We’ve all heard the saying ‘money can’t buy you happiness’, but in 2017 Yale University and the University of Cambridge’s study busted that ancient myth. According to their research, it is possible to get more happiness from your money, but only if you spend it right.
The university researchers analysed 76,000 bank transaction records over a six-month period, examining what people spent their money on. Then, the study rated the participants’ satisfaction with their purchases in relation to their personalities. The study categorised personality types into the Big Five; openness to experience, conscientiousness, extraversion, agreeableness, and neuroticism.
Surprisingly, the study found, spending money can actually increase your happiness if you spend it in a way that matches your personality. For example people that fit into the category of ‘extraversion’ are more likely to get happiness from going on holiday, however, people that fit into the category of ‘agreeableness’ would benefit from donating money to charity.
See the table below from the study displaying which purchases the personality types get the most and least happiness from:
If you would like to identify which of the ‘big five’ you are, take this test (it takes five minutes and there is no need to register or complete the political questions).
So, how can you adapt your spending to get more happiness for your money? Consider these three tips:
Think before you purchase
Take a moment to consider your personality and what makes you happy before splurging on a new purchase. The personality test should help to identify which category you are strongest in and you can use the results as a general guide for which purchases you should and shouldn’t be investing in.
Don’t feel guilty about spending money on what makes you happy. Treating yourself to an expensive comprehensive home insurance may seem like the height of dullness to an ‘extraversion’, however, if you’re a ‘conscientiousness’ that might give you an equivalent level of happiness to their long weekend in Las Vegas.
You should plan a budget on how much you can comfortably afford to spend on these pleasure purchases and enjoy the guilt-free treat.
Giving can give you happiness too
Not all purchases have to be on yourself to make you happy. Many people find that giving to others makes them happier than if they were to spend the money on themselves. Research evidences this, Elizabeth Dunn, author of Happy Money: The Science of Smarter Spending, explains “by giving to another person, you're creating a connection and a conversation with that person, and those things are really good for happiness”.
If making other people happy or helping gives you a warm fuzzy glow, then go ahead, whether that’s buying a gift for a friend or donating to a charity.
Don’t be afraid to rebel from the norm
Conforming to a norm of what we think we are supposed to spend our money on (for some people it could be exotic holidays, expensive cars, and designer clothes) is unlikely to make you any happier unless you have the right personality for those purchases. So, purchase what will leave you feeling fulfilled and happy, don’t give in to the peer pressure of having the latest cars or iPhone if it adds no real value to your happiness.
Sometimes when family members have different personality types, things like choosing holidays to make everyone happy can seem near enough impossible. Try to find a compromise between your personalities beforehand to help keep everyone happy.
At Capital, we believe money should be used to fuel your happiness and the happiness of the people around you.
We would love to hear which of the Big Five you fit into so we can ensure we give you the best advice for your personality, to get the most happiness from your investment.