Can money buy happiness? According to the old adage: No.

But a Harvard Business School professor says yes. But how much happiness you can buy depends on how you spend your money.

“We’re really underspending on the things that make us most happy,” says Michael Norton, a Harvard Business School professor, who has researched the science of spending.

With the holiday shopping season around the corner, Black Friday buyers may want to reconsider their wish list.

It turns out people generally get more happiness spending their money on experiences than on stuff. That’s even though experiences are temporary — dinner with a friend or a vacation — while stuff like TVs, computers and smart phones last longer.

“It seems odd that things that disappear could make you happier than things that stay,” Norton said at the New York Times Dealbook conference earlier in November.

When we spend on things like a TV or a phone, it often leads to activities that are typically done in silence such as watching shows alone or using apps to play solitary games, Norton says.

But on a vacation, people bond with friends and family, see new places, learn new things and create memories. The same holds true with relatively inexpensive experiences like going out for dinner with friends.

Experiences make you happier before they even happen

Even the anticipation for both is different.

Buying a big ticket item sometimes involves waiting that feels stressful. People may worry about whether they bought the best kind of TV or phone for the price, whether it will arrive on time or will it be damaged when it arrives.

So even before the purchase arrives, it can be filled with anxiety.

After it arrives, there is the stress of configuring the TV or phone, and the fact that it has already lost some of its value.

On the other hand, waiting for an experience — such as a vacation or dinner date — can feel exciting. In fact, the happiest day for people going on vacation is the day before the trip, not the time on the trip itself, Norton says.

“Even before they happen, experiences make us happier than stuff,” Norton says.

He uses honeymooners as an example. Before their honeymoon, couples often say they will be “on the beach with wine, intertwined, looking into each others’ eyes.”

But the experience may not live up to the hype. A plane is delayed, the hotel disappoints, or worse for honeymooners, “maybe you find out about some exes you weren’t aware of.”

But after the experience is over, people often tend to remember the happy moments, creating a rosy recollection of memories. Years later, the ex-girlfriend or -boyfriend that irritated during the honeymoon is long forgotten, says Norton.

“Because experiences disappear, they let us make up a reality that was amazing and wonderful, and they make us happier,” than stuff, Norton said.

Standford School of Business Research:  Can money Buy Happiness?

In his quarterly column, Francis J. Flynn looks at research that examines how to spend your way to a more satisfying life.

What inspires people to act selflessly, help others, and make personal sacrifices? Each quarter, this column features one piece of scholarly research that provides insight on what motivates people to engage in what psychologists call “prosocial behavior” — things like making charitable contributions, buying gifts, volunteering one‘s time, and so forth. In short, it looks at the work of some of our finest researchers on what spurs people to do something on behalf of someone else.

In this column I explore the idea that many of the ways we spend money are prosocial acts — and prosocial expenditures may, in fact, make us happier than personal expenditures. Authors Elizabeth Dunn and Michael Norton discuss evidence for this in their new book, Happy Money: The Science of Smarter Spending. These behavioral scientists show that you can get more out of your money by following several principles — like spending money on others rather than yourself. Moreover, they demonstrate that these principles can be used not only by individuals, but also by companies seeking to create happier employees and more satisfying products.

Investing

According to Dunn and Norton, recent research on happiness suggests that the most satisfying way of using money is to invest in others. This can take a seemingly limitless variety of forms, from donating to a charity that helps strangers in a faraway country to buying lunch for a friend.

Witness Bill Gates and Warren Buffet, two of the wealthiest people in the world. On a March day in 2010, they sat in a diner in Carter Lake, Iowa, and hatched a scheme. They would ask America‘s billionaires to pledge the majority of their wealth to charity. Buffet decided to donate 99 percent of his, saying, “I couldn‘t be happier with that decision.”

5 Reasons Money is not making you happy

1. You’re buying too many things and not enough experiences.

2. You’re more focused on getting more money than buying more time.

3.You think a McMansion will make you happy.

4. You’re letting yourself have too much of a good thing.

5. You’re investing too much in yourself and not enough in other people.

About the author, Scott Wellens

Scott Wellens, CFP® is an investment advisor and founder of Fortress Planning Group. After earning his Bachelor of Science degree from the University of Wisconsin-Oshkosh, Scott quickly ascended to become a Vice President of North American Sales at a major regional provider of telecommunications infrastructure. While financially successful in this role, Scott searched for ways to pursue his passion related to financial literacy and providing financial freedom for both his own family and others. During his search, Scott became curious about the significant gap he found in the financial services sector: he was unable to find a comprehensive financial planner that maintained a family stewardship lens without being attached to financial products. Scott decided to fill that gap by creating his own planning firm that maintains a strong passion for comprehensive, unbiased wealth planning that is genuinely client-centered.

Scott resides in Menomonee Falls, WI with his family. He is the father of three active and independent daughters who keep him on his toes. Scott is an active community member, serving on the Hamilton Education Foundation Board, serves as a Dave Ramsey Financial Peace facilitator and leads the All Pro Dad’s group at their local elementary school. Scott enjoys spending his free time visiting state parks with his family, reading, and watching the Milwaukee Bucks and the Green Bay Packers win ball games.

• Links:
• Website