The Secret to Using Money to Buy Happiness

You need to take a hard look at what you’re spending your money on, and then take a harder look at yourself and what you really value.

Women shopping together in mall
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We’ve all heard some version of the joke that goes, “no, money can’t buy happiness … but it can buy ____, and that’s kind of the same thing.”

It’s amusing because it hits on an important truth that can help set you up for financial success — if you fully understand it and use it to your advantage.

Money Doesn’t Automatically Equal Happiness

You actually can buy happiness. Most people just go about this the wrong way.

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People who can’t use money to buy happiness are spending it on things because they think they should. They’re spending on status symbols to impress other people. Or they’re trying to buy a bunch of stuff to distract themselves from deep problems instead of facing and resolving those issues.

Buying things to please or wow other people puts you on the fast track to misery. And spending all your money on stuff can leave you feeling empty.

There are a few reasons for this:

  • Humans suffer from something called “hedonic adaptation.” Because we’re so adaptable, the pleasure we get from buying new stuff quickly fades as we get used to it. We have to continuously seek newer, bigger, more exciting buys to keep that sense of pleasure. We get stuck on a hedonistic treadmill and never feel satisfied for long.
  • But sometimes we don’t even feel happy with our purchase in the first place. We tend to feel buyer’s remorse more often than not, especially because we’re prone to comparing our new things to someone else’s — and feeling like our stuff came up short somehow.
  • Acquiring stuff may be a coping mechanism to help us deal with stress and other factors that lead to overall unhappiness.

From this perspective, the old adage is right. Money can’t buy happiness.

That’s a good money lesson to keep in mind. But there’s some nuance here. No, money isn’t a direct path to happiness. It is a tool. And just like any tool, there’s a right and a wrong way to use it.

If you want to leverage your finances to bring happiness, start by understanding what you value.

Feel Like You Can Afford Anything: Align Spending with Values

Remember that joke at the top of this article, where you could insert whatever appealed to you in the blank? That’s the key to using money to “buy” happiness: knowing what’s important to you.

By “important to you,” that doesn’t mean a new smartphone or a fancy watch. We’re talking about your core values. These are things like:

  • Family
  • Community
  • Respect
  • Determination
  • Service
  • Wisdom

When you spend on what you value and cut out what you don’t, you might be surprised how much money that leaves in your monthly cash flow. You can then redirect that money to more of what you value — or save more for major financial goals.

Speaking of financial goals, make sure those align with your values, too. You don’t want to work relentlessly toward something like buying a house just because you feel like you should (or because you feel pressured by someone else’s expectations).

How You Use Money Should Reflect What’s Important to You

Once you define what your values are, take a look at your spending. Does your current budget reflect those values back at you? Or are you using your money to buy stuff that’s not deeply important to you?

If it’s the latter, there’s room for improvement — and for allowing your money to bring more happiness. For example, maybe you realized you’re spending over $1,000 per month on meals out. (And if that sounds outlandish, it’s easier to do than you think. A $10 lunch and a $20 dinner out every single day will get you there. So will fewer but more expensive meals at nicer restaurants.)

But what if your values include family, personal growth and health? Your spending doesn’t align with these at all right now. You could spend more time with your family, learn a new skill, and improve your health by taking on the challenge of cooking every meal at home for a month.

Once you define your values and understand what’s deeply important to you, you might realize that very little on that list deals with material goods or physical stuff.

Your list is probably centered around people and experiences — and spending to create memories that last with people you love is one of the most powerful ways we can use money to buy happiness.

To see the original version of this article, click HERE

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Taylor Schulte, CFP
Founder and CEO, Define Financial

Taylor Schulte, CFP®, is founder and CEO of Define Financial, a fee-only wealth management firm in San Diego. In addition, Schulte hosts The Stay Wealthy Retirement Podcast, teaching people how to reduce taxes, invest smarter, and make work optional. He has been recognized as a top 40 Under 40 adviser by InvestmentNews and one of the top 100 most influential advisers by Investopedia.