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April 18, 2014



Book Review – Happy Money

Most personal finance sources tend to focus on one major concept: getting more money.  Sometimes they look at spending less, sometimes at earning more, sometimes at both at once, but the basic idea in any case is to get more money.  But more money doesn’t always lead to greater happiness; in fact, after a certain level of income, more money doesn’t really increase how happy you are at all.  Is there any way that money can make you happy, then?

Happy Money considers how to use your money to gain more happiness.  Elizabeth Dunn and Michael Norton look at the research between different types of spending and the amount of happiness said spending brings to the spenders.  By doing so, they come up with five principles that should increase your spending related happiness.  Let’s see what those principles are and get some idea of whether they would work for you.

Summary

Happy MoneyHappy Money begins with a Prologue that looks at the inspiration for writing the book, namely, looking into how to spend money differently in order to increase the amount of happiness it brings.  With many studies indicating that simply earning more money has little effect on how happy people are, Dunn & Norton look at how people spend their money to see what could lead to happiness.  They focus on five principles, each covering one way of spending money differently, starting with:

Chapter 1 – Buy Experiences

The first chapter notes that there are two basic things you can buy with money, material goods (houses, cars, furniture, and other such things) and experiences (trips around the world or, as the chapter started by discussing, into space).  While the former are more durable, the latter actually provide more happiness.  The more entertaining experiences available in the world allow you to connect with other people, and provide memories that are more enjoyable to recall in the future than most of the items you would otherwise purchase.

Chapter 2 – Make It a Treat

Regardless of what you buy, if you buy too often, your enjoyment will decrease; those lattes stop becoming more special than regular coffee if you have them every day.  This chapter stresses the need to make your spending, particularly on the things that bring you the greatest happiness, into special treats.  By only occasionally making purchases, they stay special in your mind and the amount of enjoyment will stay high.  There’s also discussion of how breaking up a pleasure into smaller portions makes it more enjoyable (even, for example, having a TV show split up by commercials).

Chapter 3 – Buy Time

Before you get too excited by the title of this chapter, no, there is not yet any way to use your extra money to buy extra time.  Instead, this chapter looks at how not to let feelings of time constraint (which tend to increase as you gain more money) overwhelm your happiness.  From putting some of your time towards charitable causes to spending more time with your family and friends, ways of thinking about spending time differently are covered, to maximize your sense of happiness as a result.

Chapter 4 – Pay Now, Consume Later

This chapter looks at the link between when you consume something and when you pay for it, and the relative amount of happiness you get out as a result.  The more you separate the pain of payment from the pleasure of consumption, the more said pleasure increases.  Although the ever present ability to use credit cards would make consuming first and paying later the easier method of doing so, the happier method is to pay first and then consume later.  Not only does this avoid happiness-draining debt that comes with credit, but the delay allows you to savor the anticipation and have that much longer to enjoy the overall experience (sometimes even allowing the experience to feel ‘free’, and that much more enjoyable).

Chapter 5 – Invest in Others

The last principle covered in the book is how spending more of your money on other people will lead more happiness overall.  The chapter stressed how to get the most happiness out of such charitable donations: make them a choice (not being pressured into it by someone else), make a connection (form a bond with the recipients of your generosity, even if they are strangers), and make an impact (know that your donation has a substantial effect on the people to whom you are giving, rather than being a drop in a large well).  The chapter wrapped up sharing examples of how companies have used charitable donations to improve employee mood and to gain publicity.

Epilogue: Zooming Out

The book finishes by reviewing the five principles that are covered, and further discussing how they can be applied.  In particular, it notes how the principles can be used by governments, and compares governments that have taken steps towards such application and the relative levels of happiness of their residents.  It ends with encouragement that the reader apply the principles as best they can, to see if it makes them happier.

Pros

  • Provides Useful Information: The suggestions covered are interesting, and provide a good guide as to how your spending could be altered to improve your happiness.
  • Well Researched: There are plenty of references supporting the principles provided, with the ‘Notes’ section being nearly as long as the chapters.
  • Very Humorous: There are quite a few jokes and humorous references throughout the book, making it much more enjoyable to read than many books covering theories like this.

Cons

  • Few New Ideas: If you’ve done much personal finance reading, you’ll already know most of these ideas (particularly those like buying experiences).
  • Application Can Be Difficult: Some things, like paying ahead of time for many items, can be hard to put into action, particularly those directed at governments.

Overall

Happy Money is an interesting book, with plenty of interesting concepts.  Admittedly, they might not be the most unique to those of us who do a lot of personal finance reading, but they are quite useful to apply overall.  Combine them in a book that is both humorous and well-researched, and you have a good way to learn about these ideas if you haven’t already (or even get a better understanding of them if you have).

Comments

  1. So would you recommend this book to someone struggling with personal finances or what exactly is the target audience in your opinion?
    Kostas @ Finance Blog Zone´s last blog post ..Car Insurance Rates – Seven Factors That Determine Them

    • I think that the target audience is probably those people who have a pretty good grasp of personal finance, but are looking to get the greatest pleasure out of their spending, rather than letting stress overwhelm them.

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