Personal Finance and Happiness

Most people need at least a little help getting their finances in order — the personal finances of the average American are in a horrendous condition. One thing that most people do not consider when talking about personal finances is when spending actually makes us happier and when it does not. The key is to avoid spending money when we get little joy from spending and to freely spend it when it is on something that will give us joy (as long as we have the money — debt and worry are two of the greatest causes of unhappiness).

So what gives us happiness? First and foremost, our relationships make us happy. Giving to our friends and to our spouse can be very important, especially when you consider the pain of loneliness or divorce. So never hesitate to spend money to go on dates with your spouse or to get him or her gifts (again, as long as the spending is reasonable). Now think of what you do during your free time. You probably sleep: we all spend much of our time doing it and yet how much time or money have we invested in a good mattress and good pillow so that we sleep well? Speaking of which, if you do not get enough sleep, you will be unhappier, stupider, and less productive than if you get enough sleep. What is another thing that people spend a lot of their time on? How about TV? I find it odd that people who spend much of their free time watching TV are often unwilling to spend money on getting a good TV, such as a large screen LCD HDTV. (Of course, I would argue that most people would probably be happier and healthier if they spent less of their time watching TV).

Now that I have encouraged everybody to spend some money, it is time to look at those things that we spend much money on that do not really make us any happier or better. The first item on this list is going to restaurants. Eating at restaurants is expensive relative to cooking a meal yourself and restaurant meals are more unhealthy than home-cooked meals. Eat at home more often, and use some of the money that you save to splurge occasionally for really nice meals at fancy restaurants on dates with your spouse.

Another thing that people spend money on but derive little enjoyment from is expensive or deluxe versions of everyday items, whether clothes, appliances, electronics, or computers. Do you really derive more happiness from having a $5,000 stainless steel refrigerator than from having a more average model? The same can be said of many of the things we buy. Are you really happier because you have $300 purse? Or would a cheap knockoff that looked almost as good be good enough? Some people do actually get more enjoyment from the more expensive items, whether they are an audiophile who can tell the difference between a $10,000 and a $20,000 speaker, or whether they are an aesthete who finds happiness in having the perfectly decorated home. But for most of us and for most consumer goods, we are just fooling ourselves into believing that we must have the more expensive item.

Go through the money that you spend each month and ask yourself if spending that money makes you happier, healthier, or wiser. If it does not, do not spend the money. Save a portion of the money that you save, and feel free to spend a portion of that money on things that will actually make you happier, healthier, or wiser.

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