More Happiness for your Money

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One of the world’s most successful investors, Warren Buffet, made a pledge in 2006 to give away 99% of his fortune during his lifetime or on his death Since making this decision to give away his wealth, Buffet says he ‘couldn’t be happier’ and ‘the asset I most value, aside from health, is interesting, diverse, and long-standing friends’.

In a recent Harvard Business Review blog post, Elizabeth Dunn and Michael Norton, authors of Happy Money; The Science of Smarter Spending, (Simon and Schuster), tell of a series of experiments where they have found that asking people to spend money on others – from giving to charity to buying gifts for friends and family – makes them happier than spending the money on themselves. They have found this to be true even in very poor countries such as India and Uganda and even for gifts with as a low a value as $5. Dunn is a co-author of an article in the Journal of Consumer Psychology (April, 2011) which sets out the following principles for maximizing happiness when spending:

  • Buy more experiences and fewer material goods
  • Use your money to benefit others rather than yourself
  • Buy many small pleasures rather than fewer larger ones
  • Avoid impulse buying and buying on credit and enjoy the anticipation of delayed purchases
  • Avoid buying extended warranties on purchases
  • Think beforehand of the downsides  – such as coming back from a dream tropical holiday with tired children covered in itchy mosquito bites
  • Note that getting the best deal at the lowest price may not give the most enjoyment
  • Pay attention to what makes other people happy and follow suit

These are all useful principles to keep in mind over the holiday period.

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