives than people
who do not experience flow often (Csikszentmihalyi, 1997c, 1999).

            The first suggestion based on the
flow theory is, spend your money on challenges and try to find the flow
experience (Futrelle, 2006). Challenge yourself by buying and learning to play an
instrument, join a sports club or buy a book. Even though it might cost more
time and money, losing yourself in the moment will give you more happiness and
satisfaction than passive pleasures like watching television.

second suggestion based on the flow theory is, spend more on relationships with
other people. When interacting with other people, a flow experience can arise (Csikszentmihalyi, 1997a, 1997b). For this to happen, two
conditions need to be met. Our goals should be compatible with the goals of the
other person and we should be willing to give attention to the other person’s
goals. When these two conditions are met, focus and skills are needed in the
interaction. If the skills needed and the challenges available and balanced a
flow experience will arise. Because people who experience more flow report more
happiness, the advice is to spend on interactions with people. Go to a theme
park, arrange regular dinner dates or throw a party, anything to interact with
other people.

            The flow theory is not the only
reason why investing in relationships can bring you happiness. Spending time
with friends and family is strongly related to happiness (Dunn, Aknin, & Norton, 2008; Futrelle, 2006; Halpern, 2010). A study by Diener and Seligman (2002) showed that people who
spend little time by themselves and have strong social relationships, are
happier compared to people who spend more time alone and have less stable

            Spending money on improving your
relationships, people you know, is a good way to improve your happiness. Spending
money on others is, despite what people think (Dunn et al., 2008; Dunn et al., 2011), also a good way to increase your well-being. Prosocial
spending is the money spent on charity donations and gifts for others than
yourself, while personal spending contains the money spent on gifts and other
expenses for the self (Konrath, 2014). Positive correlations have been found between
prosocial spending and well-being (Dunn et al., 2008; Konrath & Brown, 2012; Mesch et al., 2017). Even across cultures (L. B. Aknin et al., 2013). While for personal spending and well-being, no
relations were found. These happy feelings after prosocial spending can be
explained through the “warm glow” or “impure altruism” model (Andreoni, 1989, 1990). This model states that
when people donate to public goods, in this case charity, they experience a “warm
glow”. This warm glow is a good feeling about yourself because you “did your
part”, you did a good thing which gives you a better self-image.

model by Harbaugh (1998)  does not only
focus on the warm glow feeling but also on the public prestige. The model states
that when donating to charity, you actually buy the private warm glow feeling
and the public prestige. The warm glow feeling is the internal satisfaction you
get from giving and public prestige the advantage of having the donated amount
publicly known.  


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