3 Wise Spending Tips: Your Guide On Spending For Happiness


In a world where you’re pressured to spend money at every turn, how can you know the best way to spend your hard-earned cash? This article will help you get your money’s maximum worth.

To spend your money wisely, first spend money to create security and stability, second to invest for the short and long term, and third for comfortability. Spending money on experiences, relationships, physical activity, time, and others will bring you happiness and increase its value over time instead of diminishing it.

There is a diminishing return when it comes to money. Knowing the best ways to spend your money can provide you with immediate and long term success and happiness.

How to Spend Money Wisely

When it comes to spending money, there really are ways that it can help provide you with happiness. That happiness comes not from material goods, but from security, longevity, and comfortability. The three best ways to spend your money are, in order, 1) to create security and stability, 2) to invest for the short and long term, and 3) for comfortability. Spending your money in these ways enables you to find basic and reliable financial footing, while shoring up your needs today and for your future self.

Along your journey to financial independence, it’s integral that you know how to spend your money and how to save it. Improperly utilized, your spending habits could lead you down your financial mountain before ever reaching the top. Properly utilized, however, you will find your way up your financial mountain – with the skills and knowledge you need to ascend any mountains you could ever want. Here’s a breakdown on how the best ways to spend your money wisely.

1. Spend Money to Create Security and Stability

Spending money wisely means taking your current financial situation into account. If you are economically poor, meaning you lack financial resources for a basic standard of living, your spending should be focused on those things that can provide relief of major life stresses like housing, food, transportation, etc. Spending money in ways that can provide stability, security, and safety in otherwise changing circumstances is a wise practice.

If there’s a gap in your safety or security that money can help fill, it is wise to spend in order to fill that gap. For example, spending money on housing or rent will provide security by having a place you can safely lay your head each night. Spending money on basics like food will provide your body with nutrition and proper energy to go about daily tasks. And spending money on core transportation needs can provide you with the ability to get from place to place in order to better help meet your needs. Perhaps that’s public transportation or a reliable used car to help get you to and from work, enabling you to make money and provide for your needs.

If you are economically stable, spending money on security or stability is still a wise practice. Once your basic necessities are met, you can spend in ways that enhance your security or stability. You will likely want to pay for things like insurance in order to be financially covered in case health issues or other emergencies arise. You may also pay down your mortgage early in order to clear yourself of payments and step into full ownership of your home.

In all cases, however, you should always put money towards emergencies. You should have a $1,000 minimum emergency fund for when life happens. This safety net is a necessity when deciding where your money should go first. From there, begin eliminating unnecessary debt (Note: it’s important to have your emergency fund first, so that you don’t need to get into more debt to fund an emergency. If it gets used up, replenish it immediately). Eventually, save up at least 3-6 months of living expenses for unexpected occurrences like losing your job. These three basic strategies provide you with a financially secure and stable foundation from which your spending lives on.

2. Spend Money to Invest for the Short and Long Term

Your salary won’t make you rich, but your spending and saving habits can make you rich. And when it comes to spending your money wisely, spending your money on both short and long term investments will pay you dividends over the course of a lifetime.

If you haven’t already, your short term savings should consist of an emergency fund and 3-6 months worth of living expenses at a minimum (see step 1). You should also be free of any debt. From here, your savings can help generate the money you need for upcoming planned expenses like a reliable car or house. Saving money over the course of several months or years in the short term can help you fund those purchases without accumulating major debt. Additionally, short term investment spending should be in reliable investments that enhance the overall quality of your life. If you don’t need a house, don’t buy one just because most people around you are doing so. Likewise, leasing an expensive new car won’t be as reliable as paying full for a more practical, used one.

Next, you should focus your spending on long term investments like planning for retirement. As a general rule, you should be spending at least 15% of your income towards investing in retirement. If you think investing is too complicated, or your definition of investing means tracking the stock market in order to buy when shares are low and sell when they’re high, you may want to think again.

Your long term investments begin with tax-advantaged vehicles like a 401(k) or HSA (health savings account) if you have access to one. If you have access to one through your employer, invest at least enough to get your company match if one is offered. Many employers will match your contributions up to a certain percentage – which is free money that you’d otherwise be leaving on the table. You should also be spending investment money towards an IRA. These long term investment vehicles help bring down your taxable income while propelling your savings into the future. Your long term investments will also likely be funding a taxable account, which is an account where you are required to pay tax on interest, dividends, and capital gains.

When it comes to these long term investments, simple and boring is better. You can invest in low-fee index funds that provide you a consistent return over time. The market historically has gone up, and an index fund allows you to purchase shares in the overall market so that they will also go up over time. The longer you leave your money in the market, the more it compounds into a nest egg that will enable you to enjoy your spending for the rest of your life. Automating your investments makes it easy to spend your money properly in this way.

3. Spend Money on Comfortability

Do not save what is left after spending but spend what is left after saving.

– Warren Buffet

After putting your money towards financial stability, security, and spending on both short and long term investments, you may have some money left to spend. If you are meeting this threshold, you can spend your money towards comfort.

Spending money on comfortability doesn’t mean spending it on the most expensive slippers the market has to offer. Instead, it means finding the right level of spending that enables you to enjoy things, without tipping the scale towards overconsumption. Consumer products have a diminishing return on our happiness. And while yes, there is science behind money being able to provide happiness, it’s only up to a certain point. There is a diminishing return on making more than $75,000-$80,000. The more money you make, the less value it begins to have for you emotionally.

As your discretionary money increases, you may think that accumulating more things will make you happier. Please avoid this tendency. It won’t. What money can do, however, is purchase goods or services to satisfy your needs to keep yourself happy and healthy. Therefore, there are several things that you can spend your money on that will increase (instead of diminish) your returns on your overall happiness.

Spend money on experiences. Remember that incredible family vacation or holiday? Or that sporting event or concert (you know, the one that you said was one of the best nights of your life)? Of course you do! That’s because you made memories. And spending money to make memories means that the dollar value of the experience grows over time, since your memories stay with you (and often, get better with time).

Spend money to strengthen relationships. If you intentionally put money towards a date night with your spouse, a night out with friends, or a family member you want to get closer to, you’re spending money wisely. That doesn’t mean you have a license to eat out every meal, but you do have a license to spend your money in ways that can help you build up, maintain, and even strengthen your relationships. Having a hard time getting through to your teenage son? Maybe some time out for ice cream one on one can remind him of a favorite pastime, and enable you the quality time you can’t find in other ways.

Spend money on physical activities. Exercise is a fantastic way to relieve stress. So put your money to work by putting your body to work. There’s no point in accumulating wealth if you’re going to spend it all on healthcare expenses that were otherwise avoidable if you’d taken better care of yourself earlier on. Get a gym membership. Participate in a sports league, or take cycling or boxing classes. Stay active, and your overall wellbeing will improve.

Spend money on time. You can acquire more money, but you can’t acquire more time. Spend your money in ways that buy you more time. Pay someone to do your landscaping or cleaning so that you can get the hours you don’t spend working a day job back with your family or loved ones.

Spend money on others. Nobody is worse off having spent money on someone else. No, that doesn’t mean covering the cost of every meal for friends each time you go out. But it does mean providing some sort of real value to someone else. Your community or a favorite charity you love could use the help. You’d be surprised how much further your dollar can go out of your own hands. Additionally, your heart will thank you.

For guidance on how to spend money on yourself, check out these psychological tips. Additionally, if you want to make sure to keep your spending in check, check out our guide on finding the right budget for you.

How to Know What Spending Makes You Happy

Poor people have big TVs. Rich people have big libraries

– Jim Rohn

What if you don’t know what sort of spending makes you happy? Well, there’s a simple activity you can participate in to help you figure it out.

To find out what spending makes you happy, reflect on your purchases from the past 30 days. Track what you’ve spent, log those items, and rate them on a scale of 1 (no happiness) to 5 (most happiness). Repeat the activity with the same items 3 months after purchase, and then 6 months later. If certain items or goods don’t make you happy, reassess how you should spend that money in the future. Repeat this activity as you purchase new items.

For example, you may have purchased a new coat, a few shirts, a couple of pairs of shoes, a new TV, a smart watch, and a music subscription recently (hopefully not all at once, and certainly in full). Make a simple chart with the purchases on the left, a column for costs in the middle, and your happiness rating on the right. Then, rate them.

ItemCostHappiness Rating (1-5)
Winter Coat$2004
Shirt 1$203
Shirt 2$353
Shirt 3$503
Pair of Shoes 1$1505
Pair of Shoes 2$1004
Smart Watch$4003
Music Subscription$105

This would be an example of how happy these items made you after 30 days from purchase. Yes, this is a manual process, but it really can help you hone in on what you enjoy so that you don’t waste money in the future. Set a reminder to go off on your phone 30 days from the day you bought the item. Automating this process can make it easier.

Perhaps over the next few months your feelings about the new goods begin to wear off. The coat didn’t keep you as warm as you thought. One of the pairs of shoes you bought rubs against your ankle awkwardly, and so on. Or perhaps your new smart watch helped motivate you to get into better shape, and you love it more than you thought. Your 3 month and 6 month table could look like this.

ItemCostHappiness Rating (1-5)3 Month Rating6 Month Rating
Winter Coat$200433
Shirt 1$20333
Shirt 2$35345
Shirt 3$50332
Pair of Shoes 1$150542
Pair of Shoes 2$100455
Smart Watch$400345
Music Subscription$10543

Maybe you begin to see patterns in your spending. Perhaps the shirt you bought that was more expensive wasn’t that much higher in quality. Or you realize having a new TV wasn’t much different than your last one. Or it turns out that you’re totally fine with ads while listening to your music. Whatever the case, you now have measurable data on how your expenses have made you happy (or not). Taking action with what you learn can curve your spending habits to financial health and well-being.


As you now know, it’s important to spend your money on security, stability, short and long term investments, and comfortability. There’s a myriad of ways to spend your money, and it’s okay if it takes you some time to hone in on what really makes you happy. Spend on experiences, relationships, physical activity, time, and others. Experiment until you optimize your spending, and invest the rest.

For tips on how to increase your savings rate, check out our story or learn more from our ultimate savings rate guide.

If you’re looking to learn more about spending habits and how they effect your life, check out these articles.

How to Not Spend Money For a Year in 9 Steps

Why Spending Money is Necessary, According to a Psychologist

Why It’s Hard to Not Spend Money and What to Do About It

9 Tips for Spending Money Wisely as a Kid

Going on a trip? How Much Spending Money Do I Need for Hawaii

How to Live Life Without Spending Money

Master your saving and your spending, and you’ll be on your way to financial independence.

Climb on, FinBase.



John is a personal finance writer, editor, and a fellow FinBase climber. Tech worker by day, design owl by night, he is the co-founder and creator behind The Financial Basecamp.
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