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A happiness optimization problem

June 11, 2011

You have a certain amount of time & skills, which you can turn into dollars, which you can turn into things & experiences, which lead (indirectly) to happiness.  This is the foundation of budgeting of both your time and your money.

The trouble is, unlike a real (mathematical) optimization problem, there aren’t actually many quantifiable things involved here. However, the money part is clear.  A dollar is a dollar.  Maybe that is why some new college graduates (me! 5 years ago!) gravitate towards personal finance.  Seeking happiness is fuzzy and squishy, but managing your money?  You can figure out how to do that!

Still, we are notoriously bad at spending our money in the ways that bring happiness.  We often overestimate how much happiness things will bring us, and undervalue our own time.   A friend shared a link to this study, which says that if consumers want to use their money in a way that makes them happy, they should do the following things:

  • Buy more experiences and fewer material goods
  • Use their money to benefit others rather than themselves
  • Buy many small pleasures rather than fewer large ones
  • Eschew extended warranties and other forms of overpriced insurance
  • Delay consumption
  • Consider how peripheral features of their purchases may affect their day-to-day lives;
  • Beware of comparison shopping
  • Pay close attention to the happiness of others

A lot of these are common themes in the pf community: experiences vs Stuff, delayed consumption, and avoiding overpriced warranties.   Some are counter-intuitive – comparison shopping isn’t good?  Many small pleasures?  Does that mean a daily latte is not so bad?  But wait, is a latte a thing?  Or an experience?   Or merely a habit?

I’m pretty satisfied with how I spend my money for happiness.  We pay a lot in rent, but honestly, being able to hop out of bed and go for a 6 mile run on the beach is quite truly one of the happiest things about my life.  Having a walkable neighborhood is immeasurably wonderful.  We spend a lot on travel, but these are memories we’ll have forever.  I don’t really think too much about the costs of visiting home, because really, I know I’ll get enough happiness out of it that it’s likely one of the best things I’ve spent money on all year.  There’s room for improvement, but I don’t think we’re doing so bad.

What about you?  Do you follow the suggested tactics to get the most happiness for your money?

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2 Comments leave one →
  1. June 13, 2011 8:18 am

    I’ve had a lot of success focusing on small purchases. I find that a small purchase makes me nearly as happy as a large one if they are of the same duration. So getting ice cream with my SO can be just as good as a fancy meal out. I think my being mindful of these trends impact your own spending and happiness you’ll naturally find a balance that works to make you happiest since meeting financial goals makes many of us happy as well.

    • June 13, 2011 9:08 pm

      good point – a meal two times as expensive is rarely produces two times as much happiness!

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