If Money Doesn’t Make You Happy, You Aren’t Spending It Right

As was noted in Chapter 3, some research suggests the relationship between pay and happiness isn’t very strong. But pay can be a powerful motivator. It’s simply that sometimes we’re motivated to pursue things that have a limited ability to make us happy.

However, the story doesn’t end there. New research suggests it’s what we want to do with money that is most important. Specifically, spending money on experiences makes us happier than spending it on possessions. That is, vacations, entertainment, and sports make people happier. Extra money spent on material objects—clothes, jewelry, cars, and furniture—did not make these people happier.

One study found that $30,000 spent on leisure over several seasons had as positive an effect on life satisfaction as did getting married.

One of the reasons spending on experiences is money well spent is that experiences build relationships, and evidence reliably shows that relationships make people happier. Other research shows that people tend to look back on experiences sentimentally (you tend to forget that dirty hotel room in Prague, and instead remember fondly the Charles Bridge at night); they don’t attach this same sentimentality when thinking about their possessions.

One researcher has even calibrated that, in terms of the happiness produced by spending money on something, experiences beat possessions 3:1.

Thus, it’s OK to be motivated by money. Just pay attention to how you spend what you earn.



Money doesn’t do much to improve happiness after existence needs (food, clothing, and shelter) are met. Why worry about what aspects of spending money make us happy when money doesn’t appear to matter much at all? Research should instead be directed toward understanding why   such a powerful motivator is such a pitiful satisfier.

What should motivate us? We know social relationships are important to happiness and well being. Keeping in touch with friends, spending meaningful time with family, building positive and supportive relationships at work—those are what really matter, and none of them have a thing to do with making money.

Activity also contributes to happiness—not only physical activity like exercise, but being proactive too. When people reflect back on their lives, they are much more likely to regret actions they never took, as opposed to the ones they did.

Money is not evil. We need it to acquire the basic elements of survival. But after those basic needs are met, we should realize our pursuit of money to make us happy is a fallacy. We can recall an inexpensive camping trip as fondly as a stay at a five-star hotel. Thus we should take jobs that have interesting and meaningful work, not those that command the highest wages. In managing others, we should create a culture that motivates by building relationships, giving others autonomy and input, and pursing work people see as important and challenging.


Source: S. Rosenbloom, “But Will It Make You Happy?” New York Times (August 8, 2010), pp. B1, B4; J. Axelrod, “Want To Be Happy? Don’t Just Sit There,” CBS News (March 3, 2011), downloaded May 10, 2011 from http://www.cbsnews.com/; J. Quoidbach, E. W. Dunn, K. V. Petrides, and M. Mikolajczak, “Money Giveth, Money Taketh Away: The Dual Effect of Wealth on Happiness,” Psychological Science, in press.