The Psychology of Spending: How Money Makes Us Happy

Updated: October 12, 2022

Do you shop whenever you feel stressed or depressed? If so, then you’re among many individuals who believe in retail therapy.

However, research has found that buying stuff to improve one’s mood or disposition is a weak solution to a symptomatic problem. It’s like putting a band-aid to a stab wound instead of seeking medical help.

Think about it. If you’re stressed from work, then how does buying a new wardrobe help solve that? Or if you’re feeling sad about a breakup, I doubt that a new pair of shoes can help you move on.

It might be better to directly address the reason why you’re stressed too much at work, or do less expensive activities that can help you manage stress, like doing mindful meditation.

Furthermore, talking to and spending time with friends is almost always a better way to cope with heartbreak than reckless spending.

And if that feeling of depression has been lingering for weeks, then a visit to a doctor is the right solution.


Dr. Ryan T. Howell, Assistant Professor of Psychology at San Francisco State University, has spent years studying how a person’s economic condition and financial decisions influence their quality of life.

In short, Dr. Howell, through his Personality and Well-Being Lab at SFSU, is trying to find the connection between money and happiness; and see if it is possible to become happier by changing one’s spending habits.

Below are some of the interesting facts he discovered in his study.

Debt and happiness don’t go together

Dr. Howell claims that the worst thing you can do for your happiness is to go into debt. Retail therapy only provides momentary relief, but the financial stress when the credit card bill comes will only make matters worse for you.

If a person wants to maximize happiness, then one must learn to manage and eliminate debt.

Happy people spend money on three things…

After spending on necessities, happy people tend to save and invest 25% of what’s left, give as tithe or donate about 12% to charity, and then spend the rest on meaningful life experiences.

Furthermore, meaningful life experiences are not always about spending money on travel, dining, or adventure. It can also be about buying stuff that can facilitate that experience.

For example, spending quality time with your family is a meaningful activity. And thus, buying a home entertainment system, so the whole family could enjoy watching movies together, can be considered an experiential purchase.

Simple questions to ask yourself before buying something

How can you know if what you’re about to buy will make you happy? The solution is to ask yourself these questions:

  • Will this bring me closer to my friends or family?
  • Can it assist me in learning something new or improving a skill?
  • Does this help me express or enhance who I am as a person?
  • Will it make me happy to have it, even if others say they don’t like it?

If your answer is yes to most or all of these questions, then you’re probably okay with making that purchase.

Happiness should be internal

Finally, the study has discovered that happy people find joy from within and not from the hands of other people.

When Dr. Howell asked people in the study what was the last item they bought that they thought would make them happy but didn’t, and most of them shared buying something that they thought would impress other people.

For example, one thought that buying a particular pair of shoes would impress her friends and get her lots of compliments. But when it was not noticed when she wore it, she found herself quite disappointed and sad.

Final Thoughts

Can money buy happiness? My answer is YES — but only if you spend it on the right things and for the right reason.

What to do next: Click here to subscribe to our FREE newsletter.


  1. I like the questions to ask ourselves when buying stuff, it brings us back to what our priorities really are. It helps us be more responsible with our spending

  2. Great “food for thought.” Just about everyone has probably been guilty at times and this certainly something to guard against so your personal and perhaps business finances will NEVER be affected. Back in the US, I have observed drugs and alcohol destroy several family business ventures. The “vices” were purchased to help cover up a small crisis in the business. It was their way of doing retail therapy. The nearly successful family enterprise ultimately failed.

    I have also witnessed excessive “feel good” spending (boats, motor homes) destroy both personal and business finances because the new entrepreneur had a great start, a little coin in the bank and decided to spend as comfort for a short rough patch and “because we can afford it now.” Well, that “rough patch” lasted far longer than expected and there was no way to continue payments on the new comfort toys. The toys were sold off at a loss and the business I am remembering had a long and very difficult recovery.

    Moral, limited retail therapy may be OK but keep it under strict control.

Leave a Reply

Your email address will not be published. Required fields are marked *