As a continuation of the Fee-Only Financial Advisor blog sharing group, this month’s post comes to us from Lauren Zangardi Haynes, a Financial Advisor in Richmond, Virginia. She shares her thoughts on ways to utilize money to create greater happiness in your life.
Money can’t buy happiness – or can it? While the phrase “money can’t buy happiness” is pithy (and in some respects true), it’s not 100% accurate. In fact, there are some specific ways we can use money to actually increase our happiness! Is money going to make you happy? Not exactly. Once a family reaches about $70k in annual income, making more money starts to affect their level of happiness less and less. By the time a family hits $200k in income the effect of additional money is virtually 0. Yet there are some specific and easy ways we can use money to increase our happiness. Today we will go through 3 specific ways to use the money you already have to increase your happiness!
Tip #1 Buy Experiences, Not More Stuff
I don’t know about you, but no matter how much stuff I donate (especially kid-related stuff) I still seem to be surrounded by things that need to be picked up, cleaned, and put away. Personally, that’s not how I want to spend my time. I want to spend my time doing something fun with my family: hiking along the James River in Richmond, VA; wandering through Colonial Williamsburg in search of lambs; or going out to eat in one of Richmond’s great restaurants.
Studies have shown that spending money on experiences increases happiness more than buying things. When we choose to experience life, we get something to anticipate as well as memories to look back on. When we are with our family and friends we rarely share that story about the time we went to (insert favorite store) and bought a new decorative bowl. No, the stories we tell are about the time we went on a nature walk and the baby ate a random leaf while riding in his stroller. And then puked it up on the car ride back home. See?! That was an experience I got for free.
I get it, going out with kids to a museum or Busch Gardens is not exactly relaxing. Yet, if we can step back for a moment and accept imperfect behavior, such as the occasional meltdown, then we can begin to experience the excitement and wonder of the moment as our children do. Whether the joy you experience is spending time with your kids or telling gross stories later, it’s very likely giving you more happiness for your buck than that soon to be dated purse/jersey or Lego set.
Tip #2 Prepay Travel
While we are on the topic of experiences vs. stuff, let’s talk about another way to use money to increase your happiness: pre-pay your travel. Many Americans take annual vacations (even if you stay-cation, this idea still applies). By pre-paying for your vacation (paying for hotel and travel beforehand, saving up for spending and food, etc.), studies show you will enjoy your trip more compared to charging everything while on the trip.
Why? Well, prepaying for your trip reduces some of the stress involved in travel, which allows you to enjoy it more. You get to daydream about the trip before you go, enjoy the trip while you are travelling (instead of worrying about every little expense…or pretending not to worry about every little expense) and then when the trip is over you don’t have a large credit card bill to pay off. Instead of being left with credit card debt, you are left with happy memories.
Tip #3 Pay Off Debt
Many Americans carry debt, but did you know that paying it off can actually increase your happiness? It’s true – carrying debt adds a measurable amount of stress to our lives, and paying it off can lead to a genuine boost in happiness.
You may be wondering how to get started paying down debt. Start with smaller debts and use the snowball method. The sense of accomplishment we get from paying off a small debt can propel us forward. Once your first debt is paid off you can take what you were putting towards your smallest debt and put it towards your second smallest debt.
Now, technically you would save more money on interest if you prioritized which debts to pay down starting with the highest interest rate debt and then applied all of that money to your next most expensive debt. Yet this doesn’t provide quite the same psychological boost of getting the “win” of paying down a debt completely. Be sure to set up good spending habits while you are paying down debt. Some people put their credit cards in a block of ice – they are there for an emergency but it takes some effort to access them. Other people find budgeting success by using only cash for their spending needs. (8 Easy Ways to Stay on Budget)
The easiest way to use these ideas: automate
What’s great about these ideas is that they are simple to accomplish if you automate them. Automate your savings, automate your debt repayment. This makes accomplishing our goals easier because we don’t have to convince ourselves every month that saving or paying extra on debt is the best idea. Let me know what you think and the ideas you have to use money to increase happiness!
About the author
Lauren Zangardi Haynes, CFP(R), CIMA is a Fee Only financial planner and blogger in Richmond, VA. She writes about personal finance for families at www.wordsonwealth.com. You can read more about her background here.