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Money can’t directly buy happiness, but there are ways you can spend it that might help.

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[INTRO ♪].

In 2006, a man named Abraham Shakespeare won 17 million dollars in the lottery. But years later, he told his brother that he'd have been better off broke.

In fact, many lottery winners find that it doesn't improve their lives the way they expect. Basically, they can’t buy happiness. But everybody likes—and to some extent needs—money.

And past a certain point of wealth, you can just go out and get books and yachts and houses without batting an eye. That’s the catch, though. Spending money on stuff like that probably won’t make you feel much better.

But psychologists have found that there are some ways that money can buy happiness. There are two big ways to look at subjective well-being: your emotions like happiness, which can change a lot from moment to moment, and life satisfaction. Life satisfaction is measured by asking people to look at their life as a whole—for instance, by picturing a ladder.

Are you down toward the bottom, or near the top living your best life? For the most part, people who remember mostly happy days rate themselves as living better lives. But occasionally these ideas can conflict.

Take lottery winners. Winning improves their life satisfaction—they look back and see an exciting event in the story of their lives. But it doesn't seem to improve day-to-day happiness very much.

This is true for us non-lottery-winners too. Income and daily emotions like happiness and stress seem to be closely related until you’re comfortably middle-class. And that makes sense if you can make sure your bills are paid, see a doctor if you need one, and enjoy some free time.

According to a study in 2010 on over 450,000 people, that happens at right about $75,000 a year in the United States. After that, life satisfaction keeps going up, but money and status alone don’t do much for day-to-day emotions. So how do you spend your hard-earned money to really make you happy?

Psychologists have found a couple patterns that we might all be able to learn from. One way is to buy back some down time, by paying others to do things that can be a burden like chores and cooking. For example, in a 2017 study of thousands of people in four countries, researchers found that people who report more time-saving purchases are more satisfied with their lives than those that don't—no matter if they’re rich or less well-off.

Stress reduction might explain why, since people who didn't report a lot of time-related stress didn't show this effect as much. To check, the same team recruited 60 people and gave them all $40, telling half to spend the money on something that saves them time, and half to treat themselves to something nice. Treat yo self!

The next weekend, they did the same thing, but switched the two groups. And both groups reported being happier and less stressed on the weekend they spent their $40 on something time-saving. Another strategy for more lasting happiness is to buy experiences like vacations and concerts, instead of things like clothes or fancy gadgets.

A few decades of research looks into this idea, and there are a couple reasons it might work. One is how they're perceived socially. In a series of studies published in 2010 in the Personality and Social Psychology Bulletin, researchers found that purchasing objects suggests to others that someone is materialistic.

So it might help to avoid negative stereotypes. People might also try to compare their own purchases and possessions when talking about material stuff, which tends to bring everybody down a little. There's also the way things age.

If you buy a brand new car, 10 years later there are scratches and dents and everything's broken and frustrating. But experiences don’t age the same way. Like, you’ll probably forget some things about your vacation from 10 years ago, and mostly remember the good parts.

Some researchers even showed that people feel differently about purchases depending on whether they’re framed as an object or as an experience. There was a study in 2012 about a hypothetical purchase of a 3D TV. Some participants were told where the TV would go in their apartment and what it would look like, while others were primed to think about having fun watching it with friends and experiencing a new kind of TV.

And people who had the sales pitch framed as an experience said that not buying it would cause more regret. A final way to buy happiness is to not spend your money on you. One experiment involved giving 46 people some cash—either $5 or $20—and telling them to spend it on either themselves or someone else.

And in a follow-up later in the day, the people who spent it on others reported being happier than those who spent it on themselves, no matter how much they spent. A similar study was done with over 200 students from Canada and South Africa. Some were given an option to buy a small goodie bag for themselves, but others were given a choice to buy one for a sick child at a nearby hospital.

After making the choice, those who bought the product for charity were happier, even though they didn't have any connection to the person they might help. In fact, according to surveys conducted in 136 different countries, how much you spend on others is correlated with your happiness—whether the country is rich or poor. And we're not entirely sure why this is.

Some research has suggested that knowing the impact of your spending helps. When donors are told how a charity will use their funds, they report more happiness than if they’re in the dark. But others say that this widespread effect might just be something that's deeply ingrained in human nature: we feel better when we help others.

So if you’ve got some extra money, you might be able to buy some happiness—if you know how to spend it. And we can’t think of a better time to remind you about one of our sister channels, The Financial Diet. From the emotional side of money to technical financial terms, you'll learn tricks to improve your life by getting a better handle on money.

Check out their video on specific ways money can be used to make personal happiness possible. [OUTRO ♪].