We live in a largely material, consumption-driven world. Naturally, you may have gone through the thought process that your money is best spent on material goods that will last you a long time, rather than on short-term goods or experiences. If happiness is high on your priorities list, you’re better off spending your money on experiences over material possessions.
Why? Mainly because what economists like to call, “hedonic adaptation,” which is a fancy way of saying that the effects of change wear off quickly as we get used to them. For example, think about the last time you bought new clothes or got a new phone. It probably didn’t take very long for your exciting new item to become a part of your everyday life. So, while buying a long-lasting material item might be a good idea, don’t expect it to contribute to your happiness long term.
The benefits of spending money on experiences
Experiences, unlike material possessions, are more open to positive reinterpretation. In other words, if you went on a grueling hiking trip or less-than-perfect vacation, you might forget the not-so-fun parts as time goes by, and develop a rosier memory of the event. Physical items, however, are ever-present, and can fade into the background of your life. Experiences get better with age.
Experiences also contribute to happiness because of the social value they can provide. Talking to a friend about an experience is much more enjoyable than talking to a friend about a recent purchase, and can help build relatability between you and your friend. Besides the storytelling aspect that comes with describing experiences, experiences beat purchases in conversation, because societally, people who regularly speak about their material possessions tend to be stigmatized in ways that experiential people are not. The social value that comes with reliving experiences with friends can have a huge impact on the growth and deepening of social ties.
Another reason why your money is better spent on experiences than on material goods is because of how people feel beforehand: anticipating an experience is more exciting and pleasant than anticipating a material good. If you compare a line of people waiting to get into a theme park to a line of people waiting to get to the checkout of a department store, you’ll see a stark difference. While thinking about a future trip is exciting and fun, thinking about getting a material good—even a gratifying one—mostly makes people feel anxious and impatient in comparison.
Perhaps the most important reason that experiences contribute to happiness much more than physical things do is because experiences are more central to one’s identity than possessions are. Since a person’s life is made of a series of experiences, acquiring rich experiences will naturally create a richer life. While material possessions are more often used as status symbols when affecting one’s personal identity, experiences can lead to personal growth–a much deeper level of being.
The benefits of spending money on others
Another way to increase your happiness with your hard-earned cash is to spend it on someone else. Warren Buffet is gradually donating 99% of his wealth to philanthropy, and could not be happier. He encouraged other rich Americans to do the same, asking them to donate around 50% of their wealth.
While you may not be a ‘rich American,’ there’s evidence that even spending just $5 on another person can bring you more happiness than if you spent that $5 on yourself. Greater happiness has been seen from giving in poor and rich countries alike, and even in toddlers, suggesting that we are hardwired to give material items and receive happiness in return.
The happiness challenge
In the spirit of Warren Buffet’s Philanthropic Pledge challenging rich Americans to give, challenge yourself to spend your next nonessential dollar on a rewarding experience or on a friend. If you’re feeling creative, think of how to combine the two into one for the ultimate happiness boost. Happy spending!
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