Thursday, April 9, 2009

Be Frugal, Be Happy

There is a connection between frugality and happiness.  For some it may be hard to believe because some people may equate being frugal to not spending money on things that make you happy.  In reality, you can be frugal with things that end up allowing you to be able to save money to spend on things that make you happy.  Of course this is if its done correctly.   

You must have a higher purpose for the effort.  Don't be prudent just for the sake of prudence.   For example, if your purpose is your family you may work toward saving on day to day basics such as groceries or energy so that you have money to put towards college for the kids or a family vacation.  You can take this a step further in being frugal on a vacation to make everlasting happy memories.  Finding ways to cut the cost down on lodging (condo rentals, hotel lodging, etc.) and car rental can give you more money to spend on a fun excursion.  The same can be used if you are single.  Perhaps your higher purpose is getting a college degree or buying a new car or going to that big concert.  By being frugal on other things you can save money to put toward those that make you happy.

The level of happiness tends to be higher for experiential purchases vs. material purchases.  Experiential purchases would include things that create a memory to hold on to.  These purchases can also make those around you happy.  Referring back to my previous example with the family vacation, being able to go on fun excursion can be fun and memorable for the entire family and not just the buyer.  While experiential purchase create more happiness, according to studies by Ryan Howell at San Francisco State University, the level of the experience doesn't affect the level of happiness.  For example, a $400 weekend getaway can provide as much satisfaction as a $40 dinner.

To read more on this topic, visit Laura Rowley's blog.
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