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How to have a happier new year

20 January 2021

Money & Life team

Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.

What’s the key to lasting happiness? If you think that having more money, a better job or more stuff will make you happier, you’d be wrong, according to science. Take a look at the latest research and follow our tips to change your spending habits and boost your happiness in 2021.

After living through a year when our collective mental health took a beating, the new year has brought with it a fresh sense of optimism and relief about what the future may hold. Like many people, you may be planning to do things differently in 2021.

But before you work on a wish list of things to buy and changes to make in the coming year, you might like to take a look at the growing body of research into what we should spend our hard-earned cash on to bring us happiness.

Experiences, not consumption

Dr Thomas Gilovich, a professor of psychology at Cornell University in the US, has been exploring the relationship between spending and happiness for more than 20 years. After publishing a number of studies and reports, he offers important insights about how much happiness we can expect from buying stuff compared with spending on experiences.

“There’s a lot of work in the area of well-being and happiness showing that we adapt to most things,” Dr Gilovich says. “Therefore, things like a new material purchase make us happy initially, but very quickly we adapt to it, and it doesn’t bring us all that much joy. You could argue that adaptation is sort of an enemy of happiness. Other kinds of expenditures, such as experiential purchases, don’t seem as subject to adaptation.[1]

Not only do experiences leave us with lasting happy memories, anticipation of an experience can substantially increase your happiness, often more than the experience itself.[2],[3]

In a 2014 study, Dr Gilovich et al argue that “waiting for an experience tends to be more pleasurable and exciting than waiting to receive a material good.”

What kind of experiences?

If experiences define who we are, how can we determine what sort of experiences we should be having to make us happiest?

Much of the recent research on happiness has revealed that it’s “inextricably linked to having strong social ties and contributing to something bigger than yourself – the greater good.[4]

So it makes sense that experiences you share with others bring you more happiness than solitary ones. That was the finding of a 2013 study, which found, “it may be less the doing that creates happiness than it is sharing the doing.”

Author and leading expert in positive psychology Martin Seligman has another theory. He divides experiences that bring us happiness into two categories: pleasures and gratifications. Pleasures bring us immediate contentment and enjoyment – things like a delicious meal or glass of wine, a massage or relaxing in a warm bath. There’s no doubt we’ll enjoy these experiences in the moment and remember them with appreciation, but they won’t bring us an enduring sense of satisfaction the way gratifications can. By challenging and engaging us, things like rock-climbing, dancing or restoring an old armchair can have a much longer lasting impact on our happiness.

Getting the best from experiences on a budget

The good news is that many gratifications don’t cost much, especially when compared with pleasures like expensive restaurant meals and holidays.

In his more happiness bang for your buck blog, Chairman of the Australian Government Financial Literacy Board, Paul Clitheroe offers a couple of useful tips for discovering new ways to experience happiness without spending big:

The $50 test

Take time to plan three activities costing less than $50 each during the next month. Ideas include going to the movies, buying art supplies, doing a cooking class or planting a small vegetable garden. For each activity rate how happy you think it will make you, how happy it makes you immediately after and how happy it makes you a month later. You’ll soon start to learn which experiences are contributing more to your overall happiness.

Keep a happiness diary

During the next month write down everything you buy and do in a notebook. Include how much it costs and how happy it makes you both immediately after and a month later. Now look at what you’re spending most of your money on. Does it match up with what makes you most happy?

When you take stock of what you’re spending money on and how happy you end up being as a result, you’ll have the insights you need to make changes to your budget and invest more wisely in your happiness.

Looking for more ways to budget for a better life in 2021? Discover how Creating a flexi-budget could be key to your financial success this year.

[1] [1] Cornell Chronicle, Glee from buying objects wanes, while joy of buying experiences keeps growing, George Lowery, 31 March 2010

[2] Cornell University study, 2014

[3] Vacationers happier, but most not happier after holiday (2010) Applied research in Quality of Life

[4] The Science of Happiness, Greater Good Science Centre