Everyone has heard the saying “money can’t buy happiness”, but research suggests it’s not accurate.
According to a study from The Greater Good Science Center in the US, spending money can boost your wellbeing. However, simply heading to the shop and splurging on the latest technology or new clothes doesn’t yield the same results. Instead, you need to intentionally spend money on experiences and things that support your goals.
The research found people are happier when they spend money on experiences, like travelling or going out for a meal, rather than possessions.
More than 450 participants took part in the study. They were asked to describe something they had spent money on in the last three months between $60 and $1,200, excluding everyday bills. Participants were then asked to explain how the purchase helped fulfil different goals and how they felt it contributed to happiness and life satisfaction.
The results show there was a clear difference in how spending affected wellbeing if it was driven by intrinsic goals.
Intrinsic goals are about improving yourself and they come from your passions and values. They could include improving your health, learning new skills for personal growth, or building meaningful relationships. As a result, people usually have strong internal motivation to pursue intrinsic goals, and the rewards when you reach them can be much stronger.
In contrast, extrinsic goals are motivated by external influence, for example, to improve your social status. So, if someone splashed out on the latest car to keep up with the Joneses, it would be an extrinsic goal.
The research found that money can buy happiness if it’s used to pursue intrinsic goals.
So, next time you’re spending, you may want to consider how it will contribute to your overall wellbeing.
3 ways to spend intentionally and improve your wellbeing
When you think about getting the most out of your money, a bargain deal or finding the best interest rate may come to mind. Yet, the research suggests looking at it from a different perspective – how could the money be used to improve my happiness? – may be valuable.
Here are three ways to spend intentionally.
1. Set goals that are personal to you
The research suggests goals are a crucial part of getting the most out of your money in terms of wellbeing. So, take some time to really think about what you want to achieve in your life. Focus on what you value most now and what you’d like to improve.
For instance, you may want to complete a qualification to improve your job prospects, spend more quality time with grandchildren, or visit some bucket list destinations.
Consider questions like:
- What are you passionate about?
- What projects are important to you?
- What goals do you need to reach to secure the lifestyle you want?
- Who do you enjoy spending time with?
Defined intrinsic goals can give your decisions and spending a clear direction.
2. Pause before you make a purchase
Next time you’re buying something that isn’t essential, ask yourself: why do I want to buy this? Will the purchase support your goals, or will it make you happier in the long run?
Delaying purchases, especially for big-ticket items, can curb impulsive spending based on extrinsic goals. It means you have time to reassess whether the spending is a good decision for you. In some cases, a small delay will mean you realise there are better uses for your money. And when you do decide that it’s a positive purchase, you can feel more confident that it’ll support wider aspirations.
3. Be aware of extrinsic influences
Everyone is affected by extrinsic goals at times. Perhaps you want to update your phone or TV after friends have done the same thing. Or you may be eager to see a new show at the theatre after a colleague said it was a must-see, even if it’s not something you’d usually be interested in.
Being influenced by outside factors is normal, and it’s not always a bad thing – maybe you’ll really enjoy that show your colleague recommended.
However, being aware of when you’re spending to meet extrinsic goals can help you get the most out of your money. It can be an opportunity to step back and consider what’s driving your decisions.
Our guide ‘Financial wellbeing: 6 ways to help you make better financial decisions’ takes a deeper look at how you can improve how you use your wealth to meet goals.