work | August 06, 2012

Elizabeth Dunn: Doubling Your Pay Won't Double Your Happiness. So What Will?

If you think money will make you happier, you might want to check out the research of Dr. Elizabeth Dunn. Dunn is the co-author of Happy Money: The Science of Smarter Spending, and she studies the effect that money has—or doesn't have—on happiness. Dunn recently asked whether or not doubling somebody's salary would lead them to be twice as happy.  While most of the people she studied expected to see happiness double along with their pay, the reality was that doubling your paycheque only resulted in a meagre 9% happiness uptick. FOX Business, who recently profiled Dunn, extracts three financial habits from Happy Money that actually help in increasing people's happiness where simple raises can't.

From FOX Business:

1. Under-Indulge Yourself: When you've attained a lot of something, or when you do something a lot, the joy you get out of each purchase decreases over time. Something that you used to look forward to becomes rote, and gives less pleasure. But if you indulge sparingly—if you lower your baseline spending, and increase your joy each time you buy--you'll feel happier.

2. Seek Experiences: It's better to spend money on experiences, rather than things. Vacations and time with friends provides more happiness than simply buying more clothes or widgets for the house. The money spent is more meaningful and memorable.

3. Give to Others: “Using your money to promote underindulgence requires a shift in behavior," write Dunn and her co-author, Michael Norton." And you should take their advice and do something even more radical: instead of giving a big sum at the end of the year to a charity, give smaller amounts throughout the year—you'll increase a bump in happiness each time.

Up Next

op-ed | August 01, 2012