How Money Buys Happiness

What type of spending makes you happiest? Cash or credit?

The New York Times reports on an interesting study comparing prepayment to repayment. Researchers gave 99 people the opportunity to buy a gift basket. Some study participants refrained from purchasing the basket until they could pay in full. Others got the basket right away and paid later.

gift basket 2Participants then rated how much happiness the purchase provided. So, who enjoyed the gift basket more?

“Although the gift baskets were identical, they provided more happiness to those who had paid in advance,” per the Times opinion column “Happier Spending.”

So how do you get more happiness for your buck?

Try this. Determine how much you want to spend on various items in a given month, e.g., $40/month for movie tickets, $100/month for restaurants, whatever. Using envelopes marked “movies,” “restaurants” or “embarrassing personal hobby,” put that much cash inside. Use only what it is in the envelope for the designated purpose for the month. By paying in cash — and paying up front — you have no chance of charging more than you can afford.

And your embarrassing personal hobby may become that much more fun.

By Megan Kuhn, Master Financial Education Volunteer

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