What You Do With Your Money Matters More Than How Much You Have

Michael Norton: [00:00:00] We're not good at knowing what is going to make us the happiest, and we focus on [00:00:05] the very short term of what makes us happy. So think about your spending. Is it reflecting your [00:00:10] values? And if not, maybe make some changes and see what happens. Then I can be happier in the end. [00:00:15] [00:00:20]

Jennifer Borget: We spend a lot of time on this show talking about how to manage money, how to budget, [00:00:25] how to protect what you have, and how to plan for what's ahead. But today's guest has spent his career [00:00:30] asking a different question: Once you have money, does the way you spend it actually [00:00:35] change how happy you are? Turns out, yes, just probably not in the [00:00:40] way you'd expect.

Michael Norton is a professor of business administration at Harvard Business [00:00:45] School and co-author of Happy Money: The Science of Happier Spending. His research [00:00:50] shows that spending on other people freely—by choice, not out of [00:00:55] obligation—tends to make us happier than spending on ourselves. It's a finding that holds across [00:01:00] countries and income levels, with amounts as small as $5.

And [00:01:05] that finding has some real implications for how we should think about building a financial life. [00:01:10] Whether you're just starting to figure out what to do with your first real paycheck, or you're already [00:01:15] doing all the right financial things and still feeling like something's missing, this [00:01:20] conversation's for you.

And one more thing: This episode drops during Childhood Cancer [00:01:25] Awareness Month, and Northwestern Mutual is marking it with action. For every new follower [00:01:30] of A Better Way to Money in September, they'll donate $10 to Alex's Lemonade Stand [00:01:35] Foundation, a leader in advancing innovative childhood cancer research, up to [00:01:40] $5,000. This supports Northwestern Mutual's larger commitment to accelerating the [00:01:45] search for better treatments and cures for childhood cancer while also supporting families and [00:01:50] survivors living with long-term side effects. Since 2012, Northwestern [00:01:55] Mutual has funded more than 860,000 hours of childhood cancer [00:02:00] research and contributed more than $75 million to the cause overall.

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All right, [00:02:10] let's dig in. Now, Mike, what got you interested in this work, and how did [00:02:15] you think about generosity growing up?

Michael Norton: I was doing [00:02:20] research on things like income and wealth inequality, which I still do research on [00:02:25] and I think is a very important topic.

But my friend and eventual collaborator, Liz Dunn, [00:02:30] said, "You're a bummer. You're studying these things that are really [00:02:35] sad, and they're making you sad." And she said, "We're going to study happiness together." And [00:02:40] I said, "It's a very nebulous concept. What is happiness?" And she said, "Too bad. We're going to do it." [00:02:45] And that shift was incredibly important for me.

She said, "What [00:02:50] if we start by just asking people to give money away instead of spending it on [00:02:55] themselves?" And I just thought it was such a simple and elegant idea that no one had looked at [00:03:00] before. So I said, "Oh my God, we have to do that." And that got me in, and then we kept [00:03:05] working together, and then eventually we wrote this book.

It really actually changed my trajectory [00:03:10] of my research to be more about ... I still study the bummer things, but more [00:03:15] about helping people in their everyday lives think about how to maximize their happiness.

Jennifer Borget: Yeah. [00:03:20] And I would hope that it helped your mood, too, and your research day to day with [00:03:25] your work and things like that, having a little more balance there.

Michael Norton: We'll have to ask Liz. We can, we can bring Liz in and [00:03:30] see if I'm any happier.

Jennifer Borget: Yeah, we should. Do you have a chart showing [00:03:35] how the trajectory's gone? When you first started studying the relationship between how we [00:03:40] spend money and our own happiness, what were you expecting to find? And then what [00:03:45] actually happened?

Michael Norton: With my collaborator, Liz Dunn, there was a lot of research on the [00:03:50] relationship between money and happiness. You know, you ask people, "How much do you make this year?" And [00:03:55] then, "How happy are you?" And you look at the correlation. Lots of fascinating research. But there was [00:04:00] nothing in it about what you should do with the money.

Let's say [00:04:05] you and I both made $50,000 this year, and I burned mine, and you used yours [00:04:10] to fund something that you care about. Obviously, it's going to be a different year for the two of us, [00:04:15] but on paper it just looks like $50,000 for each of us.

So, we really were thinking, [00:04:20] of course how much money you make is important, obviously. But do we have any [00:04:25] guidance for people on if you have money to spend, if you're lucky enough to have money to [00:04:30] spend, what should you spend it on to get the most happiness out of it?

Jennifer Borget: So what did you end up [00:04:35] finding? I'm curious now.

Michael Norton: We looked first at the research on not necessarily things that [00:04:40] don't make you happy but things that don't pay off in much happiness.

A huge category [00:04:45] is stuff. If I had you go through your credit card statement and [00:04:50] code which things are kind of just stuff for yourself. It's not negative actually, so [00:04:55] buying a lot of stuff isn't correlated with unhappiness, which is the good news for many of us. [00:05:00] But the bad news is it's not associated with more happiness, meaning that the money we [00:05:05] spend on stuff, and I mean like products and shoes and all sorts of things like that, [00:05:10] it just doesn't pay off in any more happiness.

So, we literally thought, "What's the [00:05:15] opposite of buying stuff for yourself? Maybe it's not even what you're buying, but it's the [00:05:20] direction of the spending. So instead of yourself, yourself, yourself, what if [00:05:25] we reverse the arrow and have you spend on other people?"

Of course, people have been doing [00:05:30] that all the time. We all are generous in one way or another. Most religions have something in it [00:05:35] that generosity is important. So we didn't come up with the idea of [00:05:40] generosity, but we were thinking, "If you had money, should you give it away? Should you spend it [00:05:45] on yourself? What should you do with that to make yourself the happiest?"

Jennifer Borget: Most people, if you ask them [00:05:50] whether they'd rather spend $20 on themselves or give it to someone else, would say that [00:05:55] they'd be happier if they were just keeping it. Now, are they wrong? And if so, why do you think that [00:06:00] is?

Michael Norton: I think sometimes what happens is if we think about our happiness, we're thinking [00:06:05] about how I'm going to feel right after I spend. And so it absolutely [00:06:10] is the case that when we buy something for ourselves that we feel really [00:06:15] good about it.

That's the problem, actually. It is a little bit like eating pizza. [00:06:20] When I'm eating the pizza, of course I'm enjoying the pizza. I like pizza. It's later that day that I [00:06:25] feel sick because I ate too much pizza, but I'm not good at connecting it. And giving is a little bit the [00:06:30] same. Of course, if I buy something for myself, I feel great in the moment. It's just it doesn't [00:06:35] last. It doesn't change anything because I've bought so many things for myself in my lifetime. [00:06:40]

But when we give to somebody else, even sometimes if it hurts a little bit in the moment because [00:06:45] I'd rather keep it for myself, that's the thing that in the longer term seems [00:06:50] to lead to more happiness.

So, we really need to think about our theory of not just [00:06:55] today but our theory of next week when we're trying to think about what we should be doing with our money.

Jennifer Borget: [00:07:00] I assume the amount that we give also has to matter at some [00:07:05] level, like giving away $100 maybe feels more meaningfully different than [00:07:10] giving away $5. What does the research actually say about that, and how do you think it surprises people?

Michael Norton: [00:07:15] When we started doing the research, it was around the time that the billionaires' pledge started to be a [00:07:20] thing—where billionaires pledged to give almost all their wealth away by the end of their life. Warren Buffett was one of [00:07:25] the people driving that, which is cool.

I love it if people give money away, but [00:07:30] it's not that helpful for the rest of us because I'm not a billionaire. And so maybe that [00:07:35] makes them super happy when they give away a billion dollars, but it's not helpful guidance for me [00:07:40] because I don't have a billion dollars. So Liz and I wanted to think about small amounts of [00:07:45] money that, again, you could do today.

We did things like $5 versus [00:07:50] $20. And what we tend to find is that for sure at some point the [00:07:55] amount of money is going to matter. But on small amounts, like $5 versus [00:08:00] $20, it doesn't really matter that much, the amount. It matters what you do [00:08:05] with it. So, if you buy yourself stuff for $5 or you buy yourself stuff for $20, [00:08:10] it just doesn't do that much for you.

If you give to somebody else something that's [00:08:15] $5 or something that's $20, it does something for you. And the $5 versus $20, it turns out, [00:08:20] isn't as important as to quit spending on yourself and try spending on somebody else. [00:08:25]

Jennifer Borget: Okay. That's a nice tip to know, I guess, if you're feeling like, "Oh, I don't have a [00:08:30] lot to give." I remember reading about Warren Buffett and other billionaires signing a pledge to donate most of [00:08:35] their wealth and thinking the same thing: "Well, what about me? I'm [00:08:40] not going to be able to make that much of an impact." But in your research, you're finding [00:08:45] that even if it's like a smaller amount, it's not necessarily the dollar [amount] but [00:08:50] what you're doing with that.

Michael Norton: Yeah, and I think there's a fair amount of research that sometimes we actually [00:08:55] feel constrained from giving because we're not giving enough. [00:09:00] It's like if you asked me for a donation to your favorite charity and I said 50 cents, [00:09:05] it might feel like, wow, that's not a whole lot of money, and maybe I think you're not going to like it.[00:09:10]

In fact, what the research shows is if you're raising money for something or in other cases, like if you're a [00:09:15] homeless person, my feeling that I'm not being as generous as I could turns out [00:09:20] not to be as important as the fact that the person has zero and anything is better [00:09:25] than zero. I think with small amounts, sometimes we have the wrong theory that we're not being [00:09:30] nice because we're focused on ourselves and what we could do with the money, and we're not [00:09:35] focused on how the other person's life will improve with that amount of money.

It really is [00:09:40] this feeling of "Oh my God, I got a windfall that I wasn't expecting, and I feel good about that, [00:09:45] and I'm going to go get something with it." And as the giver, I help them do that. [00:09:50]

Jennifer Borget: Michael's research keeps circling back to something that sounds almost too simple. [00:09:55] The way you spend your money matters as much as how much you have.

And one of the most [00:10:00] consistent findings in the literature is that spending on connection and [00:10:05] experiences produces more lasting happiness than accumulating stuff for [00:10:10] yourself. That's an insight that works at every income level, but it works best when you're [00:10:15] not constantly anxious about the basics. A Northwestern Mutual advisor can help you [00:10:20] build a financial foundation tailored to your goals and circumstances to help you make [00:10:25] financial decisions with confidence.

By developing a plan that addresses areas like [00:10:30] income protection, long-term savings, and unexpected things life tends to throw at you, you [00:10:35] can better position yourself to make intentional decisions about the rest, how you [00:10:40] give, how you spend on what matters, how you build a life that aligns with what you care about.[00:10:45]

And speaking of giving, if you haven't followed the show yet, go ahead and do it now. Every new [00:10:50] follower in September triggers a $10 donation from the Northwestern Mutual Foundation [00:10:55] to Alex's Lemonade Stand Foundation.

Now let's get back to Michael. [00:11:00] Let's say someone takes your research seriously, and they decide they want to spend more [00:11:05] intentionally. Maybe they treat a friend to dinner instead of buying something for themselves. Six months [00:11:10] later, are they measurably happier, or does that effect start to fade [00:11:15] like other things do?

Michael Norton: Yes, we do. We can ask people to do an audit of [00:11:20] their credit card. If you printed out your credit card statement, you could do spending on others and spending on [00:11:25] yourself, but you could also code it for experiences versus stuff.

You can think of lots of different [00:11:30] ways to try to categorize your spending. But there we do see when people are spending [00:11:35] most of their money on themselves, it's not as good as spending on somebody else, and [00:11:40] experiences also tend to be better than stuff. So in the long run, we can see that people who [00:11:45] give are happier than people who don't.

And we have in the short run ... if I tell [00:11:50] you today, "Five dollars, go spend it," I know that'll make you happier. What we don't have [00:11:55] is the five dollars that I gave away today lasts forever. [00:12:00] And so if I give five dollars, I go up a point in happiness, and I stay there forever. [00:12:05] Unfortunately, that's just not how we work as humans because things wear off.[00:12:10]

Everything wears off. It isn't the case that a little bit of generosity today builds [00:12:15] up over time. I think what it is is people who make a habit of [00:12:20] giving periodically rather than just once a year or something like that. [00:12:25] That's the people that we tend to see end up happier.

Jennifer Borget: Hmm. That makes sense, making it a habit. Now, [00:12:30] I know experiences themselves have kind of become a little bit of a [00:12:35] competition sometimes with social media, like destination bachelorette [00:12:40] parties, Coachella tickets, trips to Japan that end up on everyone's Instagram [00:12:45] feed. When an experience is basically obligatory, does it still give you what your [00:12:50] research says experiences are supposed to give you?

Michael Norton: The example that I use sometimes: I [00:12:55] play the guitar, not well, but I play the guitar. And if you buy a guitar, some [00:13:00] people buy the guitar to play the guitar for an experience. They think they're going to impress people around a [00:13:05] campfire or something like that. But in any case, they're going to use the guitar and play it.

And [00:13:10] other people who buy a guitar buy one that was signed by Eric Clapton, and they put it on their [00:13:15] wall, which is cool. I wish I had a guitar signed by Eric Clapton, just to be clear. [00:13:20] But when you buy a guitar and put it on your wall, you've turned it into stuff. And when [00:13:25] you buy a guitar and you play it, you've turned it into an experience.

And so sometimes the exact same [00:13:30] purchase can be either more like stuff or more like an experience. And [00:13:35] so if you're going to Coachella solely to brag about it and show pictures of it [00:13:40] on Instagram, it's more like stuff, right? You're not actually in the experience. You're [00:13:45] using it to show how amazing you are.

Other people obviously use these [00:13:50] experiences and really dive into them. And there again, I think the research shows that the [00:13:55] more you treat something like stuff, the less of an impact it has on you. And the more you [00:14:00] treat it like an experience, that's where the happiness comes.

Jennifer Borget: All right. I want to think about [00:14:05] this financially also. A lot of us are already feeling behind [00:14:10] on our financial goals, and when you feel behind, giving feels like a luxury [00:14:15] that you can't afford. But your research suggests that framing might actually be [00:14:20] working against people. So how do you make room for generosity when the to-do [00:14:25] list never feels like it's done?

Michael Norton: I want to say it's absolutely true that some people have [00:14:30] no flexibility in their spending. Everything goes to credit cards and debt and mortgages [00:14:35] and things like that, so I'm very sympathetic to people saying, "This guy is not helping [00:14:40] me in the slightest because I don't have $5 to throw around."

But we do things; for [00:14:45] example, if you go through your credit card statement and you count up how much money you spent on coffee. [00:14:50] For some people, it's a lot of money every month. For some people it's hundreds of dollars. [00:14:55] And in that frame, I can say, "Do you want to have one less coffee a week and [00:15:00] give money to charity instead?" And then people will say, "Yeah, I actually [00:15:05] do want to do that." But if I don't have you think about it, every day I want a coffee. So [00:15:10] I'm kind of in the I need a coffee.I do it, too. I need a coffee to get going, and I don't [00:15:15] think, “Huh, all this coffee is adding up to a big amount of money. Am I using that [00:15:20] money in the way that will make me the happiest?” Maybe coffee is the one thing in the world [00:15:25] that makes you happy, but probably there are other things that would make you happy as well.

And one of [00:15:30] those things, if you can carve a little out of that, is instead of buying yourself a [00:15:35] coffee, give it to somebody else. And we've even done research where we have people buy coffee for somebody else, [00:15:40] and it feels great. If you buy a coffee for somebody behind you in line, [00:15:45] you feel like a hero. They think you're amazing. The barista thinks you're amazing for [00:15:50] doing that. And think what happens if you buy a coffee for yourself [00:15:55] Nothing. You just drink a coffee and go away.

So you can feel how these situations get very, very [00:16:00] different for the same amount of money and the same purchase even when you're changing the arrow [00:16:05] from yourself to anybody else.

Jennifer Borget: Now, I'm also wondering, because so [00:16:10] far we've been talking about it in terms of monetary giving, like writing a check or giving some [00:16:15] cash, but there are a lot of different ways you can give, like volunteering your time or maybe [00:16:20] donating things that you have or buying supplies for a cause that you care about.

Does the form [00:16:25] of giving change the emotional return, or does the research say that the dollar [00:16:30] donated and an hour spent produce like the same thing?

Michael Norton: It's such a great question, and we [00:16:35] asked ourselves that question as well. So we tried to do the same kinds of experiments [00:16:40] that we did with money, where I give you $20 in the morning and I say, "Go spend it [00:16:45] on somebody else."

We tried to do it where we said, "You have an hour off from work. [00:16:50] Go and volunteer." We were conceptually trying to do the same thing, [00:16:55] and the problem is for volunteering, nobody shows up. With [00:17:00] money, if we give people money, they're pretty good about following the instructions, and they go out and spend it the way we [00:17:05] want them to.

If we tell people, "Here's some time," they often use it for [00:17:10] anything else in their life that they need time for because we're so time constrained that an [00:17:15] extra hour, if you think, "Should I go volunteer or should I clean the bathroom that I [00:17:20] haven't cleaned in months?" People will switch away. And so it's actually, just [00:17:25] practically speaking, harder to do the research on giving time because it's in some [00:17:30] ways harder for people to give time than to give money, which is more straightforward and people [00:17:35] are more likely to do, which is not a satisfying answer for us either because we don't know [00:17:40] in the way we know about money the parameters of giving time that make us the happiest [00:17:45] and all those important questions.

Jennifer Borget: Wow, that's really interesting. That's surprising. I don't [00:17:50] know that I would've guessed that. I will say I know if I ever [00:17:55] volunteer, when I volunteer my time, it definitely feels nice. As I was [00:18:00] listening to you talk about that and thinking about ways that we can donate time and our things [00:18:05] versus money, like taking a bag to Goodwill or something, it's [00:18:10] not the same feeling as a posting in a buy-nothing group or [00:18:15] having someone specifically that's like, "I want those."

I don't know if you've done any research on that [00:18:20] too. Am I on the right track [00:18:25] with how I'm feeling then?

Michael Norton: We have. Absolutely, yeah. So, when we feel ... actually with money or [00:18:30] time or giving, the more we feel like we had an impact on a specific [00:18:35] person, the more we get out of that action.

When I donate to a charity that [00:18:40] I don't know much about, it's good. But if I donate to a charity where I know [00:18:45] exactly where the money is going, that's better. And it's very similar with giving [00:18:50] things like clothes. If I give it to Goodwill, it's good. I know I'm doing a good thing, and I feel good [00:18:55] about it, but I don't see where it goes.

If you can see where the giving goes, that [00:19:00] makes us feel even better about our giving. We do see, in fact, that when you [00:19:05] target giving for somebody else, that's something that does feel better.

Jennifer Borget: Right. So [00:19:10] charitable giving can reduce your taxable income also, and it's a benefit I think maybe [00:19:15] a lot of people don't think about. Does knowing that there's a financial upside change the [00:19:20] emotional experience of giving, or does a deduction-motivated donation still feel as [00:19:25] good?

Michael Norton: We looked, actually, to think about when you have external motivations in [00:19:30] general, does that interfere with the happiness you get from giving, or does it enhance the [00:19:35] happiness you get from giving?

At Harvard, we have donors who like to put their names on [00:19:40] buildings, for example. So, is it worse or better to give a building and your name's on [00:19:45] it versus give a building anonymously? And what we tend to find, and I think [00:19:50] what we might want, is that the anonymous giving is the amazing kind, where you [00:19:55] truly get no benefit out of it and it's just purely altruism.

But what we tend to find [00:20:00] instead actually is that if there's a benefit beyond the giving, that actually makes [00:20:05] you happier. So if you, if for example, give to somebody not face-to-face, it doesn't [00:20:10] make you as happy as if you give to them face-to-face because you're getting approval from [00:20:15] somebody else, and they're saying you're a great person and things like that.

So, we do see [00:20:20] in general that the external at least doesn't interfere with the happiness when you're getting [00:20:25] some other benefit, and in some cases actually it can increase the happiness because you're [00:20:30] getting both the feeling of giving and then separately some other benefit that feels really good, [00:20:35] too.

Jennifer Borget: Kind of like I think if you pay for the person behind you, an example you [00:20:40] used earlier, you want to wait a second and see their reaction before you just [00:20:45] drive off, you know? Or if you get that, do you pay it forward? My husband and I [00:20:50] have had a discussion about this. Like, "Oh, if they pay for me, I'll pay for the next," keep it going.

And he's [00:20:55] like, "No, you just take the gift. You don't ..." Because then it's, I don't know, taking away from their [00:21:00] gift, I guess. But I'm like, "No, you keep it going." I don't know. Have you noticed any [00:21:05] research on that one way or the other?

Michael Norton: Yeah, people have very, very different theories about paying it [00:21:10] forward versus not paying it forward.

If you gave me a gift right now, and I immediately regifted it to [00:21:15] somebody else, that wouldn't feel that good for you. So, if paying it forward is like that, then you [00:21:20] shouldn't do it. But if paying it forward is giving generosity down the line, then you should do it. So [00:21:25] his theory isn't necessarily incorrect; it's just different from other people's theories.

Jennifer Borget: [00:21:30] Okay. I think you and I are kind of on the same wavelength there, though. But is there a version of [00:21:35] giving that doesn't actually work, maybe where the emotional return is just flat or [00:21:40] maybe even negative?

Michael Norton: People have, certainly, stories where they've given [00:21:45] to a charity, and they didn't feel great about it. Often, it's a co-worker pokes their head in your [00:21:50] office and says they're running a marathon for some cause that you don't care about, and will you sponsor them? [00:21:55] Or they say, "My kid is doing something. Will you sponsor them?" And we say yes because you have to say yes. [00:22:00] And people do say, "I didn't love that. I didn't like being forced to [00:22:05] give and being put on the spot."

At the same time, though, we're always trying to think about [00:22:10] compared to what. So, you might not have felt great about giving this [00:22:15] thing to this person you don't like at work for some charity that you don't care about, but [00:22:20] what would you have done with that money instead? And you probably would've just bought stuff for yourself.[00:22:25]

We tend to see that the type of giving doesn't matter as much [00:22:30] as the fact that you're giving. And of course, people have stories where they felt [00:22:35] terrible about giving, and I have some, too, but on average, overall, it really [00:22:40] is the case when we look at the data that the giving tends to beat what you might do with [00:22:45] it otherwise.

Jennifer Borget: So there's still hope if you're like, "Man, I could have used that," if you think, [00:22:50] "Well, I did a nice thing. I would've just bought myself another drink or something," you know? [00:22:55]

Michael Norton: And it can actually be satisfying to donate money to somebody you hate because you're [00:23:00] putting yourself as morally superior to them.

Jennifer Borget: Yeah.

Michael Norton: You know? Like, I’m such a wonderful [00:23:05] person. Yes. Exactly.

Jennifer Borget: It can inflate your self-esteem a little that [00:23:10] way. Oh, I like that. I'm pretty sure I've been there. Now, there's research [00:23:15] suggesting that people feel as psychologically distant from their [00:23:20] future selves as they do from a stranger. Is there an argument that [00:23:25] saving for retirement taps into the same instinct your work is [00:23:30] describing? Like generosity aimed at someone that you haven't even met yet.

Michael Norton: [00:23:35] I think one of the key curses of being a human is that we're really, [00:23:40] really good at maximizing happiness today, right now, and we're really, really not good at [00:23:45] maximizing it in the long run.

If you think about your [00:23:50] eating habits, I'm really, really good at maximizing my happiness today because I want pizza, [00:23:55] and I'm going to eat it, but I'm not really doing a great job about my future health because it's hard [00:24:00] for us to give up something now in order to get something later.

And you're right; it is a [00:24:05] little bit like giving up something for myself and donating it to somebody else. It has [00:24:10] kind of the same property that there's this old me ... well, I'm already old ... there's this older me [00:24:15] in the future who I know I should care about, but I don't know that guy. I haven't met him yet, so why would [00:24:20] I do anything positive for that person?

One of the things that we try to do is make that [00:24:25] person and make that saving category more meaningful to you. So, for example, [00:24:30] we can work with banks where we ask, when you start an account for retirement or any savings [00:24:35] account, we can let you label it. And when people label one of those accounts for [00:24:40] experiences, they tend to be more likely to open an account, and they're more likely to put money into [00:24:45] the account.

Because I can think about my future self wanting to go to Paris. [00:24:50] That is salient enough to me that I think, "Oh, maybe I should actually save for that person in 10 [00:24:55] years. They want to go to Paris." If I think, "This person's going to have some bills that I'm not sure what they [00:25:00] are,” it's really, really hard to get motivated to save for that person.

So, we use some of [00:25:05] the same principles of the spending, where experiences make you happier than stuff, and we try to [00:25:10] apply them over to saving and see if we can do helpful things there, too.

[00:25:15] The human nature problem is we're not good at knowing what is going to make [00:25:20] us the happiest, and we tend to focus, as we were discussing, on the very short term of what makes [00:25:25] us happy.

And so, there is this sense that if I can just lengthen your time horizon, [00:25:30] do you want to have 100 coffees this month, or do you want to have 99 coffees and [00:25:35] give some money to somebody else? Then I can be kind of this better self that [00:25:40] I might be happier in the end. And we never try to make people do anything.

We just tell [00:25:45] them, "Let's think about this. Look at your spending. Does it reflect your values?" [00:25:50] And sometimes people say it does, and other times people say, "Wow, this is really misaligned with the [00:25:55] things that I care about or that I want my kids to care about," and they'll change their [00:26:00] spending to get more in line with that.

We're never saying you must spend money on [00:26:05] somebody else. We're saying, “Think about your spending. Is it reflecting your values? And if not, [00:26:10] maybe make some changes and see what happens.”

Jennifer Borget: I like that because I know a lot of times we have these [00:26:15] discussions, and we talk about taking a pause; have a date, sit down, look at your finances, think about your goals. [00:26:20] But this is looking at maybe philosophically how you feel [00:26:25] about giving and where your time and energy is going and what maybe kind of [00:26:30] mark you want to leave on the world. I don't know if that's too deep, but ...

Michael Norton: [00:26:35] For sure. And I mean, as a parent, if parents think about when their kids start to use money, [00:26:40] we're trying to teach them what money is for.

Money can be for all kinds of different [00:26:45] things in the world. I worked with a nonprofit years ago where they started giving kids an allowance of $3 a [00:26:50] week, which to a five-year-old may as well be a million dollars. You know, it's very exciting to have three [00:26:55] singles. And what they did was they said $1 you spend on yourself, [00:27:00] $1 you spend on somebody else, and $1 you save.

And that's a [00:27:05] very, very simple way to think about your spending in life. But wow, if you did that, it'd [00:27:10] be really, really good for your happiness and for your overall financial well-being. And [00:27:15] we know with kids, we should encourage them to learn about saving, for example, and [00:27:20] learn about giving. And then for ourselves, we kind of forget because we just want another coffee.

Jennifer Borget: Now, if someone's [00:27:25] sitting with this conversation and they want to actually do something, [00:27:30] not someday but this week, what's the smallest version of [00:27:35] any of this that still moves the needle?

Michael Norton: For me, I think it's really simple, which is the next time [00:27:40] you reach for your wallet or you are about to pay with an app on your phone or whatever it might be, the [00:27:45] next time you're just about to buy something, whatever it is, pause for a moment [00:27:50] and think, "Is this going to make me any happier, or is this not going to make me any happier?"[00:27:55]

And sometimes the answer will be, "This is going to make me happier," and you should go ahead and do it. But [00:28:00] sometimes if you just think about that quick second of wait, before I click purchase, [00:28:05] is there something else I could do with this money? Sometimes that helps people say, "Yeah, I actually [00:28:10] do want to do something different with it."

It's a very small change. It's just like an extra second in [00:28:15] each purchase, but it can change your behavior in meaningful ways.

Jennifer Borget: That's Michael [00:28:20] Norton, professor at Harvard Business School and co-author of Happy Money.

So, what do you [00:28:25] think? Did that shift how you see your own spending? Because my biggest takeaway is this: The [00:28:30] budget line most of us have never included is probably the one that would actually [00:28:35] make us happier.

A giving allocation doesn't have to be big, but making it [00:28:40] intentional is where it starts. If you want to get in on the good feelings right now, hit follow [00:28:45] on A Better Way to Money. For every new follower in September, Northwestern Mutual will [00:28:50] donate $10 to Alex's Lemonade Stand Foundation, up to $5,000. This [00:28:55] supports Northwestern Mutual's larger commitment to accelerating the search for better treatments [00:29:00] and cures for childhood cancer while also supporting families and survivors [00:29:05] living with long-term side effects.

That's the kind of giving Michael's research says actually means [00:29:10] something. And if you want to make this a sustainable practice, you can download [00:29:15] Northwestern Mutual's free Family Finances Workbook at [00:29:20] northwesternmutual.com/podcast. It walks you through all the conversations worth having, from budgeting, [00:29:25] saving, protecting what you've built, so you're not staring at a blank page when you start [00:29:30] planning.

Next time on A Better Way to [00:29:35] Money ...

Robert Waldinger: There are ways to structure your life so that you're not [00:29:40] alone, so that you are connected with other people, and hopefully in the [00:29:45] process you're doing things you enjoy, doing things you care about.

Jennifer Borget: Michael Norton showed us that [00:29:50] giving money away might be the smartest thing you can do with it.

But what does a life well spent [00:29:55] actually look like in the end? Dr. Robert Waldinger oversees a study that has been tracking that [00:30:00] question for 85 years. And what the data says about who ends up healthy, [00:30:05] connected, and at peace is the right note to end on. He joins us for the finale. [00:30:10] Tap follow so you don't miss it.

Northwestern Mutual is the marketing name for Northwestern [00:30:15] Mutual Life Insurance Company (NM) and its subsidiaries, including Northwestern Mutual Wealth [00:30:20] Management Company (NMWMC), investment advisory services and federal [00:30:25] savings bank. NM and its subsidiaries are in Milwaukee, Wisconsin.

Not all [00:30:30] Northwestern Mutual representatives are advisors. Only those representatives with "advisor” in the [00:30:35] title or who otherwise disclose their status as an advisor of Northwestern Mutual Wealth Management [00:30:40] Company (NMWMC) are credentialed as [00:30:45] NMWMC representatives to provide advisory services.

Michael Norton is not affiliated [00:30:50] with Northwestern Mutual, and the views expressed by Michael Norton do not necessarily represent [00:30:55] those of Northwestern Mutual or its subsidiaries.