Buying Happiness

In our consumerist society the basic tenet is the more we have to spend, the happier we will be. Research shows that, while there is a link between money and happiness, it is a weak one. However, it is possible to get more happiness for your money by making good decisions about what you do with it.

In a well known study done at Princeton University in 2010, Angus Deaton and Daniel Kahneman, a Nobel prizewinning economist, found that happiness increases with income but only up to a certain point. At an income of around $75,000, people can enjoy a comfortable life. Increases in income beyond that level make them feel more successful but not happier. Other research suggests we can increase happiness if, instead of using an increase in our incomes to buy bigger houses and more expensive cars, we use it to improve our lives through spending on intangibles, such as freedom from a long commute or a stressful job. Other ways of increasing happiness include:

  • Spending money on others, such as giving to charity or buying gifts for friends and family
  • Buying many small pleasures rather than fewer, larger ones
  • Buying more experiences and fewer material goods.

Whereas possessions grow old and dull with time, experiences leave lasting pleasant memories. While we might be tempted to compare possessions with those of others, we are less likely to compare our experiences and so we don’t feel as though we fall short.

The key to buying happiness is not in how financially successful we are but what we do with our money; it is not how high our income is but how we allocate it. In the words of Michael Norton of Harvard Business School, “If you think money can’t buy happiness you are not spending it right”.

Liz Koh is an Authorised Financial Adviser. The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free of charge by calling 0800 273 847.  For free eBooks, go to and