so today I want to talk about two of the arguably most important currencies in our lives money and happiness and the question that I want to focus on more specifically is whether we can use one of them to get more of the other so can money buy happiness okay so let's start by looking at me at the age of three you can see I've barely changed at all since now my Grandma had brought me this beautiful garden gome and I loved it so much that I just wouldn't stop hugging it even though you probably agree
that it's not exactly the greatest talking material so in this case the money my Grandma had invested really did buy the happiness it was expected to buy that day I was pretty much the happiest person in life now before we draw any overly Hasting conclusions from this story let's look at me again this time on Christmas Eve at the age of seven so my parents had scraped together all their savings to buy me this badass bike here and they had been excited for weeks to give it to me now as you can probably tell from
the somewhat fake and forced smile on my face it didn't quite turn out the way they had expected it was basically a Christmas tragedy and that involved a lot of crying on my end and a lot of General unhappiness on Christmas Eve now why because what I had asked my parents for was not a badass bike but actually this really really girly Bobby Caravan here now imagine how disappointed I was and when I found out that not only had I not got the Barbie Caravan but my younger sister had actually got it instead yes um
and you can probably tell that I still haven't fully recovered from that childhood trauma it'll probably take years so in this case unlike in the previous Story the money my parents had invested clearly failed to buy the happiness they had hoped for now what can we learn from these two stories well first of all I was a pretty weird kid um but obviously I wouldn't have been Ed myself so badly here if there wasn't to be a great educational lesson to be learned from this because what these two stories actually show is that the answer
to the question of whether or not money can buy happiness isn't really obvious and isn't really straightforward so the only conclusion we can really draw so far is that it depends now if you're like me you're probably not very satisfied with that conclusion at the very least it would be good to know what it depends on and this is exactly what I want to talk about today so want to discuss both ways in which money can and ways in which money cannot buy you greater happiness so when I'm done talking I really want you to
have a better idea of how you can make your money work for you work for your happiness rather than having it the other way around okay so let's start by looking at ways in which money cannot buy happiness so what you see here is the annual household income in the US on the horizontal axis increasing from left to right and you get the percentage of people experiencing positive effect which is basically a measure of happiness on the horizontal axis so let's look at what the relationship between these two variables looks like the first thing you
see is that people with very low income so people on the left hand side they experience substantially lower levels of positive effort effect of happiness and that makes sense because when you think about it um having very little money available simply makes many aspects of Life much harder however what you also see is that the curve flattens very quickly so above a threshold of around $75,000 um a year money doesn't really do much for our happiness anymore now you might be thinking well this scale only goes up to 180,000 clearly millionaires with all the money
in the world and absolutely nothing to worry about will be happier right well it turns out that this is not the case so even when you look at the very end of the income scale money doesn't seem to affect happiness anymore so this tells a very clear story right and that is that money in and by itself doesn't really do anything for happiness now don't despair um because there's more to the story because what researchers have suggested recently is that money can indeed buy happiness if we're spending it right so the question is not how
much money we have or how much money we make but what we do with the money that's available to us so what this research shows for example is that people are happier if they spend money on others rather than themselves or if they spend money on experiences rather than material goods and this is great because those are two very simple but very powerful ways in which you can actually make your money work for you and your happiness however this research is based on an assumption and that for me as a personality psychologist who basically studies
um how people differ from one another seems a bit overly simplistic and that's the assumption that what makes you happy makes me happy so the idea that the same types of spending increase happiness for everybody I'm just going to show you an example of why I think this is is a bit too simplistic so let's take this young lady here and assume that she has a choice to either spend her money on going to a rock concert on buying this fancy new handbag here now if you think back previous research would suggest that people are
generally happier if they spend money on experiences rather than material Goods but I'm pretty sure that most of you here would agree with me that in her case it's fairly questionable whether she would enjoy going to the Rock concert more than buying herself the new handbag now if we take a different person this can actually shift immediately so again I'm sure that you would probably all agree that in her case going to the Rock concert is probably a better idea in terms of increasing her um happiness than buying the handbag so once you assume that
people have their unique interests and preferences the question that we need to answer shifts from what is the right type of spending to what is the right type of spending for this particular individual and luckily and there's a wellestablished theory in Psychology that actually helps us to answer that question and that's the theory of psychological fit now what this Theory suggests is that people who experience fit in the lives are happier for example um there's research showing that people are happier if they have Partners who are similar to them psychologically if they work in an
environment that reflects their psychological needs or even if they just live in a residential um area that is in line with their psychological motivations now what I have suggested um in collaboration with my coauthors Joe Gladstone and David Stillwell is that we can take the concept of psychological fed and apply it to the context of consumption so the hypothesis that we're putting forward is really that money can indeed buy happiness if we spend it in line with our personality so if we spend it in a way that money matches our most fundamental needs and preferences
okay so because we obviously had to test this hypothesis what we did is we conducted a study with students at the University of Cambridge and what we did is we gave students a personality questionnaire and we invited the students who scored among the top 30% and those who scored among the bottom 30 present of extroversion to come to us in the to the lab and before so basically the extroverted group with was was a group of students like highly sociable highly outgoing when the introverted group was kind of made up of rather reserved um in
quiet students before we told them anything about the study we actually gave them a happiness questionnaire to measure their Baseline happiness so just how happy were students in general without participating in our study at all we then randomly assign students in both groups to receive either a 7 pound voucher for the student bar which in our case was a proxy for an extroverted product or a 7 pound voucher for a bookstore as a proxy for an introverted product we then told students well go about your lives and spend a voucher within the next two days
and then please stay in the bar or read the book for at least 30 minutes and the on this consumption experience we measured students happiness at three time points first once they had received the voucher second when they cashed a voucher and third right after they had um consumed the product for 30 minutes so they had stayed in the bar for 30 minutes or they had read the book for 30 minutes and just to make to simplify the analysis we took these three measures and we calculated an overall measure of consumption happiness that we could
then compare back to students Baseline level happiness okay so now let's look at what we found so what you can see here um is student is the change in happiness in comparison to students Baseline so how did the consumption experience affect students happiness in comparison to how happy they were before everything that's above the line means they got happier everything below the line means they got less happy so if we start with book condition we have inters blue extra wordss in green and the little puzzle icon just marks the matching condition so in the case
of the book voucher the matching condition H was the group of introverted students and the first thing you can see is they're basically getting the the book voucher increased happiness in both groups so Cambridge students generally seem to appreciate getting a free book what you also see is as expected like the level of Happiness increased more strongly in the matching conditions so the blue bar is higher than the green bar now when we look at the bar condition again here we have extroverts in green that's the matching condition and what we see here is a
somewhat more Divergent pattern because while happiness increased for extroverted students it decreased for introverted students which means that sending those poor introverts to the bar to have fun with their friends um not only failed to increase their happiness but it actually made them miserable so next time you think about dragging your inverted friend to the bar well think twice you might traumatize them for life just like my parents did with a Barbie Caravan okay so but this was generally good news so these results seem to support our general idea that spending money in a way
that matches your personality can actually increase happiness and no studies perfect and there were three limitations um to our little experiment here first one is we only looked at one personality train so we only looked at extra version second one is that we only studied two products so we only looked at the bar voucher and the book voucher and the third one is that it's Highly Questionable whether Cambridge students are actually representative of the general population now having spent three and a half years there and looking at myself today I have to say I highly
highly doubted so what we did is we followed up with a second study in which we collaborated with an International Bank and together with the bank we recruited 625 UK citizens to take part in a survey that measured their life satisfaction and it also measured their personality on five distinct personality traits now at the end of the survey we asked participants whether they would be willing to share with us their Bank transaction data for the six months preceding the survey so we could look at participants spending in 59 categories to get an idea of what
they and how they spent their money on as they went about their everyday lives so we knew for example how much money they had spent on music uh how often they had gone to the pub or whether or not they were paying off a mortgage at that time now what did we find so again the hypothesis was that the better to fit between a person's personality and their overall spending so they're spending across these 59 categ would increase life satisfaction and happiness and this is exactly what we found so better the better the fit the
higher the self-reported life satisfaction of participants after these six months and what's interesting and also in line with what I discussed earlier is that neither income nor the total amount that participants had spent over these six months actually was related to life satisfaction so it really doesn't matter how much money you have or how much money you spend what matters is that you spend the money that's available to you in the right way now you might be thinking well how can I use these insights to really maximize the happiness that I gain from my own
consumption experience and the way that I see there's basically two things you have to do the first one is well not to lay down a die as this image here might suggest but actually to know yourself so just take a few minutes sit down and think about what really motivates and drives you so do you like to be constantly surrounded by other people or would you rather spend most of the time by yourself or do you like to go out and explore or would you rather go back to the same place again and again and
if you want to do that in a slightly more systematic way um and learn about your personality the way that psychologists think about it we have developed a website that's called discover my profile where you can take free psychological tests personality tests and then get immediate feedback on your responses so check it out if you want why is this step important it's important because the more you know about yourself the better you understand yourself the easier it it'll be for you to then identify the types of spending that are in line or that speak to
these motivations in the Second Step so once you have a clear idea of your personal needs and preferences this will be pretty easy and youon don't find it too difficult to really find suitable ways of spending your money okay so the the message that I want you to take away from this talk is really that it doesn't depend it doesn't matter how much money you have it doesn't matter how much money you spend what really matters is is that you spend what you have available in the right way so money alone won't buy you happiness
but if you manage to spend it in a way that really speaks to for your needs and fulfills your motivations then there's a pretty good chance that your money will actually help you to buy happiness thank [Applause] you
