The Psychological Science of Spending Money
This chapter discusses the psychological research related to the act of spending money, with the aim of understanding the underlying psychological processes involved. To that end, the emotions involved in spending money before, during, and after the money changes hands are explored, including the role of anticipated and anticipatory emotions, different orientations to the gains and losses inherent in an act of spending, and the process of hedonic adaptation. Additionally, given how fundamental choice is to the act of spending money, factors that influence the decision-making process are discussed, including the role that comparative processes and expectations play in the process of making decisions and evaluating their outcomes. In each case, particular attention is paid to the psychological forces that influence the ultimate goal underlying any act of spending: happiness. Finally, several concrete strategies for making purchases most likely to lead to success on this goal are identified, including purchasing experiences over possessions, spending pro-socially, and making meaningful purchases.
KeywordsCredit Card Purchase Decision Material Possession Subjective Happiness Scale Tangible Object
- Aknin, L. B., Barrington-Leigh, C. P., Dunn, E. W., Helliwell, J. F., Burns, J., Biswas-Diener, R., et al. (2013). Prosocial spending and well-being: Cross-cultural evidence for a psychological universal. Journal of Personality and Social Psychology, 104(4), 635–652. doi: 10.1037/a0031578.PubMedCrossRefGoogle Scholar
- Boyce, C. J., Wood, A. M., Banks, J., Clark, A. E., & Brown, G. D. A. (2013). Money, well-being, and loss aversion: Does an income loss have a greater effect on well-being than an equivalent income gain? Psychological Science, 24(12), 2557–2562. doi: 10.1177/0956797613496436.
- Carter, T. J. (2013). The abstract and concrete nature of experiences and possessions. Unpublished manuscript.Google Scholar
- Dunn, E. W., & Norton, M. I. (2013). Happy money. New York, NY: Simon & Schuster.Google Scholar
- Frederick, S., & Loewenstein, G. F. (1999). Hedonic adaptation. In D. Kahneman, E. Diener, & N. Schwartz (Eds.), Well-being: The foundations of hedonic psychology (pp. 302–329). New York, NY: Russell Sage.Google Scholar
- Gilovich, T. (1991). How we know what isn’t so: The fallibility of human reason in everyday life. New York, NY: The Free Press.Google Scholar
- Hsee, C. K., Yang, Y., Li, N., & Shen, L. (2008). Wealth, warmth and wellbeing: Whether happiness is relative or absolute depends on whether it is about money, acquisition or consumption. Journal of Marketing Research, 46(3), 396–409. doi: 10.1509/jmkr.46.3.396.
- Kahn, B. E., & Lehmann, D. R. (1991). Modeling choice among assortments. Journal of Retailing, 67(3), 274–299.Google Scholar
- Kihlstrom, J. F., Beer, J. S., & Klein, S. B. (2003). Self and identity as memory. In M. R. Leary & J. Tagney (Eds.), Handbook of self and identity (pp. 68–90). New York, NY: Guilford Press.Google Scholar
- Kumar, A., & Gilovich, T. (2013). We’ll always have Paris: Differential story utility from experiential and material purchases. Manuscript under review.Google Scholar
- Loewenstein, G., & Lerner, J. S. (2003). The role of affect in decision making. In R. J. Davidson, K. R. Scherer, & H. H. Goldsmith (Eds.), Handbook of affective sciences (pp. 619–642). Oxford, UK: Oxford University Press.Google Scholar
- Newby-Clark, I. R., Ross, M., Buehler, R., Koehler, D. J., & Griffin, D. (2000). People focus on optimistic scenarios and disregard pessimistic scenarios while predicting task completion times. Journal of Experimental Psychology. Applied, 6(3), 171–182. doi: 10.1037//1076-898X.6.3.171.PubMedCrossRefGoogle Scholar
- Nickerson, C. C., Schwarz, N. N., Diener, E., & Kahneman, D. D. (2003). Zeroing in on the dark side of the American dream: A closer look at the negative consequences of the goal for financial success. Psychological Science, 14(6), 531–536. doi: 10.1046/j.0956-7976.2003.psci_1461.x.PubMedCrossRefGoogle Scholar
- Schroeder, J., & Epley, N. (2013). Mistakenly seeking solitude. Manuscript under review.Google Scholar
- Schwartz, B. (2004). The paradox of choice: Why more is less. New York, NY: Harper Perennial.Google Scholar
- Ubel, P., Loewenstein, G. F., & Jepson, C. (2005). Disability and sunshine: Can hedonic predictions be improved by drawing attention to focusing illusions or emotional adaptation? Journal of Experimental Psychology. Applied, 11(2), 111–123. doi: 10.1037/1076-898X.11.2.111.PubMedCrossRefGoogle Scholar
- Van Praag, B. M., & Frijters, P. (1999). The measurement of welfare and well-being: The Leyden approach. In Well-being: The foundations of hedonic psychology (pp. 413–433).Google Scholar
- Wilson, T. D., & Gilbert, D. T. (2003). Affective forecasting, 35, 345–411.Google Scholar