How To Maximise Your Well-Being With Money

How To Maximise Your Well-Being With Money

New to personal finance? Maybe you’ve already started cutting down on spending, or even taken steps to increase your disposable income. Here’s something else – did you know that you can change the way you spend money you already have to “buy happiness”?

Here are four ways you can do so:

1. Buy experiences

“Buy experiences, not things” is the kind of caption you would expect to find on social media, alongside a photo of some twenty-something looking out pensively into the ocean.

But there’s some science behind it – according to research, purchasing experiences instead of material items leads to higher satisfaction in the long term. While having new possessions can lead to temporary happiness, their novelty tends to fade – we soon become accustomed to new stuff, and they deteriorate or become obsolete.

On the other hand, experiences become part of our memories or influence our identities. We also tend to look back upon them with more fondness than we do material items. Even a negative experience – for instance, getting lost in a city in which you don’t speak the language – could be turned into a funny anecdote once you return. In comparison, it’s a bit harder to entertain friends at a party with say, a story about how your new TV stopped working over the weekend.

So the key is to buy more experiences, but we’d also like to expand on it:

  1. Don’t buy experiences for the sake of having a story to tell. “Buy experiences” is a good guideline to minimise wasteful consumption of goods, but make sure you buy experiences you actually enjoy. For instance, if you have to make a decision between a trip to somewhere that sounds fun to your friends but you don’t really want to visit and a gadget you’ll find useful, the latter may be the better purchase.
  2. Buy things that enable experiences. The line that separates experience and thing is not always well-defined. Yes, one is tangible and be can touched, while the other cannot. Yet, some things can lead to having experiences. Buying local street food while in a foreign country, for example, can add to your experience of travelling. Other things, like board games, create experiences by facilitating fun social activities.
What are examples of experiences or experience-enabling things?

Travel, concerts, a good meal, a good book, a bicycle, a skill-building item (like a paint set), etc.

2. Buy now, enjoy later

Experiences also tend to lead to higher satisfaction because they provide more anticipatory pleasure. That is, anticipating an experience can be almost as fun as actually experiencing it. Think of the last time you booked a vacation months in advance – as the date approached, looking forward to it was likely pleasurable, especially if you were stuck at work.

If you’re worried that this will lead to disappointment when reality falls short of expectations, research suggests that the mind conveniently fills in the gaps bridging the two. In a 2017 study, people reported greater enjoyment levels for both high-quality and low-quality experiences when they had high expectations for them, but not when they had low expectations.

Here’s another psychological trick our mind plays on us when we choose to pay now for future consumption: when we pay up front, by the time the anticipated moment comes around, the pain of having to pay for it is too far in the past to put a damper on our present enjoyment. It’s like receiving a gift from our past selves.

Here’s what you can do to increase anticipatory pleasure.
  • Book your vacation months in advance, and not the week before.
  • Blocking out the dates on your calendar for small events periodically (like a nice meal at a restaurant or front-row seats to a play) can give you something to constantly look forward to.
  • Pay up front for purchases so you can enjoy them guilt-free later.

3. Buy time

If you want to be happier, spend money on things and services that save you time, especially for tasks that you dislike. This isn’t just for the wealthy – people across different income levels and careers who do so report greater life satisfaction.

Many people have it the other way round, choosing to save money by spending time instead. This isn’t bad by itself – if you have limited income, or if you stand to save a lot of money, then trading time in return for potential savings might be a good idea. But if your instincts for frugality are kicking in on overdrive, and you find yourself driving to another supermarket twenty minutes away to shave a ringgit off an item, then you should re-evaluate how much you value your time.

How much is your time worth?

The tricky bit is deciding when a trade-off between time and money is worth it. Should you queue up for an hour to get an RM20 discount on an item, or should you buy it at full price to save yourself the hassle? Is the time saved by a dishwasher worth its RM2,000 price tag? Should you pay a part-time cleaner RM50 an hour to clean your home so you could have a few extra hours this weekend?

One way of answering these questions is to attach a monetary value to an hour of your time by using your income as a baseline. Take your net monthly income (after taxes and EPF contributions) and divide that by the number of hours you work in a month (including lunch breaks) to get your net hourly wage:

Net monthly income ÷ number of hours worked in a month = net hourly wage

Let’s say your net monthly income is RM5,000. If you divide that by the number of hours worked in a month (let’s go with 160 hours), your net hourly wage would be around RM31.25. Knowing this number is useful for making time vs money decisions. Since you now know that you need to work an hour to earn RM31.25, deciding if you should queue up for an hour to save RM20 on an item becomes easier.

For a more in-depth analysis on how much your time is worth, check out this questionnaire by Clearer Thinking. It can also help you make other money decisions, such as how much you should accept for part-time work.

What purchases can help you save time?
  • Skip the long queues by shopping for groceries online and having them delivered to you.
  • Use a service like to Kaodim engage in home cleaning services.
  • Get better broadband to reduce loading times and increase overall productivity (assuming of course, you’re using your speedy internet connection to get stuff done).
  • Use a time-saving device in the kitchen, such as a dishwasher or a crock pot – just make sure that the time these devices will save are worth their price tags.
  • If you are a freelancer or self-employed, consider outsourcing administrative tasks to virtual assistants.

4. Spend on others

Spending on others (gifts, or donations to charity, etc.) can provide more happiness than spending on one’s self – this research paper suggests that this is true even if you predict otherwise.

The same paper outlines a few factors that influence how much (and if) you derive happiness from giving. First, we tend to be happier about giving when it helps to facilitate a social connection. For instance, you might feel happier about treating a friend to lunch if you were having lunch together.

We also feel better when we can see the impact of our charitable spending. A donation to a charity with a clear promise (e.g. every RM5 you donate buys a meal for someone in need) can make you feel better than if you couldn’t see where your money is going.

Finally, it must be a voluntary choice – you should have control over whether or how much you give. If a charity organisation volunteer has cornered you on the street and strong-armed you into making a donation, you may not experience the same fuzzy feelings.

How can you spend on others?

  • Treat a co-worker during your morning coffee run.
  • Donate to an organisation whose values you identify with and discloses how your donations will be used.
  • Take a friend to the movies.

What we get wrong about money and happiness

Even though we’ve just shown you a few ways money can buy happiness, we’d also like to point out: having more money won’t necessarily make you happier.

According to research in the US, emotional well-being rises according to level of income – until the income reaches US$75,000 a year (roughly the salary of a software engineer). There is no increase in emotional well-being beyond this level of income.

This suggests that having little money causes or amplifies emotional pain – it’s certainly harder to be happy if you’re struggling with your mortgage, paying for your next meal or dealing with the financial implications of a divorce. But beyond a certain level of stable income, where you can meet all your basic needs and spend a little extra on leisure activities, your emotional well-being will be constrained by other factors – not money.

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