The Secret to Using Money to Buy Happiness

I’m really excited about getting a new iPhone.

I’m rather attached (addicted?) to my phone, so I rarely think twice about shelling out several hundred dollars to get a new one. I can even say it’s an extremely reasonable purchase to make, because I use it for work and recreation.

That said, I wouldn’t say that my phone makes me happy. Sure, those first few days with a new phone are great, but the novelty wears off quickly. I also don’t have any memories specifically tied to any of my past phones that shaped the person I am today.

The same is true for most of the material stuff you can buy in a store.

Why Doesn’t Stuff Make Us Happy?

There’s nothing wrong with purchasing material items such as gadgets or jewelry, but research suggests that experiential purchases like a vacation or elaborate date night bring more happiness.

Consider the last several big-ticket material items you purchased. You probably got a lot of pleasure out of those items initially, but that happiness wears off as the novelty of the material item fades.

Meanwhile there is a strong link between happiness and experiential purchases, particularly when those purchases are tied to leisure. In addition, experiences are also less likely to generate buyer’s remorse than material purchases.

This applies to big purchases (vacation versus new television) and small ones (seeing a movie versus buying a small trinket), which makes sense when you consider the lasting memories an experience can create.

How Experiences Provide Exponentially More Value

In February 2009, near the nadir of the financial crisis, I took a ski trip with friends from high school. For weeks I considered not going because it seemed like a poor use of money in the midst of a severe recession when I could be investing for the future at extremely attractive prices.

My wife convinced me that staying home would be a huge mistake. She was right. That trip turned out to be one of my most memorable.

Looking back nearly ten years later, I don’t remember how much the trip cost. I do, however, have vivid memories that I wouldn’t exchange in return for the money spent or anything I could have earned by investing those dollars instead.

As Mark Twain said: “Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do.”

If You’re Going to Spend, Invest in an Experience Instead of Stuff

Experiences become part of our identity. Unlike material purchases such as a new smartphone or a pair of noise-cancelling headphones, the memories from our experiences make us feel more connected to friends and family.

On my death bed, I won’t remember the dozens of gadgets I’ve purchased over the years. I will remember my ski trip as well as the many other trips, concerts, and sporting events I’ve spent with family and friends.

My wife calls me cheap – I prefer frugal – but she will also tell you that my wallet is wide open when it comes to experiences from vacations and playoff baseball to live performances and special occasion dinners.

Again, I value a great experience because they mean more to me, provide more (and lasting) happiness, and allow me opportunities to deepen connections and relationships with others.

The other great thing about experiences is that you get to enjoy them in advance as well as when they’re actually happening. In fact, the period leading up to an experience can be equally fulfilling as the experience itself.

Think about the last time you took a vacation. In the weeks or months leading up to the trip, you likely looked at pictures of your destination, talked about activities you plan to do, and bragged to your co-workers about the upcoming time off.

You can also extract happiness in advance of lower cost experiences, like a date night, by thinking about how great it will be to relax with your significant other, how funny a new movie might be, or how tasty a new restaurant will be.

How to Get More Value From Every Dollar You Spend

In my experience, people are too quick to deem an experiential purchase as too expensive, while they don’t hesitate to buy something like a new iPhone. Even if it’s useful, the happiness from buying stuff quickly fades. Experiences, on the other hand, provide lasting happiness.

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