Money and happiness: what the research says about your budget

End of the month. The card statement is long: an online order you'd forgotten, a meal out, a subscription you never opened, a birthday present. Each purchase made sense at the time. And still, scrolling down the list, a quiet question comes up: which of these actually made us happy?

"Money doesn't buy happiness," say the people who have it. "Let me try," say the people who don't. Both sentences sound true, and neither helps you build a budget.

The old story offers two roads. One: chase more income, because "a bit more and it'll all work out." The other: go without, give everything up for the sake of your values, and feel right and slightly bitter. Both are about the amount. Neither asks what the money goes on.

Does money buy happiness: what the research found, and how it changed

There is a part of you that doesn't want to check. It's afraid the check will show that the purchases you love, the morning coffee or the Thursday takeaway, don't "add," and then they'll have to go. That part is protecting the small pleasures that hold the week together, and that's an important job. And there is a part of you that wants to feel good about money, not just watch it run out. Both are right.

If you never knew what to do with this question, that isn't on you. The researchers changed their minds too. In 2010 Daniel Kahneman and Angus Deaton published a famous finding in PNAS: people's overall evaluation of their lives rises with income, but day-to-day emotions stop improving above a certain income level. That's where the idea of a "happiness ceiling" came from.

In 2021 Matthew Killingsworth, also in PNAS, published data collected from people at random moments of their day and found that everyday well-being keeps rising with income, even at high levels. In 2023 Killingsworth, Kahneman and Barbara Mellers sat down together and reanalysed the data. Their joint conclusion: for most people, well-being keeps rising with income; only among the least happy group does it level off at some point.

So you don't have to choose between money and happiness. But the amount is only half the story. The other half is how it's spent.

Three questions the research suggests for every expense

Three sets of findings become three questions you can ask of any line on the statement:

An experience or a thing? Leaf Van Boven and Thomas Gilovich found in 2003 that people report more happiness from experiential purchases, a trip, a concert, a meal with friends, than from material ones. The experience keeps living in memory and in the story; the thing fades into the background.

Did it buy us time? Ashley Whillans and colleagues found in 2017, in PNAS, that people who spent money to free up time, cleaning, delivery, a service that saves an hour, reported higher life satisfaction. We go deeper in buying time with money.

Was it for someone else? Elizabeth Dunn, Lara Aknin and Michael Norton published an experiment in Science in 2008 in which people received a small sum to spend on themselves or on others. Those who spent it on others reported feeling better by the end of the day. Giving as a planned line in the budget is the subject of giving in the family budget.

And two caveats, honestly. These are findings about averages, mostly from American studies, not a law of nature for every home. And not every expense has to pass the test: nobody buys groceries or pays the electricity bill to feel joy.

One expense from last month

Pick one expense you remember from last month. What was it, mainly?

Pick the answer closest to yours. There is no wrong one.

An experience: an outing, a trip, a meal with peopleA thing you bought for yourselfA service that saved you timeSomething for someone elseA routine charge, nothing special

Not spending less: spending differently

Move a little money each quarter from what doesn't add to what does. Without changing the total, without chasing more income, and without giving up the small pleasures that hold the week together. 100 ILS a month, not a revolution.

Four stages to a budget that spends on what adds

Stage 1: Go through last month

A quarter of an hour with last month's list. Not to judge; to see.

In AlphaHome: the expense list shows one month at a time and can be filtered by category and date. Pick last month and go category by category: restaurants, going out, shopping.

Stage 2: Three that added, three that didn't

On paper, two columns. Three expenses that really added to your life, and three that didn't. Not by size; by how you feel remembering them today. The three questions help, but the call is yours.

And the small pleasures that hold the week together? They aren't under threat. Often they're exactly what lands in the "added" column, and the check simply confirms them. What moves to the other column is usually something bought out of habit, a sale or tiredness, that you wouldn't miss.

Stage 3: Move 100 ILS

You don't delete; you move. Take 100 ILS off the limit of a category that doesn't add, and put 100 ILS onto one that does. The total stays the same.

In AlphaHome: on the budget page any category can carry a variable budget; if one of the two has none yet, create it. There's no automatic transfer between limits, so you edit two: one down and one up. Next month you see both being measured.

Stage 4: Check again each quarter

Once every three months, the same quarter of an hour. Is what you moved working? Is there another 100 ILS to move? Slowly, the budget starts speaking your language.

When a favourite purchase doesn't pass, and one person's joy looks like waste

The purchase you love, the one you thought you couldn't do without, isn't on the "added" list at all. You don't give it up in one go. Today: halve it, don't cancel it. Next time: check next quarter whether you missed it. If you did, it comes back, and that's useful information too.

Your partner enjoys completely different things, and what adds for one looks like waste to the other. This isn't an argument to win. Today: each of you fills in your own page. Next time: each of you gets a line of your own in the budget, with an amount nobody checks.

A quarter went by and you forgot to check. It's a check-in, not an exam. Today: fifteen minutes with the last month only. Next time: put the check in the calendar on the first day of every quarter.

Money and happiness at home: a question you return to each quarter

Without a question, the same spending brings the same vague feeling at the end of the month. Not because you did something wrong, but because nobody asked. Now you have three questions and one page.

The question stops being "how much did we spend" and becomes "on what." Ask it every quarter and the budget starts to look like the life you actually want. And if your next question is "how much is enough," we wrote about it in how much is enough.

This week: go through last month's expenses, write down three that added and three that didn't, and edit two limits on the budget page: lower one category that doesn't add by 100 ILS, and raise one that does by 100 ILS.