Happy Money is different from other personal finance books. It talks about how to spend money instead of how to earn it.

Even a small amount of money can bring happiness. It depends on where and how you spend it.

Take a look again at the 5 Principles from the book Happy Money:

1. Buy Experiences
2. Make It a Treat
3. Buy Time
4. Pay Now, Consume Later
5. Invest in Others

You may have accumulate plenty of material things and yet you don’t feel as happy as you expect yourself to be. Little changes in your spending might help bring that smile back.

Act Now

Apply what you have learned from the book Happy Money with these suggestions:

1. Is this “Happy Money”? Before purchasing, ask yourself if your purchase will bring you more happiness. If not, then you reconsider your decision.
2. Combine any of the five principles. The more principles used, the more happiness.
3. Buy last year’s model. An older model is cheaper. While the difference in features may differ, the older model can provide similar amount of happiness as a newer model.
4. Limit the supply and access to your favorite things. Make it a treat by cutting down on your frequent purchases. Save the money you should have spent instead. Saving money can also boost happiness.
5. Review your big purchases. Look at your budget again. Typically, housing and transportation ranks on top although they don’t really increase our overall happiness. Consider reallocating your budget without sacrificing much happiness.
6. Buy more free time. Hire someone else to clean the house. Take used clothes to the laundry shop. Order food to be delivered for a special dinner.
7. Donate to a local charity. See the impact of your money by donating it to a charity institution that is smaller and closer to where you live.

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Happy Money Book Summary 
Part 1 | Part 2 | Part 3 | Part 4 | Part 5

The last two principles from the book Happy Money are PAY NOW, CONSUME LATER and INVEST IN OTHERS.

The Joy of Waiting

Businesses recognize this psychological phenomenon, which has driven the development of financial and technological innovations that enable people to consume sooner and pay later. By putting this fundamental principle into reserve, you can buy more happiness while spending less money.

Happy Money, Elizabeth Dunn and Michael Norton

Technology has made it possible to get things in an instant. Online shopping can now provide same-day delivery. Digital products can be downloaded in a few seconds. Credit cards let us consume now and pay later.

The authors recommend the opposite instead – PAY NOW, CONSUME LATER. By delaying consumption, you can increase the happiness of what you have purchased.

But not all purchases can be delayed. The authors provides these guidelines on when a delayed consumption will translate into more happiness.

• When the delay provides an opportunity to develop positive expectations while waiting. For many kids, the joy of anticipating the time they can open their gifts on Christmas outshines the joy of having the gift itself.
• When the delay makes you “drool”. The drool factor increases the pleasure once the actual consumption takes place.
• When the delay is longer the the time to consume it. Most brides find the months of preparation for the wedding more exciting than the wedding ceremony itself.

By making purchases that we consume later, it can be easier to choose things that we know are good for our own well-being.

Happy Money, Elizabeth Dunn and Michael Norton

The benefit of paying now, consume later is not easily felt. In fact, we often feel the pain if we pay now. The hidden wisdom in this principle is how it discourages us from accumulating debt. How much our debt is is a big predictor of happiness than how much we earn. “In Britain, households with more debt exhibit lower happiness.”

It is better to give

If you have been focusing on trying to make more money, remember that giving some of it away can be just as rewarding as getting more of it.

Happy Money, Elizabeth Dunn and Michael Norton

New research shows that spending even small amounts of money on others can make a difference for our own happiness. In some researches, when people invest in others, the happier they were.

The authors give three strategies to boost the impact in investing in others.

• Make It a Choice. People feel better when the giving is their choice rather than when they feel they had to give or were forced to give.
• Make a Connection. You’re more likely to get more happiness when the giving helps you connect with people, especially with people you care about.
• Make an Impact. The more you see the impact of your giving, the more happy you feel.

The benefits of giving your money are surprising. It can make you physically healthier, and even make you feel financially wealthier.

Just as being able to give time away makes us feel we must have a lot of time to spare, giving money away makes us feel that we must have a lot of money.

Happy Money, Elizabeth Dunn and Michael Norton

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Happy Money Book Summary
Part 1 | Part 2 | Part 3 | Part 4 | Part 5

The next two principles from Happy Money are to MAKE IT A TREAT and to BUY TIME.

Abundance, it turns out, is the enemy of appreciation.

Happy Money, Elizabeth Dunn and Michael Norton

Sweeter the second time around

The first time I tasted my mother’s homemade Choco Dream Cake, it was bliss. She makes them in Negros and we brought one in Manila. I enjoyed every spoonful of it. I savored every layer of chocolate, from top to bottom, in that tin can.

When we are stayed in Negros for the holidays, I have access to my mother’s Choco Dream Cake at any day and anytime. But the next tin can of cake doesn’t have the same experience and satisfaction as the first.

As the authors put it, “the more we are exposed to something, the more its impact diminishes.”

This is where we apply MAKE IT A TREAT to bring more happiness in what we spend. When we limit our exposure to something, the more it feels great once we possess that thing. I bet that after a year of not eating my mother’s Choco Dream Cake, I will crave for it and the first spoon will burst will happiness again.

By adding something new to a boring routine is also a way to MAKE IT A TREAT. This is great news for couples. “When couples do novel, exciting things together, the relationship itself feels novel and exciting.” I know many couples who regularly try new restaurants for their date nights. Great food plus stronger relationships really brings more value for the money spent.

Time is Money

People who feel they have plenty of free time are more likely to exercise, do volunteer work, and participate in other activities that are linked to increased happiness.

Happy Money, Elizabeth Dunn and Michael Norton

We all wish we have more time to do the things we love and the things that will make make us truly happy. But we rarely think of ways to create free time. The authors say that is possible to BUY TIME and use this extra time to pursue happiness.

Try these tips in transforming decisions about money into a decisions about time:

1. Avoid sacrificing free time just to save or earn a little money. No need to spend an hour in a line to get free samples, or visit all the malls around the city to compare the best price on an item.
2. Buy products that reduce or eliminate the worst minutes of your day. If you hate sweeping the floor, then buying that vacuum cleaner will be worth it to create free time.
3. Lessen the time in commuting. “Taking a job that requires an hour-long commute each way has a negative effect on happiness similar in magnitude to not having a job at all.”
4. Lessen time spent on television. “In many countries, people spend almost as much time watching TV as they do working.” Try replacing some time spent watching TV to other activities that bring happiness.
5. Spend more time socializing. “People experience the most positive moods of the day while spending time with family and friends.” But avoid the trap in making yourself spend more time at work in order to afford the time to socialize.
6. When comparing two products, “ask yourself whether the differences in features will alter how you spend your time. If the answer is no, go cheap.”

Rather than seeing time as a vehicle to get more money, we suggest viewing happier time as an end in itself.”

Happy Money, Elizabeth Dunn and Michael Norton

In the Part 4, we will look at the last two principles from the book Happy Money.

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Happy Money Book Summary
Part 1 | Part 2 | Part 3 | Part 4 | Part 5

The first principle in Happy Money is to BUY EXPERIENCES, not buying stuff.

The authors, Elizabeth Dunn and Michael Norton, suggest making experiential purchase instead of making material purchase. Experiential purchase includes leisure like trips, movies, sporting events, gym memberships, and the like. People who spend more of their money on leisure report significantly greater satisfaction with their lives.

We don’t wish to deny that material things can provide immediate delight. But this material rush will likely fade, whereas the experiential high lasts much longer.

Happy Money, Elizabeth Dunn and Michael Norton

There are plenty of experiences that money can buy but the authors suggest that these types of experiences bring the most happiness:

• Experiences that brings you together with other people fostering a sense of social connection.
• Experiences that makes a memorable story that you won’t get tired of retelling for many, many years to come.
• Experiences that are tightly linked to your sense of who you are or who you want to be.
• Experiences that provides a unique opportunity and that cannot be easily compared with other available options.

This is probably why I love running. Despite the pain, the cost, and the availability of shorter distances, I always enjoy the experience of running a marathon or even just the half of it. I am sure many runners will agree with me.

Studies show that even when people spend only a few dollars, they get more lasting pleasure from buying experiences such as playing a video game or listening to a new song than from buying material thing like a key chain or picture frame.

Happy Money, Elizabeth Dunn and Michael Norton

Experiential purchases can be very abstract. It’s hard to put an exact value on what you have experienced. This is what I think adds to the appeal of an experiential purchase. I can be just as happy running either 21K or a 42K.

The authors mentioned a study in New Zealand where vacationers rated their happiness after their trip. “Although the vacations ranged in length from four to fourteen days, the duration of the trip had no bearing on their overall feelings about the trip.” They felt happier during and after the trip. This is true even if there are unpleasant things that happened during the trip.

The problem with material things

Material things don’t necessary improve overall happiness. For example, the authors mentioned a study of homeowners and “there is almost no evidence that buying a home – or a newer, nicer home – increases happiness.” You may be satisfied by the newness of the purchase, but overall happiness doesn’t improve as much. You could be just as happy with the previous one.

Material things losses their appeal when better things are available. You would be happy to own the latest mobile phone today. But a year or two from now, you won’t be as happy. You would wish for the next latest model instead. And this cycle goes on. “We are happy with things, until we find out there are better things available.”

Looking back on their past decisions about whether to purchase experiences, 83 percent of people reported that their biggest single regret is one of inaction, of passing up the chance to buy an experience when the opportunity came along. The opposite was true for material goods; most people’s biggest regret was buying something that they wish they hadn’t.

Happy Money, Elizabeth Dunn and Michael Norton

In Part 3, we will discover the next 2 principles from Happy Money.

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Happy Money Book Summary
Part 1 | Part 2 | Part 3 | Part 4 | Part 5

“If you think money can’t buy happiness, you’re not spending it right.”

The book Happy Money, The Science of Smarter Spending by Elizabeth Dunn and Michael Norton explores the ways we can use our money to get more happiness from it. Plenty of books have been written on how to earn money but every few talks about how we could spend it in a way that will bring happiness.

She found about seventeen thousand articles on the relationship between money and happiness, many of which seemed to suggest that additional income provides surprisingly little additional happiness.

Happy Money, Elizabeth Dunn and Michael Norton

Happy Money provides five principles to follow in order to get more happiness from whatever we spend our money on. I find many of the principles as an eye opener on how I tend use my money. Some are easy to follow. Some are surprisingly unconventional. But I personally try to follow them. These principles surely bring more smile to my face every time I remember where I used my money on.

Below are the five principles from Happy Money.

1. Buy Experiences
2. Make It a Treat
3. Buy Time
4. Pay Now, Consume Later
5. Invest in Others

Following the principles of Happy Money does not mean you should stop acquiring money, or you should stop spending it as much as you want. The authors’ goal is for us to start asking ourselves if we are spending the money in a way that will bring the biggest happiness.

Our first discoveries were promising: changing the way people spent their money altered their happiness over the course of the day. And we saw this effect when people spent as little as $5.”

Happy Money, Elizabeth Dunn and Michael Norton

Will buying a more expensive item make us happier than buying a cheaper one?
Will travelling abroad make us happier than just travelling in our own country?
Will a longer vacation make us happier than a shorter one?
Will giving money make us happier than receiving money?

In the next parts of this book summary, I will discuss each of the five principles from the book Happy Money. Each summary will give interesting examples from researches and the advice on spending money.

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Happy Money Book Summary
Part 1 | Part 2 | Part 3 | Part 4 | Part 5