Turns out money actually can buy happiness. Here's where to splurge...

Spend money on: a holiday
Instead of: spa treatments
In need of R&R? A mani-pedi or massage might seem like the perfect way to pamper yourself. After all, compared to a trip, this is small change. But experts say putting some distance between you and your daily surroundings is a much better way to destress and is worth the expenditure. In a study published in the journal Occupational Medicine, researchers found that holidays not only had a positive effect on short-term happiness but also a beneficial impact on people’s long-term mental and physical wellbeing. More good news: “It’s not just the holiday 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 financial psychologist Alan Lysaght, co-author 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: make-up
Instead of: clothes
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 pharmacy 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. “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: something for your bedroom
Instead of: something for your living room
Generally, when people splurge on a home upgrade, they focus their expenditure on a room that guests spend time in – the living room or kitchen. But those might not be the best places to invest your home happiness rands. 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 business consultant Denis Cauvier, Lysaght’s co-author. And when you consider that we spend a third of our lives in bed, investing in a new mattress 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: an expensive piece of home equipment
You might think you’d be a lot more likely to work out if you have a treadmill or weight machine sitting right there in your spare room. Not necessarily. According to a recent survey by the US Consumer Reports National Research Centre, 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. “The gym automates your time with friends,” explains Laura Rowley, author of Money and Happiness: A Guide to Living the Good Life. “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 spare room 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 money to students, asking half to spend it on themselves and half to dole the notes 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, author of Happier. Consider donating a small amount every month to your favourite cause. Don’t have a cause close to your heart? Check out www.greatergoodsa.co.za, a site that brings great causes and committed givers together. Or do something good close to home: researchers 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 – soup kitchens, a homeless shelter, or a local museum or library – and write a cheque to help them out. On a smaller scale, treating a friend to lunch for her birthday or buying your boyfriend his favourite flavour of ice cream can make you feel warm and fuzzy, too.