In Part I of this series, we dove into research on the relationship between money and happiness and found money can magnify satisfaction and well-being, but it cannot fix underlying dissatisfaction. In Part II of the series, we looked at two of the major drivers of satisfaction: relationships and purpose. We have concluded that money itself is not the source of happiness, satisfaction, or well-being. The things that bring happiness cannot be bought with money. However, there are indirect ways to use money better to support the areas of life that can increase contentment and satisfaction. That is the focus of this final part.
So, how can we use money in ways that truly enhance happiness? In this final part of the series, we’ll explore two powerful strategies: spending more meaningfully and embracing the impact of giving. First, we’ll challenge common assumptions about spending by examining why material purchases often fail to deliver lasting satisfaction and how prioritizing experiences can create deeper fulfillment. Then, we’ll turn to the science of generosity, uncovering how giving — whether to loved ones, community, or charitable causes — can strengthen relationships and increase well-being.
How to spend better
This isn’t about getting the best deals, maximizing credit card points, or finding the cheapest options. The real question is: Can you spend your money in a way that increases happiness? Research says yes, but not in the ways we often expect.
To start, let’s discuss where spending does not generally increase happiness — buying stuff. To be a bit more precise, I am talking about tangible and material goods. This can range anywhere from small items such as a new pair of shoes to large life purchases such as a home or a car. Increasing ownership of consumer goods or buying higher status physical possessions does not typically move the needle on happiness. We are hardwired to quickly adapt to these purchases and revert to a desire for something new or better.
This tendency to adapt isn’t inherently bad. It’s a fundamental part of human psychology described as the Hedonic Treadmill that helps us survive and move forward. It works both ways. Just as we quickly adjust to material upgrades and start craving something newer or better, we also adapt to major life changes, both positive and negative. This is why both lottery winners and individuals who experience life-altering challenges, such as losing a limb, often regain their previous levels of well-being over time. Evolutionarily, this ability to reset allows us to navigate both fortune and adversity without becoming complacent or paralyzed by hardship. But when it comes to spending, it means that chasing happiness through material accumulation is a losing game. We adapt too quickly for it to have lasting impact. Instead, to truly enhance well-being, we need to focus on spending in ways that create lasting fulfillment rather than temporary pleasure.
Focus on experiences
While buying stuff has a quickly diminishing rate of return, there are alternative ways to spend that do bring lasting pleasure. One way is investing in experiences. It may seem counterintuitive when compared to material goods that should have a durable quality and lasting usefulness. The reality is that experiences are the most durable of all.
Think about your last great vacation. It wasn’t just the trip itself that made it special, it was the whole process: the anticipation while planning, the excitement of being there, and the joy of reliving those moments when sharing stories with family and friends later. Experiences don’t just bring happiness in the moment; they become part of your life’s story.
Research shows that when it comes to experiences, smaller and more frequent can actually be better than one big, extravagant event. Dreaming of a “trip of a lifetime” for a big milestone like a honeymoon or retirement? You might get more joy by splitting it into several smaller trips instead. That way, you get multiple opportunities to build memories, from the anticipation beforehand to the nostalgia afterward.
This idea applies to everyday life, too. Ever notice how a small indulgence, like your favorite coffee or a weekly movie night, can start to feel routine? If you find yourself not appreciating those little joys as much, try shaking things up. Research suggests that making something an occasional treat — not an everyday habit — can bring back the excitement and boost your enjoyment.
And perhaps the best way to make experiences even more meaningful? Share them with others. As we talked about in Part II, relationships are one of the biggest drivers of well-being. When we invest in experiences with people we care about, we’re not just making memories, we’re strengthening our connections, which pays off in happiness again and again.
I had an especially proud dad moment this summer on our own family vacation. Every trip, whether it’s to the zoo or somewhere far away, my kids beg for a stuffed animal as a souvenir. For a day or two, the new “stuffie” is their constant companion — at meals, in the car, at bedtime. But eventually, it joins the others in the ever-growing basket of forgotten plushies. This summer, though, my oldest daughter broke the cycle. During a visit to the Fort Worth Stockyards, she picked out a colorful cowgirl hat instead. Not only did it protect her from the hot Texas sun, but it’s also become a go-to accessory back home — perfect for silly hat day at school or just playing dress-up. And every time she puts it on, we get to relive that trip together.
What experiences have stuck with you the most? What small changes could make your spending bring more happiness?
Be intentional with big purchases
It’s easy to focus on small daily expenses — like the classic latte example — but when it comes to the intersection of money and happiness, the big purchases matter most. The jobs we take, the homes we buy, and the cars we drive have a much bigger impact on our financial picture than an occasional splurge on coffee ever could.
Take “Mark”, for example. He took out student loans to earn a degree that led to a high-paying job in the city. With his new salary, he bought a large home in the suburbs to give his family more space, funding it with a mortgage. Then came the upgraded car to handle the long commute, financed with a loan. For a while, everything seemed to be falling into place. Then reality set in. The job that once seemed like a dream wasn’t making him happy. But now, he’s stuck. The loans that got him the job also require him to keep it. The house and car that were supposed to improve his life now tether him to long work hours just to keep up with the payments.
This is the hedonic treadmill in action. We adapt quickly to our new possessions, but the costs linger. We chase higher salaries to afford bigger and better things, only to realize that the job demands more of our time, pulling us away from the people and activities that bring us happiness.
So how do we break the cycle? It starts with being intentional before making big financial decisions. Before you start searching for a new home or car, ask yourself: What am I really hoping this brings to my life? If you’re looking at a bigger house, is it because you truly need the space, or because it feels like the next step? Will the upgrade give you more time with family, or will the longer commute and higher costs pull you away? Picture the trade-offs: Will missing more weeknight dinners and soccer games be worth the twice-a-year convenience of giving your in-laws their own guest suite instead of asking the kids to sleep on the couch?
There’s no universal right or wrong answer. It’s about knowing yourself. A colleague recently shared the option that cars should always be a purely utilitarian purchase. Focus on value for dollars spent, keep the car as long as possible, and repair over replacement. That is the best answer as a consumer economist. But what about people who find real joy in cars? My brother, for example, owns a 1960s Corvette Stingray. He’s spent countless hours and dollars restoring it. The return on happiness has been anything but diminishing. Those hours in the garage have given him a deep sense of purpose. Now, he takes Sunday drives with his daughter, shares road trips with his wife, and has built friendships through Corvette owner meetups. For him, the car isn’t just a thing, it’s an experience, a passion, and a connection to others.
The key is to spend in alignment with what truly matters to you, not just what seems like the next logical step.
What purchases in your life have brought you the most fulfillment? And what trade-offs are you willing to make to ensure your spending supports, not detracts from, your happiness?
Savor what you Spend
No matter how intentional we are with our money, some spending is unavoidable. We all need a place to live, a way to get around, and the essentials of daily life. But just because certain purchases are necessary doesn’t mean they have to fade into the background. Instead, we can change the way we interact with the things we own, extending the happiness they bring.
Gratitude isn’t just for Thanksgiving. It’s a powerful tool for slowing down the hedonic treadmill. We adapt quickly to our possessions, but taking a moment to truly appreciate them can stretch their value far beyond the initial excitement of ownership.
For example, let’s say you spent more on a home because it’s within walking distance of your office. It’s easy to take that perk for granted after a while, mindlessly popping in AirPods and checking emails during your commute. But what if, every so often, you walked without distractions? Instead of rushing through the routine, take in the details: the changing colors of the seasons, the architectural details of the homes, the small interactions with neighbors that wouldn’t happen if you were stuck in traffic. Suddenly, the very thing you once justified as an extra expense — location — becomes a source of daily joy and connection.
This mindset applies to other purchases, too. Maybe you finally upgraded to that high-end espresso machine you’d been eyeing. Instead of letting it become just another appliance on the counter, turn your weekend mornings into a ritual: slowly steaming the milk, pulling the perfect shot, and sharing a café-worthy cup with your partner before the day begins. What started as a splurge becomes a small but meaningful moment of connection, something to savor rather than rush through.
The goal isn’t just to spend wisely, it’s to truly experience the things you’ve already chosen to invest in.
What are the purchases in your life that might still have untapped joy left in them?
Give It Away
The final piece of advice for using money in a way that truly enhances happiness? Give it away.
Psychologist Shalom Schwartz conducted extensive research across cultures, religions, and societies to identify 10 core human values. His findings are illustrated in the wheel below, which not only shows the values themselves but also how they relate to one another. Values in adjacent sections complement each other, while those on opposite sides are in conflict. It’s hard to hold opposing values at the same time. Looking at the values wheel, you’ll notice that wealth and success are directly opposite values like relationships and altruism. This suggests that if we focus all our energy on chasing money and material success, we might be doing so at the cost of the very things that bring lasting happiness.
The takeaway? Hoarding money may actually work against your overall life satisfaction. Once you have enough to meet your own needs, using your resources to help others — whether friends, family, or your community — can enhance your relationships, build social connections, and even create a stronger support system for yourself when you need it most.
There are many ways to give that go beyond just writing a check. Here are a few ideas to maximize the impact of your generosity:
Give your time, not just your money. Volunteering can be one of the most fulfilling ways to give, especially when you see the direct impact of your efforts. Whether it’s mentoring a student, helping at a food pantry, or serving on a nonprofit board, your time can be just as valuable as financial contributions.
Focus on local and smaller organizations. Research suggests that charitable giving is often more fulfilling when directed toward causes we feel personally connected to. Supporting smaller, community-based organizations allows you to witness the real-world impact of your donation, which can deepen your sense of purpose.
Consider giving privately. While public recognition for generosity can be gratifying, studies suggest that people who give anonymously or without fanfare often report higher levels of satisfaction. This may be because private giving feels more authentic, rather than something done for social status or external validation.
Make giving a regular practice. Instead of viewing charitable contributions as something you do only when there's a fundraiser or end-of-year appeal, consider building giving into your budget or lifestyle. Setting up a recurring donation, establishing a donor-advised fund, or making a habit of small acts of kindness — like covering a friend’s meal or contributing to a community initiative — can make generosity a consistent part of your life.
At its core, giving isn’t just about the recipient, it’s about the giver too. When done with intention, generosity strengthens relationships, reinforces our sense of community, and adds a deeper sense of meaning to our financial decisions. In the end, the money we hold onto can only take us so far. The money we give is what truly lasts.
If you want to learn more about setting up your own charitable gifting plan, I highly recommend Charitable Giving - A five part series on more effective philanthropy by my good friend and colleague, Zach Teutch.
Conclusion: The real role of money in happiness
Throughout this series, we’ve explored the complex relationship between money and happiness. We’ve learned:
Money can support happiness, but it’s not the source of it. It’s a tool that, when used wisely, enhances well-being.
Relationships and purpose matter more than wealth. Investing in meaningful experiences and aligning work with values leads to greater satisfaction.
Smart spending and intentional choices help avoid financial traps. Thoughtful decisions about purchases and career paths can prevent stress and regret.
Generosity fosters deeper connections and long-term fulfillment. Giving — whether through time, money, or resources — enhances both personal and collective well-being.
If you're looking for guidance in aligning your financial choices with what truly matters to you, let’s talk. Contact us here.
Learn More
As much of this final part on Money and Happiness is combing my experience in guiding clients with the science of money and happiness, I thought I would provide sources in a format of how to learn more.
To start, much of this content was adapted from Money and Happiness (ACE 243) I co-developed with Donovan Sanchez for the Financial Planning program at University of Illinois. Donovan played a huge role in shaping the course, and I can’t emphasize enough how much I’ve learned from him — both about teaching and about how to weave together ancient wisdom from philosophy and religion with modern scientific insights.
A large portion of the course material comes from The Handbook of Well-Being, an open-access publication that anyone can read for free! It’s a treasure trove of knowledge from multiple contributors, and I’m so grateful they’ve made it available to the public at no cost. You can access it here:
Diener, E. Ed.; Oishi, S. Ed.; Tay, L. Ed.; and Zhu, Ze, "Handbook of Well-Being" (2018). Psychology Faculty Books and Monographs. 9.
https://digitalcommons.unomaha.edu/psychfacbooks/9
Finally, if you’re looking for more practical advice on applying happiness research to your own life, I highly recommend checking out the works of Harvard happiness researcher, Arthur Brooks. His latest book, Build the Life You Want, is an incredible resource that walks you through how to implement these happiness concepts in real life. It’s a great way to put theory into action!