4 ways money can buy happiness

Before you go, we thought you'd like these...
Before you go close icon

Yes, Money Can Buy Happiness

It's the age-old question: Can money buy happiness?

Much of the time, our energy and focus is on work and career, which primarily is about the chase for the almighty dollar. Generally, people want more for basic needs, including a roof over their heads, food, clothing and maybe a car.

And we all want more of the fun things money can buy, including vacations, entertainment and the latest high-tech toys.

It can be a valuable exercise to take a step back from the daily grind to examine what money means to you and how you spend it. "I think deep down, the brain equates money not so much with happiness as with security and survival. These are nonnegotiable values, primal motivators," says Kenneth Reid, founder of DayTradingPsychology.com.

"Research shows that the greatest psychological stress occurs when one is unable to act in one's own best interest," Reid says. "But when we are able act in accordance with those primal imperatives, we feel a sense of deep satisfaction. Such acts can be as simple as clipping a coupon and saving 25 cents."

Ultimately, the goal of money management is to provide discipline and a process for doing the things we must do that may not feel good at the time but are crucial to our future success, says Joshua Wilson, chief investment officer at WorthePoint Financial in Fort Worth, Texas. "Money shouldn't be viewed as a score card, but as a ticket to different degrees of freedom. Some people require more to get to the degree of freedom that they need."

Money can have paradoxical effects, Reid says. "We've all heard stories about how sudden wealth, such as lottery winnings, can be disruptive, even devastating, to a person or a family. A phrase comes to mind from complexity theory: 'more is different.' It means that scale brings unique challenges. Too much, too soon can be as bad as too little, too late."

Behavioral economists have identified some ways money could increase levels of happiness.

Neil Krishnaswamy, a certified financial planner for Exencial Wealth Advisors in Plano, Texas, recommends the book "Happy Money: The Science of Happier Spending" by Elizabeth Dunn and Michael Norton. "This book provided me with great insights, particularly in how we think about our discretionary spending," he says. "Once our essential, or nondiscretionary, expenses are met, how should we think about spending our discretionary dollars in ways that lead to real, lasting fulfillment? If we're more conscious of how our spending is connected to our values and learn from some of the recent scientific research, we might just be able to use money in a way that really does buy happiness."

Science shows that there are several ways we can spend money more effectively to increase life satisfaction.

Related: 15 things you should stop wasting your money on

16 PHOTOS
15 things you can stop wasting your money on
See Gallery
4 ways money can buy happiness

1. Cable TV

With the advent of Hulu, Netflix, Amazon Instant Video, and Apple TV, there's hardly a reason to splurge on a fancy DVR system or even basic cable — so long as you're willing to be patient.

Most shows are added at least 24-hours after airing and some networks won't give them up until eight days.

See some great alternatives to cable TV here.

Via Business Insider

Photo Credit: Getty

2. Bank fees

Banks love to slap you with fees at the drop of a hat, but that doesn't mean you've got to put up with it.

"Consider going with a credit union, which are better than banks in many ways, to avoid some of these fees," says Andrew Schrage, founder of MoneyCrashers.com.

"If you travel abroad often, make sure you use credit cards without foreign transaction fees, otherwise you'll be paying an extra 3% to 5% on all your purchases."

Via Business Insider

Photo Credit: Getty

3. Extended warranties

Retailers push hard to sell you extended warranties — and conveniently pump up their sales figures at the same time.

Don't do it, Schrage warns.

"The only instance I'd recommend a warranty is in the case of a laptop. Otherwise, the warranties themselves can often cost as much as simply buying a used or new replacement for your item, or repairing it," he adds.

Via Business Insider

Photo Credit: Getty

4. The roof over your head

If you're blowing most of your income on a loft in Midtown, you're making a big mistake, says Jeremy Gregg, executive director of the PLAN Fund.

His organization provides loans to low-income entrepreneurs, who Gregg says he often sees spend more than half their income on rent and utilities.

The U.S. Department of Housing & Urban Development recommends spending less than one-third of your income on housing.

Via Business Insider

Photo Credit: Getty

5. Unnecessary smartphone data

"Many of us (including me) pick a cell phone plan, then never check to see if it's the right one for us based on our usage," writes author of "I Will Teach You To Be Rich," Ramit Sethi. "Because the average cell phone bill is about $50, that's $600 per year of money you can optimize."

When buying a new cell phone, Sethi likes to pay a little bit more upfront by choosing the unlimited data and text messaging plan. He then sets a three-month check-in on his calendar, and analyzes his spending patterns after a few months to see where he can cut back.

You can use this method for any usage-based services, he says.

Via Business Insider

Photo Credit: Getty

6. Online shipping

Nearly all retailers offer some sort of option that gets your purchases to your doorstep without additional fees.

Zappos and L.L. Bean are among the rarest breed of businesses offering free shipping on every single purchase, but most companies will demand a minimum purchase.

To help track down deals on shipping, use Freeshipping.org. The site stores information on expiration dates, tells you much to spend to qualify, and lets you search by store name or product.

Otherwise, check out CouponSherpa or Retailmenot, which offer discount codes for free shipping.

Via Business Insider

Photo Credit: Shutterstock

7. Cheap art

Environmental designer Pablo Solomon says picking up knockoff prints and other art is a great way to blow cash for no good reason.

"Nothing sends me through the roof like the art sold on cruise ships and at resorts," Solomon says. "(They're) basically glorified posters being sold as originals."

The best way to score deals on art is to track up and comers, he says. You can nab their art early on and laugh your way to the bank after they've made it big.

Via Business Insider

Photo Credit: Getty

8. Fast food

You're only hurting yourself (and your wallet) if you're feeding yourself out of the bodega around the corner from your home or office.

"I am shocked at how many people live paycheck-to-paycheck and yet routinely spend $10 per day on fast food and convenience store food," Gregg says.

If you're looking for an alternative to brown-bagging it, check out how to shop for the healthiest foods at the grocery store for the least amount of money, and start preparing your own food.

Via Business Insider

Photo Credit: Getty

9. Piecemeal insurance

Buying overpriced insurance for things like accidental death and diseases is an easy way to blow your funds.

"Instead of buying piecemeal insurance policies, get good term life insurance and disability insurance," says Sally Herigstad, a certified public accountant and Creditcard.com columnist.

Take a look at the types of insurance you should buy at every age.

Via Business Insider

Photo Credit: Getty

10. Lousy gifts

Personal finance expert Dani Johnson suggests you think twice before rushing out to buy Dad another tie this Christmas.

"You should make a pact with your friends and family to give back instead," Johnson says. "Pool a percentage of money you were going to spend on gifts and give a secret blessing to somebody who is truly in need."

If you want to buy a great gift without completely breaking the bank, check out these holiday gift ideas for under $50.

Via Business Insider

Photo Credit: Getty

11. Weight loss traps

Weight loss pills and supplements marketed as miracles for overweight couch potatoes are most likely traps.

"Not only are there enough pills and potions that you could start a new one each week, but the negative effects on your health outweighs the money you will waste," says nutritionist Rania Batayneh.

"This is a billion dollar industry and the truth is that a lean body does not come in a pill," Batayneh says.

Via Business Insider

Photo Credit: Getty

12. Lottery tickets

"Sure, you can (buy a lottery ticket) every once in a while just for fun, but never make a lottery purchase with any real expectation of winning," Schrage warns.

"The odds are significantly stacked against you, and why waste your hard-earned money on lottery tickets when you could be saving for retirement or treating yourself to a nice meal?"

Via Business Insider

Photo Credit: Getty

13. Brand new cars

"People get bored with cars quickly. They always want a new car and so they're always dealing with a car payment," says certified financial planner Michael Egan. "But it's a hugely depreciating asset. You don't want to be putting a lot of money into something that's going to be worth nothing after a certain number of years."

Look for used car options, which could save you a substantial amount of money. Check out Kelley Blue Book to get an idea of how much you should pay for a used car.

Another option is leasing a car. You can determine whether or not this is a good option for you by following this flow chart.

Via Business Insider

Photo Credit: Getty

14. Subscriptions

Subscriptions — to magazines, newspapers, and the gym — can add up, and oftentimes, we don't use them as much as we had originally planned.

Sethi recommends implementing what he calls the 'à la carte' method, which takes advantage of psychology to cut our costs.

"Cancel all the discretionary subscriptions you can: your magazines, TiVo, cable — even your gym," Sethi explains in "I Will Teach You To Be Rich." "Then, buy what you need à la carte. Instead of paying for a ton of channels you never watch on cable, buy only the episodes you watch for $1.99 each off iTunes. Buy a day pass for the gym each time you go."

It works for three reasons, Sethi writes: You're likely overpaying already, you're forced to be conscious about your spending, and you value what you pay for.

Via Business Insider

Photo Credit: Getty

15. A morning latte

Author of "The Automatic Millionaire," David Bach, coined the term, "The Latte Factor," which basically says that if you ditch your $4 latte every morning, you'd have quite a bit of money to contribute towards savings — about $30 a week, or $120 a month). Over the course of a few decades, that money could grow substantially.

Rather, invest in a nice coffee maker, even if the price tag is a bit steep. Oftentimes, spending more on high quality items can help you save in the long run.

It can seem counterintuitive to make purchases to save, but that's what some of the most successful money-savers do. They're not just buying things, they're investing in things — tools and services — that will eventually save them money over time.

Via Business Insider

Photo Credit: Getty

of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION

Buy experiences. Dunn and Norton's research reveals that satisfaction with experiential purchases increases over time, while satisfaction with material goods decreases over time. "I met an older woman the other day in a dentist's waiting room. She had an intense vitality about her that was impossible to ignore," Reid says. "We struck up a brief conversation, which led to my discovery that she also spent two months a year leading walking tours in faraway lands. Money may not buy happiness directly, but it might buy you the challenges you need to achieve something even deeper and more lasting – something we don't have a simple name for."

Buy time. Spend your money to free up time for family, friends or meaningful hobbies and activities. For instance, hire a housecleaning service or use a dry cleaning service that picks up and drops off to reduce your time spent on errands.

Pay now, consume later. Technological innovations have made it possible to fulfill almost all desires immediately, Krishnaswamy says. "We are enabled more than ever to consume sooner and pay later. With the Internet, we can shop faster, pay with a credit card and have things delivered to us the next day. When you shop at Amazon.com (ticker: AMZN), you may be tempted to join their Prime program, giving you two-day shipping on all purchases. While efficient and often very practical, shopping this way may deprive you of the experience of delayed gratification."

Invest in others. Research shows there are good strategies to invest in others that can boost happiness, Krishnaswamy says. Make it a choice to invest in someone, make a connection with them and make an impact in their lives, he says.

In the end, money may mean different things, including power, freedom or security. If your goal is happiness, research shows that how you spend your money could actually help boost life satisfaction. Maybe money can actually help you buy happiness after all.

More on AOL.com
What are Americans spending their tax refunds on this year?
3 signs you should put your home on the market yet
The 15 sexiest jobs, according to Tinder

Read Full Story
Credit Card Compare

Credit Card Compare

Whether you're looking for great travel rewards or low annual fees, find the card that's right for you.

Compare Now

From Our Partners