Money

3 ways money can buy you happiness, according to science

Charlize Theron visits 'The Tonight Show Starring Jimmy Fallon' at Rockefeller Center on July 20, 2017 in New York City.
Getty Images | Theo Wargo
Charlize Theron visits 'The Tonight Show Starring Jimmy Fallon' at Rockefeller Center on July 20, 2017 in New York City.

Forget what you've heard in the past — money can indeed buy you happiness, say experts Michael Norton and Ashley Whillans.

"It's what you do with it," Norton, a Harvard Business School professor and co-author of "Happy Money: The Science of Smarter Spending," tells CNBC Make It.

"When you ask people the secret to happiness, they talk about living with purpose or having close relationships," says Norton. And while money can get in the way of that — if you work all the time at a job you hate, for example — spending money on things that foster those goals actually does increase well-being.

Here are three ways to buy happiness.

1. Pay for services that give you more free time

According to a new study by Norton and Whillans, hiring others to do drudge work boosts happiness.

"Spending money on time saving purchases — like housecleaning, lawn-mowing and task outsourcing — promotes happiness by protecting people from the time-famine of modern life," Whillans, also a professor at Harvard Business School, tells CNBC Make It.

Whillans, Norton and their colleagues had study participants spend $40 on different things each week — first on material goods, then on time-savers. "Our results suggest that buying time has similar benefits for happiness as having more money," says Whillans.

In fact, "Both the most and least wealthy individuals we studied derived benefits from spending money to buy time," meaning it has "broad benefits for well-being," she says.

2. Spend money on others

Regardless of income, most people tend to spend any discretionary funds they have on themselves, Norton tells CNBC Make It. But "buying something for yourself doesn't do much for your happiness," he says. Spending money on others, however, does.

That can be in the form of a gift for someone else or a donation to charity. And the price tag doesn't matter much.

Starbucks' Unicorn Frappuccino
Source: Starbucks
Starbucks' Unicorn Frappuccino

According to Norton, one study found that people who bought Starbucks for others, even strangers, reported feeling happier after the experience than those who bought coffee for themselves.

Another tip? If you can, spend the money on someone when you're face-to-face, says Norton, because close proximity garners stronger results. "Evidence of the impact you're having" increases the happiness benefit, he explains.

3. Buy experiences, not stuff

"One of the most common things people do with their money is get stuff," Norton tells Harvard Business Review. But research shows that "things" don't make you happy.

Instead, spend your hard earned cash on what Norton calls "prosocial" experiences — like a vacation or dinner with the family.

First, you tend to do these kinds of things with other people, which is a source of happiness, says Norton.

Additionally, "You look forward to [experiences] more," says Norton, so you feel happiness even before the experience. Then when you're in the midst, it's engaging and interesting, he says. Afterwards, you have memories and nostalgia, all of which also make you happier.

"So before, during and after, it turns out experience beats stuff," he says.

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