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When we read about Laura Vanderkam, author of books including All the Money in the World: What the Happiest People Know About Wealth and I Know How She Does It: How Successful Women Make the Most of Their Time, we figured she had pretty much cracked the code to life. So we tracked her down and asked her exactly how the happiest, most productive people spend their hard-earned cash. Turns out it’s not on "it" bags.

woman on vacation at th beach
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They spend on experiences

When it comes to most possessions, there's a certain funny phenomenon called the "hedonic treadmill." That means we get used to things over time, and what made us happy once no longer makes us happy. You buy a big house and love the extra space, and then after a while it no longer seems so big! Or you compare it with other homes and feel inadequate. But experiences aren't subject to the same factors. They are not quite as easily compared. You'll still enjoy your trip to the art museum even if someone else you know went to a sports game. Likewise, experiences are always slightly different. Today's trip to a bar with friends is different from next week's trip to a bar with friends—so you don't get used to it. That's why spending on experiences often gives people more happiness bang for the buck than spending on objects.

RELATED: Why Taking a Trip to Paris Is Better Than Buying a Flat Screen, According to Science

woman standing in grand central station
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They spend to save themselves time

We can make more money. We cannot make more time. Thus, when money can be used to buy time, that's generally a good investment! Think about how you spend your time, and think about when you are unhappy or counting the minutes. Then ask yourself if there's some way you could strategically use money to make those minutes better. If you hate mowing the lawn, maybe you could outsource it. If you hate your commute, maybe you can negotiate to work from home one to two times a week and spend on some good home office equipment. 

RELATED: Money Doesn’t Buy Happiness—Unless You Spend It on *This* (According to Science)

friends laughing and hanging out outside a coffee shop
Twenty20

They spend philanthropically

Humans are social creatures. Tight bonds with other people make us happy. One way to create tight bonds is to spend money on other people. It doesn't have to be elaborate. Buying a friend coffee is a great use of money. Why? You get to spend time with her, and she'll probably reciprocate. So you get two fun coffees out of your investment! Giving money to causes we support not only makes us feel good, it helps us feel wealthier—because we then think of ourselves as the kind of people who can give money away. That helps create a sense of abundance.

RELATED: This Is Exactly How Much Money You Need to Make to Be Happy, According to Science

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