Happiness & Money: Studies, Examples, and Tips

The “end of materialism” hypothesis predicts that the money–happiness correlation should get smaller as a society gets richer. An alternative hypothesis could be that as a society gets richer, people’s desires for material goods could also grow (Oishi, 2022). Although these researchers have interesting theories about why money generates more happiness in different countries, they’re not considering how people spend money (and it turns out that this is important!)

What About Us? The Relationship Between OUR Money and OUR Happiness
Other research shows that how we spend our money has a big impact on our happiness (Dunn & Norton, 2013). 

Specifically, these “money & happiness” researchers recommend that we should:

1. Buy more experiences (and fewer material goods)
2. Use money to benefit others rather than ourselves
3. Buy many small pleasures rather than fewer large ones
4. Not buy extended warranties
5. Delay consumption, in general 
6. Reflect on how peripheral features of our purchases may affect our day-to-day lives
7. Avoid comparison shopping
8. And pay close attention to the happiness of others (Dunn et el., 2011).

Keep in mind that this research only looks at how money leads to happiness on average. In other words, this may be true for you, or it may not be true for you. 

In the next section, we’ll talk about how to figure out the best ways for you to spend your money, depending on your developmental stage.

Money > Happiness When It Matches Our Beliefs, Meets Our Needs, or Improves Our Emotions
The existing research fails to addresses whether our buying habits match our beliefs, meet our needs, and improve our emotions. But these are ways by which money increases happiness. So if money doesn’t do these things for us, it’s not likely to make us happy. 

So how do we make our buying habits match our beliefs, meet our needs, and improve our emotions?

• If we spend in ways that don’t reflect our worldview, it’s not likely to make us happy. 
• If we spend in ways that do reflect our worldview, it is likely to make us happy. 

Before continuing on to discuss how money can increase happiness at each stage, let us quickly review the stages.

The 8 Life Stages

• I am my body
• I am my personality
• I am my actions 
• I am my outcomes
• I am my understandings
• I am my patterns 
• I am my awareness
• I am

You’ll soon discover that all of the suggestions made by researchers on how to spend money focus only on one or two developmental stages. In fact, for people at other stages, the advice to do what is best for the average person is downright destructive!

In the sections below, we’ll talk about what to buy at each life stage. I’ll refer to the stages by colors of the rainbow to help you keep track of how we move through these stages, from red to violet.

• Perspective: I am my body.
• Beliefs: If I can just be bigger, stronger, or more clever than other people, I’ll be happy/safe. Everyone is out for themselves.
• Needs: Physical safety, survival, taking care of my body.
• Thoughts: I could die. I am fragile or in need of protection. I must defend and protect my physical body. When I feel bigger, stronger, or more clever, I think I’m better than others. When I feel smaller, weaker, or less clever, I think I’m not good enough.
• Emotions: Positive emotions emerge from feeling safe; negative emotions emerge when feeling unsafe. 

How to Use Money to Boost Happiness at the Red Stage
At this stage, spending money on material, physical things is likely to have the greatest impact on our happiness. Often, people at this stage have few financial means, and buying things that make them feel safe, protected, secure, or protected likely has the greatest benefit for them.

• Perspective: I am my personality.
• Beliefs: If I can just get the approval of “my” people, I’ll be happy. The right type of person is the type of person that I am. 
• Needs: To feel like my personality is good. This is usually achieved by placing oneself around like-peers, “yes-men”, or others who provide validation. 
• Thoughts: My value depends on what others in my group think of me. When accepted, I think I’m better than others. When rejected, I think I’m not good enough. 
• Emotions: Positive emotions emerge from positive social experiences like social approval, inclusion, and acceptance by the group; negative emotions emerge when given negative feedback or constructive criticism and when rejected by the group. 

How to Use Money to Boost Happiness at the Orange Stage
At this stage, spending money on our small group likely gives us the most happiness. We might buy gifts for our family members, donate to our church, or spend money taking a trip with our best friends. At this stage, spending money on those we are close to is likely to have the biggest impact on our happiness.

• Perspective: I am my actions.
• Beliefs: If I can just take the right actions, I’ll be happy. The right type of actions are the actions I would choose. 
• Needs: To feel like my actions are right and good.
• Thoughts: My value depends on the actions I take. When I take actions that are valued by the larger group, I think I’m better than others. When I take actions that are NOT valued by the larger group, I think I’m not good enough.
• Emotions: Positive emotions emerge from positive actions; negative emotions emerge from negative actions. What is defined as a positive action or negative action varies from person to person.

How to Use Money to Boost Happiness at the Yellow Stage
At this stage, spending money on action-related items or experiences is likely to give us the most joy. We might buy a musical instrument to play. We might buy a tennis racquet so we can play tennis. Or we might buy cake-making pans so that we can bake. Purchases that help us engage in the actions we value are likely to have the biggest impact on our happiness at this stage.

• Perspective: I am my outcomes.
• Beliefs: If I only achieve X, I’ll be happy. The only valuable achievements are the ones I think are valuable.
• Needs: To feel like my outcomes are good.
• Thoughts: My value depends on what I achieve. When I achieve my goals, I think I’m better than others. When I fail to achieve my goals, I think I’m not good enough.
• Emotions: Positive emotions emerge from achievement and positive outcomes; negative emotions emerge from failure. 

How to Use Money to Boost Happiness at the Green Stage
At this stage, spending money on experience or outcome-related items is likely to give us the most joy. Overall, society is thought to be in this stage (Wilber, 2000), which is probably why most researchers suggest this is how we should spend our money (e.g., Zhang et al., 2013). If we are at this stage, we might buy a trip to a tropical island. We might buy tickets to a concert. Or, we might take a series of classes to help us achieve our career goals. These experiential and/or outcome-focused purchases are likely to have the biggest impact on our happiness at this stage.

• Perspective: I am my patterns.
• Beliefs: If I can undo my negative patterns (or the negative patterns of society), I’ll be happy. The right way to resolve internal and external patterns is the way that I choose to resolve them. 
• Needs: To understand the roots of emotional pain, move past trauma and cruelty, and stop the patterns of behavior that lead to human suffering.
• Thoughts: My happiness arises from patterns (both internal and external)—patterns that were created through conditioning from peers, family, community, and society. Internal patterns may include limiting beliefs or bad habits; external patterns may include oppression or racism. When I can see the patterns, I think I’m better than others. When I feel trapped in a pattern, I think I’m not good enough.
• Emotions: Positive emotions emerge from identifying a pattern and stopping it from playing out; negative emotions emerge when we realize that we are still stuck in a specific pattern (personal or societal) and don’t know how to get out.

How to Use Money to Boost Happiness at the Blue Stage
At this stage, spending money on things that help us change personal or societal patterns is likely to give us the most joy. We might contribute to organizations that are making a difference in some way that’s meaningful to us. We might also buy self-help books or take classes to get to the route of what we are the way we are. At this stage, making purchases that help us rewrite internal or societal scripts is likely to have the biggest impact on our happiness. ​

• Perspective: I am my awareness.
• Beliefs: If I can just transcend my ego (which includes all of the self-identifications of the earlier levels), I’ll be happy. The right way to transcend the ego is the way that I choose. 
• Needs: To find the self, to move beyond suffering, to find true well-being.
• Thoughts: I begin to observe all the thoughts that I’ve had in all the earlier stages including the ones that lead me to think, “I’m better than others” and “I’m not good enough.” When I have greater awareness, I think I’m better than others. When I have less awareness, I think I’m not good enough.
• Emotions: I observe how positive emotions emerge in the same ways they did at any of the prior stages; I observe how negative emotions emerge in the same ways they did at any of the prior stages.

How to Use Money to Boost Happiness at the Indigo Stage
​At this stage, we realize that wanting anything (i.e., attachment) just causes suffering. We now can directly observe that while spending money can provide temporary happiness, it always ends in suffering (that happiness fades or we lose the thing we bought). At this stage, we might stop spending money on all wants (other than basic food and shelter), give our possessions away, and/or donate our belongings to non-profits. At this time, money does not bring us happiness, and that forces us to look inward and grow.

• Cook-Greuter, S. (2014). Ego development: A full-spectrum theory of vertical growth and meaning making. mimeo, Wayland.
  
• Dunn, E. W., Gilbert, D. T., & Wilson, T. D. (2011). If money doesn’t make you happy, then you probably aren’t spending it right. Journal of consumer psychology, 21(2), 115-125.
  
• Dunn, E., & Norton, M. (2013). Happy money: The science of happier spending. Simon and Schuster.
  
• Oishi, S., Cha, Y., Komiya, A., & Ono, H. (2022). Money and happiness: the income–happiness correlation is higher when income inequality is higher. PNAS nexus, 1(5), pgac224.
  
• Wilber, K. (2000). Integral psychology: Consciousness, spirit, psychology, therapy. Shambhala Publications.
  
• ​Wilber, K. (2007). Integral spirituality: A startling new role for religion in the modern and postmodern world. Shambhala Publications.
  
• Zhang, J. W., Howell, R. T., & Caprariello, P. A. (2013). Buying life experiences for the “right” reasons: A validation of the Motivations for Experiential Buying Scale. Journal of Happiness Studies, 14, 817-842.