With households having less to spend, they need to prioritise, and stark choices have to be made. For some, these decisions are extreme.
But even those who have their basic needs covered are still faced with having less money to spend now than they did a year ago. And whether it’s cancelling a streaming service or cutting back on grocery treats, many of us will be deciding what we can afford to keep and what we should do without over the coming months.
Research suggests that the way we spend what money we do have can have a marked impact on our happiness and wellbeing. There is evidence, for example, that purchases which help us to gain autonomy (a bicycle, say) or improve our self-esteem (a confidence boosting outfit perhaps) can have a positive effect.
Here are some of the other ways that research has shown how spending money and wellbeing are linked.
1. Connecting with others
Research suggest that spending money on social experiences, such as going for coffee with friends, or attending a concert or festival, boosts our wellbeing. The same goes for spending money on others, whether it’s buying someone a gift or making a donation to charity.
This is because sharing experiences with others and taking action towards positive change fulfils our basic psychological needs of social connection and fulfilment.
Of course, such experiences don’t have to cost anything. Going for a walk, joining a running group, or volunteering can all be done for free.
2. Buying time
Other research suggests that wealth should not be measured solely in terms of economic resources, such as property or cash, but also through the amount of free time you have. Lack of time, known as “time poverty”, has been consistently linked to increased stress, and poor lifestyle choices.
Spending money on products or services which free up time – such as help with domestic chores or avoiding a lengthy commute to work – can be considered a wise investment.
3. Achieving potential
Feeling competent at what we do and developing our potential are also key ingredients for improving happiness levels. Research suggests that spending money on things or experiences which help you to feel better at things you like to do, or that improve your self-esteem are worthwhile.
This might include evening classes or training courses that develop skills, or items that could improve the way we do activities we enjoy, such as technology or sports equipment.
But again, learning new things doesn’t need to cost much at all. Various platforms and social media channels can provide good quality free courses and “how to” guides.
4. Impressing less
Research has shown that buying things specifically to impress others does not make you happy. In fact, a focus on materialism, the accumulation of wealth and possessions to signal social status, has been shown to have a detrimental effect on wellbeing.
This is because seeking external rewards through other people’s admiration and compliments comes with no guarantees. Instead, seeking personal fulfilment through consumption is likely to distract you from investing time and money on nurturing your social connections or on self-development that will actually have a positive impact on your wellbeing.
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So stepping away from the goal of wanting more money to buy more things might be one of the most positive steps you can take when there’s a cost of living crisis. Or, for that matter, even when there isn’t.
Olaya Moldes Andrés receives funding from The British Academy and the Academy of Marketing.