Spending Your Way to Happiness (No, Really)

Conventional wisdom says “Money can’t buy happiness,” but in her new book All the Money in the World: What the Happiest People Know About Getting and Spending, Laura Vanderkam sets out to re-examine the conventional wisdom surrounding money.

Money is just a tool. Some people use it well; some people don’t. All The Money explores how happy people strategically use this tool to build the kind of life they want–for themselves, and for others.

The problem is that most of us aren’t very good at predicting what expenditures will make us happy. Americans tend to overspend on houses, cars and other huge material purchases that we expect to bring us happiness. These big-ticket items don’t make us nearly as happy once the novelty wears off, yet they eat up large chunks of our budgets, leaving little available to spend in ways that actually could boost our happiness.

Vanderkam brings this concept of opportunity cost to life in one of my favorite chapters, What Else Could That Ring Buy? In 2010, the average couple spent $5,392 on an engagement ring before the marriage began. What if they skipped the expensive ring and put that money to use a little down the road when funds are tight and time together is hard to come by?  With that money, “a set of new parents could pay a babysitter $50 a night for 107 nights so they could have time to themselves.” The average wedding florist bill runs $1,988, but could just as easily be spent later “as 198 thinking-of-you $10 bouquets–a once-a-month gesture for a solid 16.5 years.”

It’s not wrong to spend a lot on a wedding or a ring, but thepoint is that we can choose how we spend our money–and we might be a lot happier if we used it more strategically. Figure out what makes you happy, and spend accordingly.

For me this means buying fresh flowers and frequenting independent coffee shops with friends. It means hitting the neighborhood farmers’ market and local small businesses. It means hikes and picnics and family vacations; donating to our church and causes we believe in. And just as importantly, it means not spending a lot on fashion, media, and home decor–because those things just aren’t as important to me.

I’d consider myself financially savvy, yet Vanderkam’s no-nonsense, low-drama, just-the-facts-ma’am approach to money has shifted my outlook on my family’s finances, and I suspect All the Money–like her previous book 168 Hours–is going to stay with me for a long time.

Laura wrote a nice summary here on what the happiest people taught her about money, but she was also kind enough to answer a few questions about money for us:

Anne: Why do people accept the conventional wisdom about money, and why is it so hard to overcome?

Laura: Humans are social creatures, and money is one way we compare ourselves with others. Consequently, we imbue money with lots of meaning, and we come up with all kinds of maxims that may or may not be true. I’m sure if your readers tried, they could think of many money beliefs they’ve inherited from their parents.

In All the Money in the World, I write about how hard it was for me to buy name brand Ziploc bags the first time. I’ve wasted $2 too many times to count in my life, but spending it consciously on a higher-priced item when the generic ones are probably fine? The feelings of profligacy were almost overwhelming.

We repeat various mantras of scarcity: money doesn’t grow on trees; easy come, easy go; money can’t buy happiness; money is the root of all evil. The reality is that money is just a tool. Used properly it can help us build the lives we want and a world we’d want to live in. But treating it that way requires stepping back from the drama and trying to extricate ourselves from the pack mindset, and likely from beliefs we learned growing up. This is clearly not easy to do.

Anne: I thought the examples in 168 Hours seemed aimed at an urban, affluent crowd; I had a much easier time relating to your anecdotes in All The Money. Has moving from New York City to the Philadelphia suburbs changed your outlook?

Laura: When life changes, your outlook changes, and certainly moving to the ‘burbs was a big shift. I now have no idea how all of us fit in 1500 square feet in NYC, and my house in PA, which used to feel large, now feels about right.

But while my examples may be slightly different, I think that my underlying philosophy is still the same: we have a choice about how we spend our money and our time, and even in the suburbs, you can make choices like living closer to the places you need to go so you don’t spend as much time in the car, or spend as much of your hard-earned money on gas. We live within walking distance of a post office, grocery store, coffee shop, my son’s preschool, etc. I’m trying to keep some of the urban feel!

Anne: Even before reading your book, I knew my husband and I have gained a lot of happiness by sweating the big stuff: we’ve always had a tiny mortgage and no car payments. Now we’re debating making paying off the mortgage a financial goal. Is this likely to make us happy?

Laura: Paying off your mortgage could make you happy, because it will free up cash for other things that might be new and exciting (like travel, or more pro-active charity). Some people really like the idea of being completely debt free.

However, if your mortgage is truly a “tiny” percentage of your income, then you might not get quite the happiness boost that someone who was devoting a third of their income to a mortgage would from suddenly being free of that debt.

Have you read 168 Hours or All the Money in the World? Let us know what you think in the comments.

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  1. Jennifer H says:

    The wedding examples really resonated with me. We didn’t spend much on our wedding, but we’re still together almost 11 years later and have had very few money fights. It hurts my heart every time I go to a really expensive wedding, and I never know why – it’s not my money – I just worry for the couple that this is starting them off on the wrong foot, or I worry for the parents that they may have to delay retirement to pay for their daughter’s “dream” wedding. We should all forget the dream wedding and focus on the dream marriage 🙂

    The “Seven” sermon series at SECC last year really resonated with us and we’ve made several changes, which I think have enhanced our enjoyment of life.

    I haven’t read either book, but I just put myself on the library request list for Laura’s book.

  2. Sara Broers says:

    $5000.00+ for an engagement ring! Let’s just say I must live in a closet- I have been married 25 years and I can tell you that my engagement ring and wedding ring cost a grand total of $405.00. I can honestly say I am still perfectly happy with the set that I have after 25 years. Now,I am not a bride in 2012, but I would have to say that if that much money has to be spent on a ring, it must be about the “stuff” and not the marriage. I guess my old fashioned ideas and my age are showing.

  3. Great review and author interview, other Anne!

    I love the advice to “sweat the big stuff”. I’m about ten years older than you, also with a happy marriage and four kids. I can say that having money freed up for travel and the little things that make life happy really is a good thing.

    I’m looking forward to reading both of Laura’s books–thanks for introducing me to this author!

    I can’t believe I didn’t get to meet you at Blissdom. I’ll make a point of saying hey next year.

  4. Sherri Ohler says:

    Oh my gosh I LOVE this post!! And MUST read this book! I’m wondering if IT includes help for those of us in debt 🙁 Not from overspending on things like weddings II bartered for almost the entire thing!) -but from starting a business on credit cards about 6 months before the economy crashed-ugh! Can’t wait to read it and find out.
    Again-AWESOME post! Thank you 🙂
    Sherri Ohler

  5. Alia Joy says:

    I have always thought this way and it was sad to go to a few friends weddings around the time my husband and I got married and see them spend upwards of $60,000 on it only to have divorced a few years later over financial issues and tensions. It’s so sad. We definitely have seen that there are ways to spend money that bring more happiness to our family as a whole and there are other things that are a total waste. I’ll have to check out her book. It looks really interesting. Thanks for the review, Anne. Informative as always.

  6. angela says:

    I like the idea behind this book! I know there are things in our past that my husband and I have spent money on that I’d kind of like to have back. Our wedding was a bit expensive, and we paid for it ourselves. I think the complicated part is at the time, I thought I was being careful and smart about it, because we set a budget and stuck to it. My husband is much better with long-term goals; I am a little impulsive with finances.

  7. Great article. I’m definitely going to look into this book. While our disposable income is, for now, going to medical bills, she makes some excellent points on prioritizing. For me, a weekly date night with my hubs is at the top of the list of enjoyment, and often these nights don’t cost anything (hiking, disc golf, swimming, picnic, etc).

  8. Greta says:

    This is a really great review and it sounds like a book I could really relate to. I have OFTEN found myself wanting a big ticket item for no other reason than it will make me look better to other people. I love the examples of how many date nights, etc that money could otherwise be spent on!

  9. Denise says:

    This is a really good, really helpful review – thank you.

    I am a terrible one for impulse spending, for chasing trends, and for measuring my worth by what I can buy. I have started working on that part of myself because I’ve learned what the author found in her research: money, in and of itself, can’t make you happy – it’s the lasting experiences that you use your money to create that are really satisfying.

  10. April says:

    Thanks for this post. I have added all of her books to my wishlist. How we deal with money and value what it can bring into our lives is definitely something to think about–especially couples.

  11. Carrie says:

    I loved this book too, and her other, 168 Hours. I gave myself permission to buy books again (one of my greatest pleasures), and stop feeling guilty about lattes. I’m so cheap in so many other areas. 😉

  12. I’ve been wanting to read this book since seeing it reviewed on another site. My dad was especially big on emphasizing opportunity cost to me while growing up, and especially how it related to weddings. Did I want a big expensive wedding, or would I rather use that money towards a house downpayment or something else?

    I think I’ve started spending my way towards happiness lately – I’m paying for a babysitter semi-weekly (try to do it weekly, but her schedule doesn’t always allow it) to get a break from my 2.5 year old. Those two hours are so worth what she charges!

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