Monday, April 1, 2013

Happy Money: The Science of Smarter Spending

Happy Money: The Science of Smarter Spending
Elizabeth Dunn and Michael Norton

The colourful cover with a happy face hiding behind an American coin immediately caught my attention. I was also intrigued by the title and assumed that Happy Money would not be the typical money book filled with budgeting and investment advice.

I was not disappointed.

Using light and entertaining voices, behavioural scientists Elizabeth Dunn and Michael Norton demonstrate how money can buy happiness—if you spend it right. These are their five core principles:

  • Buy experiences.
  • Make it a treat.
  • Buy time.
  • Pay now, consume later.
  • Invest in others.

The ultimate goal is to wring the most happiness out of every dollar and to apply as many principles as possible to each money transaction.

I was impressed by the Starbucks example: In a controlled study, three different groups were given $10 Starbucks gift cards. The authors discovered that the people who were asked to take their friends out for coffee were happier than those who had treated themselves or simply given the cards away. Investing and connecting provided the most bang for the buck. To reap even more happiness, the authors suggest that you pay up front for the card at the beginning of the week, putting in enough money to buy a basic coffee, Monday through Thursday, and a Frappuccino on Friday. Offer to treat a different friend each day and accompany them to Starbucks.

See Michael Norton's TEDx talk below on the book's findings. Definitely food for thought.

- Joanne Guidoccio

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