Principle 5: Pay now and consume later

Consume now and pay later is known to be bad, for obvious reasons. You satisfy your desires as fast as you can and don’t think about the future. That future, when it comes, can be awful, because of the debts you now have. But there is another reason why consuming first doesn’t make people happy. It eliminates anticipation, and anticipation is a source of “free” happiness. Planning a holiday, for example, may provide more pleasure than actually having it. People who devote time to anticipating enjoyable experiences report being happier in general.

Principle 6: Think about what you’re not thinking about

We have a tendency to blur details about proposed spending, in ways that mislead us about how happy it will make us. This is especially true of events that are far away. Having a regular job and a flat in a city might seem like a blissful condition. But those life circumstances don’t actually affect our happiness so much as the day-to-day life events. If getting a smart city flat means you have to work longer hours, and no longer have time for your old friends, it may not be such a good deal for you. Think carefully about a typical day in your life hour-by-hour and you’re likely to be more realistic about whether a single purchase item will really make you happier.

Principle 7: Beware of comparison shopping

Yes, you can pick up bargains and, sometimes, save money. But comparison shopping focuses attention on particular attributes of products, which may be very different from the ones that are important for your happiness. When you’re using a product that you bought, the ones you didn’t buy don’t figure too much in your thinking. So you could get an undisputed bargain, but be dissatisfied with it, because actually it wasn’t what you wanted.

Principle 8. Follow the herd instead of your head

The best way to predict how much we will enjoy an experience is to see how much someone else enjoyed it. Get used to listening to other people, and trust their reports on their actual experience rather than your own assessment in advance. Another odd discovery from research is that other people who pay attention to you, and who have your interests at heart, might be better at determining what you will like than you are yourself. One reason is that they can see your very revealing non-verbal reactions to the idea.

The article helpfully summarises key principles to be followed by anyone who wants to think about what money is for, and how to use it to maximise their happiness. Here are the first four principles, with brief explanations from me based on much fuller and better ones in the article.

Watch out for the remaining principles in a future post. When you’ve read these you’ll appreciate the thinking behind splitting them in this way. It gives you more happiness than reading them all in one go would have done. Either way, they are invaluable source material for discussion and argument with young people.

Principle 1: Buy experiences instead of things

There are various theories about why people get more happiness from things they do than things they own. You get used to things you buy, but experiences are different each time. And you get more pleasure from anticipating and remembering experiences than you do reflecting on things. Also, experiences tend to be shared, and other people are a great source of happiness.

Principle 2: Help others instead of yourself

Easy to mock, but there’s sound evidence that spending money on other people leads to activation in brain areas that associated with receiving awards. Give individuals a £20 note and randomly ask some to spend it on themselves and some to spend it on others. Those who spent on others were happier. Just because people don’t think this is true, doesn’t mean it isn’t.

Principle 3: Buy many small pleasures instead of few big ones

The trouble with big ticket items is that you get used to them. The novelty and excitement wears off. Smaller but more frequent pleasures tend to score more highly on novelty, surprise, uncertainty and variability. We pay more attention and don’t get used to them so quickly.

Principle 4: Buy less insurance

The theory here is linked to the previous principle. You get used to pleasures, so they don’t wow you anymore like they first did. Likewise, you get used to bad things that happen to you. Put another way, we tend to overestimate our vulnerability to negative happenings. So businesses naturally trade on that by offering insurance against various forms of potential future unhappiness. Generally, it’s not worth it.