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Elizabeth Dunn: 5 Steps To Happier Spending [VIDEO]
Economics | May 30, 2013

Elizabeth Dunn: 5 Steps To Happier Spending [VIDEO]

When economics speaker Elizabeth Dunn got her first job after college, she was curious as to how she could turn her new-found "grown up" wealth into happiness. What she found, was that there was very little research on the relationship between money and happiness, and there was even less on how you could transform your money into contentment. So she decided to set out on a research project of her own, and co-wrote the new book Happy Money with Mike Norton. They were looking to determine if money could, indeed, buy us happiness. And, as she stressed in a recent interview with U.S. News, she didn't want to find out if people with "mounds of wealth" could become happier. Instead, she wanted to find out how all of us—no matter how much or little wealth we have—can make smarter spending decisions to bring us more joy in our lives.

"How could you change the way you spend as little as five dollars to be happier on a given day?" Dunn asks in the Google Hangout interview. You shouldn't, Dunn advises, constantly spend all your money on yourself. Rather, spending it on experiences, and on people you care about, can increase your happiness far more than splurging on a trendy new material possession for yourself. That's because the thrill of purchasing a material object wears off quickly. The joy that you get from a great trip or engaging conversation, however, can last much longer. "The path to happiness, Dunn and Norton say in their short and engaging tour of the happiness landscape, is, in effect, an end run around the brain's adaptive power," the U.S. News interviewer says of their work in Happy Money. That means that happier spending can be derived from making a few tweaks to your purchasing decisions: Spending on others rather than yourself, and on experiences rather than things.

That may seem easy to do in theory, but in practice, our spending habits have been long engrained in our heads, which makes them hard to change. How can you rewire your brain to view treating a friend to a cup of coffee as bringing you more content than buying a fancy, new car? "For one week, keep track of all the money you spend," Dunn suggests. "Rather than grouping your expenditures into the traditional categories used by the Bureau of Labor Statistics, try putting them into categories according to our five spending principles. Then take a close look at all the discretionary income you've spent that falls outside these categories—and see how much of it you can forgo the following week." In her book and her talks, Dunn outlines these 5 spending principles in detail. She explains how money and happiness are linked—and how changing the way we spend our cash can lead to true happiness.
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