Total Pageviews

Monday, September 10, 2012

Spending Your Money to Make Someone Else Happy


Carl Richards is a certified financial planner in Park City, Utah, and is the director of investor education at BAM Advisor Services. His book, “The Behavior Gap,” was published this year. His sketches are archived on the Bucks blog.

In the early 1990s, I went to Philadelphia on a Mormon mission and lived in a tough section of the city. One day I received a letter from a friend. In it was $100 and instructions to spend it doing something nice for someone else. No spending the money on myself.

It was the holiday season, and I figured it would be fun to provide a great dinner for a family we had recently met who was clearly going to go without. We bought a turkey, stuffing, all the fixings, a p ie and small gifts. I still remember leaving the box of food on the doorstep, knocking a few times and running.

We watched from a hiding place as someone came to the door, looked at the food, looked around, gathered it all up and went inside. I have no idea what the reaction was after that. We never saw that family again, but I do know that the experience ranks among the best I had during that time in my life.

I find it interesting that spending that money on someone else made me far happier than it would have if I had spent it on myself. Part of that feeling might come from the fact that the money was a gift and came with specific instructions on how to spend it.

But there's another part to consider. In a fascinating paradox, the more we try to find happiness and the more we devote our resources, time, talents, energy and money to making ourselves happy, the less it seems to work. Something weird happens when we use our money t o make someone else happy though: we get happier. This seems to be true of charitable giving in general, as well as for gifts to family and friends.

Turns out that there is research to support this idea. In a paper by Elizabeth Dunn, Daniel Gilbert and Timothy Wilson that was originally published in the Journal of Consumer Psychology, they shared the results of a 2008 experiment:

Researchers approached individuals on the University of British Columbia (UBC) campus, handed them a $5 or $20 bill, and then randomly assigned them to spend the money on themselves or on others by the end of the day.  When participants were contacted that evening, individuals who had been assigned to spend their windfall on others were happier than those who had been assigned to spend the money on themselves.

So if happiness is the goal, we get a two-for-one deal when we spend our money on other people. We're happier, and the people we spend it on are hap pier too. And then there's the story Gretchen Rubin shared in The Huffington Post as part of her encouragement to pursue nonrandom acts of kindness:

… a friend told me a wonderful story about a nonrandom act of kindness she'd performed. On April 15 a few years ago, she was standing in a post office crowded with people who needed to mail their tax returns. There was a huge line in front of the one machine that dispensed stamps.

When my friend's turn finally came, instead of buying the minimum number of stamps, she bought $20 worth. Then she went along the line of people behind her, handing each person as many stamps as needed, until she ran out.

The people who got the free stamps were ecstatic â€" and even the people who didn't get the free stamps were ecstatic, because the long, slow line got so much shorter so quickly. Everyone was surprised, excited and laughing.

Imagine if someone walked up to you today and handed you $10 0. How would you use that money to make someone else happy? For close to 20 years my experience has stuck with me. I have a strong suspicion that if you try it, it will stick with you too.