How Money Can Buy Happiness

If you think money can’t buy happiness, you’re not spending it right…

In this TEDx Michael Norton explains his fascinating research on how spending affects our happiness. We’ve all heard it before “Money can’t buy happiness”, but this research reveals a different answer… and it doesn’t take as much as you might think.

Highlights from How To Buy Happiness

The ways we spend money that DON’T make us happier.

Lottery Winners Are Less Happy


When people win the lottery they think their lives will be amazing, but actually this sudden wealth ruins lives. When people win the lottery they 1. spend all the money and go into debt and 2. All of their friends and everyone they’ve ever met find them and bug them for money. This ruins their social relationships. More debt and worse frinedships than before they won.

Apart from making us anti social, money also has a tendency to make us more selfish. Michael Norton and his colleagues thought, “maybe we are spending our money on the wrong things” and developed a study to test this question:

What would happen if we made people spend more of their money on others?

The Study:

  • Make some people spend money on themselves
  • Make some people give money away
  • See who is happier

Details of the experiment

  • Assess the happiness of each particpent
  • Give them one of two envelopes
    • Envelope 1: By 5pm today, spend this money on yourself (personal)
    • Envelope 2: By 5pm today, spend this money on someone else (prosocial)
  • Afterward, contact the participants and ask them:
    • What did you spend your money on?
    • How do you feel now?

personal and prosocial spending - happiness experiment

What Participants Bought

money can buy happiness study

The Results

People who spent money on other people: got happier

People who spent money on themselves: nothing happened

Another finding: The amount of money doesn’t matter that much.

Expanding the study outside of Canada

Michael and his team took this same study and replicated it in Uganda to see how cultural differences would impact their results.

Cultural differences dictated the way people spent their money, but didn’t change the results. For example, in Uganda one of the participants gave their money to a family who needed help with medical bills, while in Canada a woman bought a gift for her mother.

differences in how participants spent their money


The Result: The specific way that you spend your money on other people isn’t nearly as important as the fact that you spend money on other people in order to make yourself happy.

Key Finding: You don’t have to do amazing things with your money to make yourself happy, you can still do trivial things and get these benefits.

Expanding the Results Globally: Gallup Poll Data (136 Countries)

What’s the correlation between these two:

  1. Did you donate money to charity recently?
  2. How happy are you with your life in general?

Gallup poll - happiness around the world

Guess what? These two are positively correlated. People who give money to charity are happier people than those who do not.


Looking At Teams

Michael and his colleagues expanded this study once again to see how personal and prosocial spending impacted teams.

They studied pharmaceutical sales teams, asking them to 1.

  1. Spend money on themselves OR
  2. Spend money on their teammates.

sales team

The teams that are prosocial performed better than the teams that spent the money on themselves.

Then… they studied dodge ball teams with the same parameters.

dodgeball team - spending money and happiness

The dodgeball teams that spend money on themselves saw no changes – their winning percentage stayed the same. The dodgeball teams that were prosocial became different teams, performed better, and went on to dominate their leagues.

The Takeaway From This Research: Think less about how you can spend money on yourself and more about what you can do to benefit other people.

How you can participate: opportunity to donate for happiness

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I am a minimalist, environmentalist, and conscious consumer with a background in environmental studies, conservation, and tech. I founded prch to help others be more sustainable and realize an alternative to consumerism.