How to use money to buy happiness, according to Harvard professor Mike Norton

You’ve probably read about research showing that money doesn’t make us happy (above a certain baseline). In fact, household income in the US has gone up for the last 30 years while life satisfaction has decreased.

But Mike Norton, a professor at Harvard Business School, has done a lot of research to show that in fact, money can make you happier if you spend it the right way. We were so inspired by reading about it that we went to meet him. We’re happy to report that in addition to being really smart he is also just awesome.

We interviewed Mike about what makes him happier and how we can spend money in ways that makes us more satisfied when his new book, Happy Money: The Science of Smarter Spending, which he co-authored with Elizabeth Dunn, came out. It’s decidedly unboring and has inspired us to think about and change some of the stupid ways we spend money.

So, Mike, what makes you happier? Ideas! Nothing is more fun than meeting new people and coming up with new ideas about how “the humans” (as we social scientists call them) work. And the very best ideas are those that have the potential to give people guidance on how to inject more happiness into their lives – a topic my co-author Liz Dunn and I have been studying for a decade now.

You’ve studied money and happiness for a long time now. What’s the biggest myth people believe about how money can make them happy? The biggest myth is also the most pervasive and hardest to shake: more is better. Research shows that after people hit a certain amount of income (some estimates say around $75,000 a year), the next few thousand bucks really doesn’t affect their day to day happiness all that much. What we suggest people should think is not “Do I have enough money to be happy?” but rather “Am I using the money I have now in the best way to wring the most happiness from every dollar?”

If I have $20 to spend, what would you suggest I do spend it on to feel happier? This one is easy. Buy an experience for someone you care about, and, geez, since that person is going, why not tag along with them? Not only does spending our money on others make us happier than spending on ourselves, but buying experiences makes us much happier than buying stuff. And spending time with loved ones is a huge happiness booster.

What’s the last thing you purchased that made you happier? The last thing I purchased that made me happier was actually something I didn’t purchase. I got all wrapped up in wanting to buy a new fancy flat screen TV, spent hours comparing models, and then remembered my own advice – quit buying stuff. In fact one of the best ways to use your money to get happy is simply to stop using it to buy stuff that doesn’t pay off in happiness. I can’t say I always catch myself before I click ‘Buy,” though.