5 Ways to Improve Your Relationship with Money

Jul 22nd, 2011

5 Ways to Improve Your Relationship with Money

(Shine.yahoo.com)

1. Buy experiences, not things.

Psychological research shows that, for a given amount of money, people get more happiness from buying experiences than buying material things. Your day at the beach or night at the theater will come to an end, but if you have a really good time, its benefits will last. Good times boost our moods for a while afterward, provide a basis for enjoyable conversations, and generate memories that have no expiration date. In contrast, the initial kick of buying an expensive possession usually doesn’t last. People become accustomed to high-end homes, cars, shoes, and jewelry, and it doesn’t take long before the thrill is gone—while the resulting debt might go on forever.

2. Make a lot of small purchases, not a few big ones.

Research also shows that a given amount of money produces more enjoyment when it is spent on a large number of small purchases rather than a small number of big buys. We get a surge of pleasure when we treat ourselves to something nice, and it doesn’t make much difference how big the treat is, but the frequency of these pleasures does affect our quality of life. If you do the psychological math, this means that five $10 purchases produce more enjoyment than one $50 buy, so you get more bang for each buck by spending money at different times on different things, rather than going for one big-ticket item.

3. Mix it up, don’t get in a rut.

Enjoyable experiences usually involve novelty and variety. When pleasures are repeated over and over, we become accustomed to them and the experience becomes routine. (This is one reason why big purchases are inefficient.) If you get a latte every morning or a restaurant meal every day for lunch, you’ll run through thousands of dollars a year without ever feeling you’re doing something special for yourself. Lattes and restaurant meals bring much more enjoyment when they are treats, not habits.

4. Use your head, not just your money.

Over spenders rely on expensive purchases as their sources of pleasure, while happily thrifty people often get enjoyment from activities that are either free or very inexpensive. If “having fun” is synonymous with “spending money” in your mind, it will be hard to maintain financial balance, while being creative and thoughtful in your search for good times can substitute for a considerable amount of money. The good news is that psychological studies have identified a number of inexpensive activities that bring real happiness to people: exercise, gardening, spending time in nature, arts and crafts, music, and religious activities.

5. Spend on others, not just yourself.

Research has found that performing acts of kindness for other people is a particularly effective way of increasing happiness. In one experiment, people were given a small sum of money and told to spend it either on another person or on themselves. A week later, scores on happiness questionnaires showed that it was indeed more blessed to give than to receive. Translating our values into action through generous deeds can build self-esteem and enhance our feeling of connection with other people.