Contrary to our long-time belief that money can’t buy happiness, a new study shows it can. They key is where and how to spend your money. Bottom line, money can make us happy if we spend it more on doing things and less on material things.

The study was recently presented in the the Society for Personality and Social Psychology. It comes from our basic need to feel alive and connect with other human beings. Given a choice between a new iPhone versus a trip to a tropical island, the latter will give your more satisfaction that will last over a long period of time.

Here are the highlights from LiveScience.com

“These findings support an extension of basic need theory, where purchases that increase psychological need satisfaction will produce the greatest well-being,” said Ryan Howell, assistant professor of psychology at San Francisco State University…

…Participants in the new study were asked to write reflections and answer questions about their recent purchases. Participants indicated that experiential purchases represented money better spent and greater happiness for both themselves and others. The results also indicate that experiences produce more happiness regardless of the amount spent or the income of the consumer.

Experiences also lead to longer-term satisfaction.

“Purchased experiences provide memory capital,” Howell said. “We don’t tend to get bored of happy memories like we do with a material object.”

Howell notes that several studies going back at least 35 years show that money does not make people happy. Yet the belief persists that it will.

“Maybe this belief has held because money is making some people happy some of the time, at least when they spend it on life experiences,” Howell said.

photo by {artemis}