I am sitting outside a coffee shop writing this column. I’m not in my office, with ringing phones or beeping e-mails. I wanted to write this column in a place where I could be focused, relaxed and ... happy.
My plan was to go to the Arboretum, but I didn’t have the time. The paradox is that if I had made the time, I would have felt like I had more of it. Why? Because scarcity begets scarcity. When we think of resources as precious, we fight to keep them. When we feel as though we have enough, we relax a bit. Right now, I am happily taking the time to write this column about the book “Happy Money: The Science of Smarter Spending’’ by Elizabeth Dunn and Michael Norton.
While it’s true that money can’t buy us happiness, it can certainly help pay for it. And that is important.
To neglect money is unrealistic, and to obsess about money is paralyzing. To have a healthy relationship with money can put us on a path to happiness. Effectively using our money can make us happier.
There are five lessons that I learned from the book that help move us from money being a burden to it being a facilitator for building a better life.
When you close your eyes and imagine important moments in your life, are you smelling the leather in your new car or picturing the birth of your child, your wedding day or some amazing interaction with nature? Spending our money on experiences rather than things has proved to make us happy for a number of reasons. We tend to remember and re-create experiences and often value them more as time goes by. The experiences don’t even have to be good to be memorable. I finished almost an hour slower than I expected when running my first marathon because I could no more than shuffle for the last several miles. I remember my sense of fulfillment when I finished, but more important, I remember all the people on the side of Summit Avenue shouting encouragement. I remember runners passing me and providing support. Experiences tend to make us happier because they help us feel more connected.
Make it a treat
“Abundance is the enemy of appreciation; scarcity may be our best ally,” Dunn and Norton write. This means that the more we do or have something, the less we tend to value it. Many years ago, my wife and I were 10-month vegetarians until we had the greatest cheeseburgers of all time. Today, a cheeseburger is just a cheeseburger. When you are spending your money, think if there are things where you can switch from regular spending to making it a treat. If you had that Northern Lite Caramel High Rise once a week at Caribou instead of once a day, you would be more excited about it. This is not about viewing time or money from a place of scarcity or abundance. This is about becoming accustomed to the things for which we regularly pay.
When my father was in his 80s, he would spend a couple of hours with the phone company fighting over a $2 discrepancy. Even when he won, he lost. While this sounds ridiculous, think about things that you do in your own life where you may not be appropriately valuing your time. What should you hire out or stop chasing? Are you spending too much time on things with too little benefit? Commuting time is one of the largest drags on happiness, yet we often don’t pay close enough attention to the commute when we decide where to live. And since spending time with friends and family has also been shown to increase happiness, less time in traffic creates more connection time.
Pay now, consume later
In our credit-card society, we are paying for the meal months after we digested it. To increase your money happiness, it is better to do the reverse. If you pay for your winter trip in June, you have months to think about it, get excited over it and then experience it without the bad money hangover. Paying for things before we have them lengthens our enjoyment of them because there is a value to anticipation. Paying upfront also tends to reduce our spending.
Invest in others
Doing things for others generally increases our happiness. I was having a particularly rough day and I found myself writing a couple of notes to people who had done something interesting or something I appreciated. My mood immediately lifted. Our clients who feel the most comfortable with their spending are those who have a regular charitable component in their budget. It doesn’t seem to matter how much. Rather it is simply the act of investing in others that leads them to believing that they have enough for themselves. In fact, Dunn and Noble cite that: “People who report donating money to charity feel wealthier than those who do not, even controlling for how much money they make.” While it seems ironic, if we are feeling both time and money scarcity, volunteering and donating may actually decrease those feelings.
After reading the book, I am drinking regular coffee at the coffee shop. But as I wrote this column, I had an iced latte, and man, did it make me happy.
Ross Levin is the founding principal of Accredited Investors Inc. in Edina. His Gains & Losses column appears twice monthly on the Star Tribune Your Money page. His e-mail is firstname.lastname@example.org.