If you think that financially happy people buy a lot of expensive stuff, then you are wrong.
Most of America believes that material possessions improve personal happiness and social well-being. However, contrary to this belief, multiple studies show that materialists have lower social and personal well-being.
Financially happy people really know how to manage their money. They have built certain habits that keep them both happy and wealthy. And “buying stuff” is not the thing that pulls them out of bed in the morning.
Then, what are their secrets?
Let’s dive in to learn how you can manage your money well by taking cues from research on how happy people interact with money.
7 Habits of Financially Happy People
1. Happy people know how to manage their money well.
In a nutshell, happy people spend within a budget, avoid impulsive spending, pay their credit bills on time, save for financial emergencies, and plan ahead of time for retirement.
You can make a budget and track your daily financial transactions by spending just a few minutes every day. In fact, it’s so simple that anyone, including children with pocket money, should make it a habit.
Keeping a track of daily spending can immensely help in avoiding impulsive purchases.
As per research, people manage their money better when they have clear goals in mind, like paying off a credit card, investing for a peaceful retirement, or saving for an emergency fund.
It is as simple as this: if you handle your money better today and keep track of your expenses, you will be happier tomorrow.
2. Happy people spend their money on life experiences rather than material objects.
Researchers over the decades have investigated how money affects our well-being when we invest in life experiences, as against material things.
There is now compelling evidence showing people are happier when they spend their money on life experiences rather than material objects.
It is now abundantly obvious that those who habitually spend their money to buy life experiences (experiential purchases) are happier than people who tend to buy material items (material purchases).
3. Happy people fondly reflect on the positive moments from their past.
Humans, maybe uniquely among other animals, have the ability to travel back and forth in time. They can uniquely use the “specious present” to experience their past life as well as speculate and dream about the future.
Research finds that happy people appear to live more in the past, re-experiencing the ecstatic events of the past while ignoring the pains.
When happy people reminisce about their past, they tend to focus on the positive memories rather than the unpleasant parts of their past.
So, the more happy experiences you buy while young, the more joy of remembering them in your old age.
4. Happy people make it a habit of “catching” the positive emotions of others.
Some people are more vulnerable to profoundly experiencing the emotions of others.
They are sensitive to what others around them feel and easily “catch” their emotions during their happy and sad times. These people tend to be happier, especially when they make it a habit of being around joyful people.
Research shows that when people smile warmly at happy people, they are more likely to smile back and feel warm on the inside.
So, paying greater attention to the positive emotions of others is an easy way to boost your happiness. You can do this by asking your friends to pool their money and spend it on group vacations.
5. Happy people live in a caring and thriving community.
A person is at their happiest when their three basic psychological needs are met: autonomy, competence, and relatedness.
Thousands of studies show that this psychological need fulfillment has a favorable effect on happiness. Data from research suggests that living in a supportive community can help you meet your psychological needs.
Happy people have a sense of belongingness where they live and look forward to returning to their home community after a trip.
6. Happy people have goals to reach for.
Goals are important to have a happy life. They are often part of our personal milestones, like getting married, moving to college, getting a new job, and having children
Goals give us a purpose, and they keep us focused on what we want to accomplish. They motivate us and make us stay productive.
Without goals, we just drift along, doing whatever we can to get through the day. Without goals, your life might not seem as worthwhile.
However, setting the right goals can put you on the right path to success.
Research shows that having several different types of goals in our life, like achievement goals, relationship goals, social goals, and personal growth goals, can improve our overall happiness.
One thing here, remember to carve out a personal definition of success before you set your goals.
7. Happy people savor what they have.
People who are financially happy find happiness in what they have rather than spending money on things that other people have.
Savoring in positive psychology is defined as the process by which people increase their positive feelings by directing their attention to emotionally significant experiences in their past, present, and future.
Savoring is the use of thoughts and actions to intensify, prolong, and appreciate pleasurable experiences and emotions.
The financially happy people do exactly that. They understand that authentic financial happiness can never come from keeping up with the Joneses. So, they appreciate and value what they already have, spend mostly on necessities, and only occasionally indulge in the exotic.
It seems that most people equate having financial freedom with having financial happiness. But, really, are they not the same thing.
Financial freedom is being able to live comfortably without having to take money from your savings or selling something valuable.
Financial happiness is understanding that money is just a means to an end, and you spend within your means to protect yourself from the misery of penury.
Even if they don’t have as much money as they would like, financially happy people will still keep finances to allow themselves to be happy.
Let’s close this with this famous quote on money and happiness:
If you want to feel rich, just count the things you have that money can’t buy.
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You think you know how to face criticism calmly. But as soon someone calls you a cheapskate, you react in a shockingly bad way. Why not learn how to handle criticism like a pro?
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Author Bio: Written and reviewed by Sandip Roy—a medical doctor, psychology writer, and happiness researcher. Founder and Chief Editor of The Happiness Blog. Writes on mental health, happiness, positive psychology, mindfulness, and philosophy (especially Stoicism).
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