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The Physician Philosopher Podcast

TPP 87: Can Money Buy Doctors Happiness?

Does money buy happiness? This is such a fun topic to talk about because there are studies that say yes, but there are ways to do it that make financial sense! I will also include some ways that Lisha and I “splurge” on spending that traditionally isn’t viewed nicely in the personal finance community. Did you hear I recently purchased a third car??  All the science says this is the dumbest thing in the world to do…but is it? Let’s talk about ways people can find happiness using money and what the studies say.

Larry Keller

The Science Behind Spending Money

Spending money is my favorite topic of all in personal finance. It is always fun to talk about. The numbers part is easy because it is all math. It is easy to measure and look at what exactly goes where, but this is really the least important part. The most important part of money is how to actually be happy with how you spend money.

Social science says that buying experiences over things is how to buy happiness with money. If you do this, you are spending money instead of wasting it. Lisha feels that this part is true because it gives you three sources of happiness. You get the anticipation of the experience before, the experience during, and then the memories after. Just because it is true doesn’t mean it is everything. For example, you shouldn’t purchase an experience over something you really really want, such as the car I just bought. It will be different for different people.

Buying an Experience

Science says to buy an experience, but what counts as an experience for one person won’t be the same for another person. I like cars. I have loved cars since I was a kid and worked on them with my dad. Buying my Porsche was buying an experience for me. I researched it and knew exactly what I wanted. I love driving it and sharing the experience with my family. I waited for this car until I paid off my student loans and didn’t have any car payments, and I finally got it. I had also put it off for a long time because it wasn’t technically a good financial decision, and as a self-proclaimed finance nerd I was worried about what others thought. 

Lisha, on the other hand, loves to travel and create an experience. In her family, her father has always been very frugal even though he didn’t need to be, except when it comes to family vacations. They went on a huge vacation to Europe and created a lot of memories that they still talk about. Money bought them that happiness. She spends her money on these types of experiences. 

When Can I Splurge?

You might be reading this and wondering when it is ok to start splurging on things like a $79,000 car or a trip to Jamaica. I waited and waited to purchase this car. When I started thinking about it, I decided I wanted to be financially independent outside of the business by fifty. I decided to buy it when I found that I can still reach my goal AND buy the car. 

Every person is in a different situation, but if you have a negative $500,000 in net worth, it would be inappropriate to make a large purchase like this. Knowing where you are financially and having a plan in place is step one. If you have an end goal to retire by a certain age and purchasing a new car will fit into that plan without hindering, it is ok to do it. 

Finding a Little Happiness Without the Wait

While larger splurges should be thought about and planned for, smaller things can help bring you a little happiness without the hit on your bank accounts. Dopamine is released and makes you happy when you buy stuff. This happens whether you buy something big or small. 

Giving to Others

Spending money on other people also makes you happy according to social science studies. Giving to charities, helping family members, helping your parents, and saving for a college education all counts towards giving to others. The receiving party and giving party both receive fulfillment and happiness in this situation. Just be sure that when you are giving you are still able to take care of your own needs.

Buy Small and Buy Often

Buying small and often is a very common solution for buying happiness. You can buy little things along the way that make you happy but that don’t hurt your finances. This could be a pair of new shoes, going out to dinner, getting your hair done, or anything else that makes you happy. Feeling rewarded with smaller things helps you wait for the bigger things. 

Delaying Purchases 

Delaying purchases will reduce consumer regret. If you have something you are looking at purchasing 6 months from now, you are excited and preparing for that purchase for all that time. It gives you something to look forward to on those hard days. Delaying it also gives you a chance to figure out if it is really the right thing for you. You think on it more and determine if it is really valuable to you or not. Delaying allows you to avoid impulse buys and prevents overspending. 

I am an impulsive person by nature and if you are like me, give yourself a rule. If it costs more than a certain amount, you can’t purchase it for 30 days. Make yourself wait and fully think it through. This also gives you time to make sure it fits into your end financial goals.

Splurging

You can know a lot about money, but you are still human and will make mistakes. I have made many financial mistakes, mostly because I am highly impulsive. There will also always be things you love so much that it is worth the splurge, even if it doesn’t make financial sense. 

Lisha is a traveler and loves experiences. She recently splurged on a ski trip to Denver and another trip to Jamaica. She also loves to eat! She loves to go out to a nice dinner with a nice wine and enjoy herself. 

I personally like cars and golf. While cars don’t technically make financial sense, they make sense to me. Golf is also something that I enjoy, and feel is worth the splurge. Golf is expensive. Golf clubs can be around $1000 and then there is the country club membership, but it is an experience with my friends and family. 

Being Intentional with Spending

Personal finance is personal. Make sure what you are spending your money on are things that will make you happy, not to keep up with the Jones’. If you are buying for somebody else, you will definitely have consumer regret. 

Know your financial goals and be intentional about spending your money. As physicians, spending money on things that make your life easier might make sense to you. Thinking you have to do it all is exhausting, but hiring somebody to clean your house, do your laundry, or do your landscaping can give you your time back and allow you to reconnect with your family after a busy week.

We all are different and find joy and pleasure in different things. If you are looking for more information on this topic there are two books I want to recommend. One is The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel, and the other is How to Think About Money by Jonathan Clements. Spending money to find happiness in life is part science, part art, and 100% individual to the person.

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