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Video: Spend money to buy happiness

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updated 9/14/2009 10:23:05 AM ET 2009-09-14T14:23:05

The term "retail therapy" is a bit of a misnomer. Sure, buying yourself something expensive can improve your mood, but the boost is often temporary. In fact, you usually end up feeling worse later on (like when your credit card bill arrives).

Fortunately, there are ways to spend your money — even if you don't have much of it — that will bring you true long-term happiness. Over the past 25 years, behavioral economists and psychologists have been examining the connection between money and mood, and they've made some intriguing discoveries. Using their research, Women’s Health identified five simple ways to reallocate your budget so that you feel more bliss.

Spend money on a vacation instead of spa treatments
In need of some serious R&R? A mani-pedi or massage might seem like the perfect way to pamper yourself. After all, compared to a trip, these things go for chump change. But experts say putting some distance between you and your daily surroundings is a much better way to de-stress and is worth the expenditure. In a study published in the journal Occupational Medicine, researchers found that vacations not only had a positive effect on short-term happiness but also a beneficial impact on people's long-term mental and physical well-being.

More good news: "It's not just the vacation itself that'll make you happier, but the potential perspective you'll gain on your getaway, which can lead you to a happier life," says Alan Lysaght, a financial psychology expert and coauthor of The ABCs of Making Money. "Breaking free from your usual routine gives you a chance to take stock of your life and figure out the kinds of changes you need to make to be happier." Can't swing a far-flung trip right now? Even a weekend spent at a local B&B can work wonders.

Spend money on makeup instead of clothes
It's as simple as this: When you look good, you feel good. But that mood booster doesn't have to be a big-ticket item.

According to a study conducted by BuzzBack Market Research, beauty products — even the drugstore kind — are a more satisfying purchase than a chic new addition to your wardrobe. As crazy as it sounds, studies have found that during economic downturns, lipstick sales actually spike. (Economists call it the Lipstick Effect.)

One possible reason: There's something satisfying about adding a little bit of luxury to your life — and even if you're strapped for cash, you can usually fit a lip gloss into your budget. "And unlike a dress you wear every once in a while, that tube of lipstick will provide a daily pick-me-up," Lysaght says.

Spend money on your bedroom instead of your living room
Generally, when people splurge on a home upgrade, they focus their expenditure on a room that guests spend time in — for example, they'll buy a sofa for the living room or granite countertops for the kitchen. But those might not be the best places to invest your home happiness dollars.

One recent study found that the cities where residents got the most restful night's sleep were also the places where people's happiness levels were highest. "The bedroom is where you relax and unwind," says Denis Cauvier, Ph.D., a business consultant and Lysaght's co-author. And when you consider that we spend a third of our lives in bed, investing in a new mattress, soft 600-thread-count sheets, or heavy-duty light-blocking window shades makes a lot of sense. In fact, you'll reap one of the most priceless things of all: a good night's sleep.

Spend money on a gym membership instead of home equipment

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You might think you'd be a lot more likely to work out if you have a treadmill, stationary bike, or weight machine sitting right in your basement. Not necessarily. According to a recent survey by the Consumer Reports National Research Center, 37 percent of respondents admitted that they use their home equipment less frequently than they expected to.

One possible reason: Working out with other people at the gym makes those sweatfests more enjoyable — and when people have fun exercising, they're more likely to stick with it, reveals an article published in the Journal of the American Academy of Physician Assistants. What's more, merging your workout with your social life will help you fit two important tasks into your overbooked calendar at once.

Video: Spend money to buy happiness (on this page) "The gym basically automates your time with friends," explains Laura Rowley, author of "Money and Happiness: A Guide to Living the Good Life" and a financial columnist for Yahoo Finance. "You can see people you really want to see, which makes you happy and makes the expense feel worth it." If that's not enough of a reason to shell out that monthly fee, consider this: While you can slack off on the treadmill in your basement without anyone knowing, that militant spin instructor isn't going to go as easy on you. So in the long run, you'll be much happier with the results, too.

Spend money on others instead of yourself
If you want instant gratification, give some of your money away. In one experiment, researchers handed out $5 and $20 bills to students, asking half to spend it on themselves and half to dole the dollars out to other people. Those who gave the cash away reported feeling happier at the end of the day.

"Not many things contribute to our happiness more than generosity," says Tal Ben-Shahar, Ph. D., a former Harvard lecturer and the author of "Happier." Consider donating $25 per month to your favorite cause (which you can deduct come tax time). Don't have a cause close to your heart? Check out charitynavigator.org, which catalogs organizations by topic (animals, environment, health, etc.) and even rates charities, so you can be certain your contribution really will make a difference.

Or do something good close to home: Researchers at the University of Pennsylvania's Wharton School have found that we're more motivated to help others when we have some personal connection to them. Find local charities that strike a chord — food pantries, the humane society, a homeless shelter, or a local museum or library — and write a check to help them out. On a smaller scale, treating a friend to lunch for her birthday or buying your boyfriend his favorite flavor of ice cream can make you feel warm and fuzzy, too.

© 2012 Rodale Inc. All rights reserved.

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