Posted by on Aug 23, 2013 Views: 4853

The Surprising Science of How To Be Happy By Spending Money

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Dan is on his way to work and pulls up to the coffeehouse down the street from his office. He orders a latte and a scone, pays $5, and leaves. Amy is standing behind him in line. It’s the birthday of the intern in her office, and while Amy doesn’t really know her that well, she buys a $5 gift card for her intern.

Dan and Amy both spent $5 this morning. Logically, they should feel relatively equal from an emotional standpoint after having just spent the same amount of money, but studies have shown that Amy feels happier and, in fact, wealthier than Dan does. The reason for this difference? Dan spent the $5 on himself, while Amy spent it on someone else. Studies show that when you give, whether you give randomly to a stranger or donating to a charity, it boosts both your happiness and your feeling of wealth.

Elizabeth Dunn and Michael Norton’s book Happy Money: The Science of Smarter Spendingexplains why this simple good deed can be such a powerful mood booster. In one experiment people randomly received an envelope containing $5 that asked them to spend it on themselves and gave others one containing $5 that asked them to spend it on a gift for someone else or donation to charity. At the end of the day, those who spent money on others were measurably happier than those who spent money on themselves.

Another experiment gave people an envelope containing $1 and randomly assigned them to either keep the money, give the money back to the experimenter, or give the money to a charity. Following the same logic as Dan and Amy, those who gave the money back and gave the money to a charity should have felt equally poor – but instead, those who gave to charity felt significantly wealthier than those who gave the money back, and just as wealthy as those who got to keep their $1. Giving money away makes us feel wealthy.

“It is in spending oneself that one becomes rich,” said Sarah Bernhardt.

Want to feel happy today? Spend some money on others today – pick up a coffee for your intern, give a gift to someone, or make a donation to a nonprofit! You’ll get the rush of natural happiness.

Follow Perla Ni, GreatNonprofits founder and CEO, on LinkedIn!