Money Only Buys Happiness if You Spend it Right

Matching bank records to personality tests

Can the way we spend our money make us happier?

A research paper titled "Money Buys Happiness When Spending Fits Our Personality" tells us, “Yes, so long as what you buy aligns with your personality.”

In the academic world, there is conflicting evidence about whether money can buy happiness.

In the Buying Happiness series, I am writing about that research and what it means for you.

The researchers in this paper focus less on income and more on spending (although the two are obviously related as more income allows more spending.)

They suggest that maybe it's not how much we spend but whether our spending matches our personality that determines our happiness.

Let’s take a look at the study.

Matching bank records to personality tests

The study uses data from a pretty extensive source—over 76,000 bank transactions from 625 customers of a UK bank.

By examining what these people bought and matching those purchases with their personality traits, the researchers aimed to uncover patterns between spending, personality, and happiness.

They looked into whether people who spent money on things that aligned with their personality traits—like an extrovert spending on social events or an introvert buying books—reported feeling happier.

They conducted two studies:

In study 1, they analyzed how well the purchases matched the customer's personality traits using a well-known framework in psychology called the Big Five, which includes traits like openness, conscientiousness, extraversion, agreeableness, and neuroticism.

In study 2, they looked at whether these personality-congruent purchases correlated with higher life satisfaction. This approach is unique because it suggests a more personalized way of thinking about how we spend our money—not just on what we need or want, but on what reflects who we are.

Happiness requires aligning spending with who you are

In Study 1, the findings were quite revealing about how our personalities can influence our happiness based on our spending habits.

Basically, when people bought things that aligned with their personality traits, they tended to feel happier. This result showed up strongly across various personality types and spending categories.

Let's break it down by each of the major 5 personality types.

• For extraverts, who are outgoing and thrive on social interaction, spending on social activities like going out to pubs or events made them happier. On the flip side, spending on more solitary or quiet activities like buying books didn't boost their happiness as much.

• Introverts, who prefer quieter, more solitary environments, showed the opposite pattern. They found more happiness in purchasing books, which align with their love for alone time, whereas spending on social events didn't bring them as much joy.

• For those high in openness—a trait associated with a love for art, adventure, and intellectual pursuits—buying creative or educational goods like books on arts and crafts provided a happiness boost. In contrast, spending on more mundane or practical items like insurance didn't make them as happy.

• Conscientious people, who are organized and thoughtful, gained more satisfaction from purchases that helped them feel structured, like buying organizational tools or health and fitness memberships. However, spending on impulsive or frivolous items was less fulfilling for them.

• Agreeable people, known for being friendly and compassionate, might find joy in spending on charitable donations or gifts for others but less so on competitive-themed purchases like tickets to a sports game. UFC tickets would not make for a great birthday gift for these people.

The cool thing about these results is that they suggest a more tailored approach to spending—that is, aligning spending with personality— might be the key to living happier

In Study 2, the researchers set up a scenario where people were given money to spend in a way that either matched or didn't match their personality.

For example, extraverts were given vouchers to spend at a lively bar, a setting that suits their outgoing nature, while introverts received vouchers to buy books, catering to their preference for quiet and solitude.

The results confirmed what Study 1 told us: When people spent money in ways that aligned with their personality—extraverts socializing at the bar and introverts cozying up with a new book—they not only enjoyed the experience more, but their immediate happiness levels significantly increased.

This boost in happiness was bigger than any effects related to how much overall money they had or how much they generally spent.

Pause for a moment and consider this crucial point: The way you spend your money impacts your happiness more than simply having or spending more money.

This is why this article is titled “Money Only Buys Happiness if You Spend it Right.”

So, if you want to live happier:

1. Start by really knowing your personality traits.

2. Start spending money on things that align with those traits

3. As your income increases, repeat steps 1-2.

I find this a refreshing way to think about money, not just as a means to an end but as a tool for happiness. It also aligns with two things that I strongly believe:

1. Money doesn’t guarantee happiness.

2. If you know what you want in life, money can absolutely buy happiness.

So next time you're about to make a purchase, maybe take a moment to consider whether it really reflects your personality and if it's likely to bring you joy.

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This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.