Millennial Money: Can Money buy Happiness?

By Brandon Hill, CFP

Special to the Financial Independence Hub

Do you believe the saying money can’t buy you happiness? Most people laugh at that notion, while some of the wealthiest people sing its praises …

I recently read a book called Happy Money: The Science of Happier Spending by Elizabeth Dunn and Michael Norton.

The book set out to tackle the question – “Just because money often fails to buy people happiness, does that mean that it can’t?”

Luckily it can:  it just depends on how you go about spending it. It turns out that our everyday spending choices releases a variety of biological and emotional effects – either positive or negative.

This book covers five specific spending strategies to spark positive effects and increase happiness. You may have heard of some – such as buy experiences, not “things.”

The goal is to maximize the amount of happiness you get out of every dollar you spend.

Some of the wealthiest individuals have mastered these tactics (Bill Gates / Warren Buffett) and don’t let their wealth become a source of anxiety or stress.

It’s important to note that these ideas aren’t supposed to encourage you to spend your way to happiness. All strategies are meant for your discretionary spending, after your needs and future savings goals are taken care of (see my previous article on Guilt-free Spending).

All of the ideas written about here are completely attributable to the authors of this book and include paraphrased ideas and/or direct quotes from the authors. I don’t take credit for the concepts written here. The full book is a quick read and if you are interested in reading more in-depth, you can buy a copy here.

Buy Experiences

A study found out that once an individual makes $75,000 or more (in the US), any increase in income has no effect on their everyday general happiness. Isn’t that crazy?

However, how an individual spends this income can increase happiness – leading to the first tip: Buy Experiences, Not Things.

The reasons for this are simple and you are probably able to relate. The excitement from a recent purchase (new phone, tv, or purse) may have an initial happiness spike, but will inevitably fade.

An experience on the other hand will incur this same initial happiness spike, but then pay dividends over your lifetime as you share the memories / stories with friends, family, and colleagues.

That’s why bucket list items and global travel are becoming so popular – not only are they more accessible than they ever were, but we are seeing the sheer joy and happiness that they bring.

A great example used in the book is the story of Tough Mudder races. Although I haven’t personally completed one, I’ve heard countless stories of how gruelling but amazing the experience is.

This example highlights an important point: sometimes challenging and even painful experiences can bring enjoyment, as a story and memory are created that you get to share with the people you ran it with.

Because in reality, you’re paying money to run through mud and beat your body up… but people keep still signing up.

Think about this: Would you get more happiness out of spending $4,000 on a new 60” Sony LED 4K Smart TV or a month long trip to a foreign country backpacking with your best friends?

The latter will create lifetime memories, friendships and build future connections with other people who have experienced the same trip.

Now don’t get me wrong, I’d love watching the Blue Jays games this summer on a new TV, but like most products, you’ll get used to the quality and features and soon take it for granted.

The authors wisely noted that some product purchases can still act as an experience though. Their example they used was buying a new album. If you enjoy the music more as you progressively listen to it and you realize that it makes you feel happy, than it’s hard to argue that this isn’t an “experience.”

I hope the concept of buying experiences helps you plan your next major purchase. Remember, try to maximize the amount of happiness you will receive per dollar: it’ll payoff in the long run.

Make it a Treat

The main idea behind this is simple – gratitude. Through time, and repeated exposure, experiences and purchases that were once exciting become routine and mundane.

The authors go into detail on a study of new car purchases. The result? There was no direct correlation between the enjoyment of driving a car on any random day and its market value.

Just think – if you’re running late for work, it’s raining, and there’s an accident that caused bumper to bumper traffic, do you think you would be focused on the fact that you’re driving a $100,000 car?

The interesting part is that the study goes one step further and asks participants to rate their enjoyment of their vehicle during a leisurely Sunday drive through the mountains. Guess what? Individuals with a higher-end car get more happiness out of their vehicle.

The point of this is not what kind of car you drive, but the psychology behind making an experience or purchase a “treat.”

By focusing on the event or item as a luxury and allowing yourself to be in the moment, you will get more happiness out of your dollars, rather than rushing through it and making it routine.

The authors also use an example of an individual who got into the habit of buying premium Starbucks drinks every morning on the way to work.

The example is not about the actual dollars spent on these drinks, but how it became so routine that she didn’t even look forward to them anymore, and they weren’t generating the enjoyment they once did.

Her strategy? She started to make coffee at home and saved her Starbucks trips for one day a week. This led to an increased satisfaction and something exciting to look forward to every week.

Buy Time 

Time is Money: How many times have we heard this saying?

At times it can be true, but in reality time is a non-renewable resource that we will never get back.

In a way, millennials are wealthier than Bill Gates as we have something he could never buy – youth.

The next idea is built around spending money for the freedom or flexibility of how you use your time.

We often sacrifice time to save small amounts of money. This includes driving an extra 20 minutes out of our way so save 2 cents per litre on gas, or spending hours online just to save a few bucks on a product.

I’m all for being cost conscious, however there is a trade-off between cost and time spent.

One of the best ways to buy time is to eliminate or reduce our daily hassles. One study showed that over a 9-month period, psychological stress was caused more by daily hassles than major life events. These can include cleaning (hire a house-keeper), dishes (purchase a dishwasher), or even commuting (move closer to work).

By using money to free us of doing the things we hate on a daily basis, we create more time to do things that bring greater happiness: extra curricular activities, exercise, time with friends/family, etc.

Commuting is one area that we can all relate with at one point or another. And studies have found just how much of a drain on happiness it is for you, and your family/friends.

A lot of people justify their long commute by having a bigger house, or making more money. Both of these over the long-term don’t add to general happiness, but the long commute definitely takes away from it. Just something to think about.

In the end, everyone is unique and has different preferences and goals. Just because something makes someone happy, doesn’t mean it will work for everyone.

Use the Make it a Treat or Buy Time strategies to see what resonates with you. Again, it’s all about using your money wisely to ensure happiness, rather than the opposite.

Pay Now, Consume Later 

How great are the weeks leading up to a vacation? You start looking up sites to see, activities to do, and restaurants you just have to try. Have you noticed that this can create just as much happiness as the actual vacation does?

This is exactly what the Pay Now, Consume Later concept refers to: anticipation.

Credit cards, Amazon, and one-click shopping have created a level of convenience that we now come to expect.

And don’t get me wrong, it’s amazing what were able to do with this new technology.

Unfortunately, it actually may be counter-productive to our happiness, as we have adopted a Consume now, Pay later culture, rather than the opposite.

We skip the anticipation phase and go straight to consumption – inducing an initial spike in happiness until it fades and buyer’s remorse sets in.

Now think to a time when you ordered something online and it would take weeks to arrive.

You would dream about it finally showing up at your door, checking the mailbox every day while building hype as each day goes by. This free anticipation adds to the pleasure of the actual purchase / spending.

It’s an easy way to add happiness to your purchase – by delaying the gratification and using the anticipation to your advantage.

Interesting enough, the authors point out how this strategy works in the opposite way when we want to avoid something. Trips to the dentist, or an awkward conversation you have to have with a colleague are perfect examples.

The longer you put it off, the more anxiety builds and the worse the overall experience is.

I know it’s easier said than done: the lure of paying later and the pain of paying now usually outweighs the thought of delaying the gratification to build anticipation.

But try it out – the next time you are looking to go on vacation or make a major purchase, spend the money a couple months in advance and take advantage of the free benefit of anticipation.

Invest in Others

Bill Gates and Warren Buffett have figured out the way to have the biggest impact on your happiness when spending money.

At their level of wealth, with the ability to buy anything they want, they’ve committed to giving away over half of their net-worth. This is the true secret to Happy Money: Investing in Others.

Investing in Others can take many forms, including: donating to charity, giving a gift to friends or family, or even helping a stranger financially. The basic premise is spending money on others, not yourself.

Is there a certain dollar amount that you have to donate or give away to experience an increase in everyday happiness? Absolutely not. The authors’ research shows that any level has a direct correlation with increased happiness.

The authors discovered a few key criteria to maximize your happiness through “investing in others:”

  • It has to be your own choice: if you give or invest in others because you feel like you have to, or that the individual will be upset if you don’t, it can actually have the inverse effect.
  • The closer the connection you have to the cause, or individual, the more you will get out of it.
  • When you can see the impact and/or measure it, it will result in more happiness. An example of this could be donating $5 to a local charity, or buying a homeless person lunch. You would be able to see the direct impact of the latter, resulting in more enjoyment.

While this strategy may come across as selfish and take away from truly helping other people, I see it as a win-win. Not only are you able to have an impact on someone else’s life, you get to benefit from it as well.

Finally, I wouldn’t be much of a Financial Planner if I didn’t mention the tax benefits of this strategy (and trust me, Bill Gates and Warren Buffett are very aware of this too).

When donating to a registered charity or organization, you can claim a credit on your annual tax return, putting more tax dollars back into your pocket!


Most of us use our discretionary spending to enrich our lives. The interesting ideas in this book uncover the best ways to do this.

The main principle I want to leave you with is just to be mindful of your spending, as the happiness you experience is all psychological.

 Again, I just want to remind you that all of these strategies are directly from the book Happy Money: The Science of Happier Spending. I do not take any credit in developing these ideas, but thought it would be very valuable to share with you.  

Brandon Hill is a certified financial planner and founder of, a Toronto-based fee-only advisory service targeting Millennials. His investment model leverages the technology of the Wealthsimple robo-adviser platform. This blog originally appeared on Brandon’s site on April 13th and is republished here with permission. 

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