Tag: Happy Money: The New Science of Smarter Spending

💎 Abundance is the enemy of appreciation (on the benefits of abstinence)

But there’s a way to maximize the pleasure of that second confection. Temporarily giving up chocolate can restore our ability to enjoy it. After an initial chocolate tasting, students promised to abstain from chocolate for one week. Another group of students pledged to eat as much chocolate as they comfortably could, and they received a two-pound bag of chocolate to help them fulfill their pledge. The students who left with this reservoir of chocolatey goodness may seem like the lucky ones. But their sweet windfall came at a price. When they returned the following week to sample additional chocolate, they enjoyed it much less than they had the week before. People only enjoyed chocolate as much the second week as they had the first if they had given it up in between.”

Except from: Happy Money: The New Science of Smarter Spending by Elizabeth Dunn and Michael Norton

💎 Experiences are less likely to suffer from the problem of unflattering comparisons than possessions (we like to compare ‘things’)

The apples-and-oranges quality of experiences also makes it easier to enjoy them in the moment, unfettered by depressing comparisons. Researchers at Cornell gave students a Pilot G2 Super Fine pen as a prize and asked them to try it out. When it was surrounded by inferior prizes, including an unsharpened pencil and a bag of rubber bands, the students gave the pen rave reviews. Other students saw the same pen alongside a USB drive and a leatherbound notebook. The presence of more desirable goods significantly diminished the pen’s appeal. This simple study illustrates one of the major barriers to increasing human well-being. We are happy with things, until we find out there are better things available.

Luckily, this tendency may be limited to things. Even the simplest experiences, like eating a bag of crisps, are relatively immune to the detrimental effects of attractive alternatives. Offered the chance to eat a bag of crisps, students enjoyed the crisps’ crunchy goodness regardless of whether the surrounding alternatives included Cadbury’s chocolate or clam juice.

Except from: Happy Money: The New Science of Smarter Spending by Elizabeth Dunn and Michael Norton

💎 Short deadlines can be more effective at encouraging behaviour than long ones (Big Ben Problem)

The Big Ben Problem suggests that introducing a limited time window may encourage people to seize opportunities for treats. Imagine you’ve just gotten a gift certificate for a piece of delicious cake and a beverage at a high-end French pastry shop. Would you rather see the gift certificate stamped with an expiration date two months from today, or just three weeks from now? Faced with this choice, most people were happier with the two-month option, and 68 percent reported that they would use it before this expiration date. But when they received a gift certificate for a tasty pastry at a local shop, only 6 percent of people redeemed it when they were given a two month expiration date, compared to 31 percent of people who were given the shorter three-week window. People given two months to redeem the certificate kept thinking they could do it later, creating another instance of the Big Ben Problem

Except from: Happy Money: The New Science of Smarter Spending by Elizabeth Dunn and Michael Norton

💎 One danger of the increasing move to digital payments is the reduction in the pain of payment (overspending)

This detachment also makes it harder to remember how much we’ve spent. When researchers asked thirty people to estimate their credit card expenses before opening their monthly bill, every single individual underestimated the size of their bill—by an average of almost 30 percent.

Except from: Happy Money: The New Science of Smarter Spending by Elizabeth Dunn and Michael Norton

💎 If you’re transparent about the efforts that you’ve undertaken to create your product people will appreciate it more (The Labour Illusion)

While Kayak.co.uk searches the Web for your flight from London to Lanzarote, the site gives you a real-time update of the work it’s performing (now searching Iberia … now searching Aer Lingus … ). Research shows that waiting can increase satisfaction if customers get the impression that work is being done on their behalf during the delay. This “labor illusion” is so powerful that it leads customers to prefer services that make them wait to services that provide the same quality immediately.

Except from: Happy Money: The New Science of Smarter Spending by Elizabeth Dunn and Michael Norton

💎 Higher happiness only correlates with increased spend in one category (leisure)

One ongoing U.S. study has tracked how much money adults over age fifty spend on just about everything, from refrigerators and rent to alcohol and art. When researchers link these spending choices to happiness, only one category of spending matters. And it’s not refrigerators, or even alcohol. It’s what the researchers label “leisure”: 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. Not surprisingly the amount of money these older adults reported spending on leisure was dwarfed by the amount they spent on housing. But housing again turned out to have zero bearing on their life satisfaction.

Except from: Happy Money: The New Science of Smarter Spending by Elizabeth Dunn and Michael Norton