When dealing with personal finance, it is important to remind yourself from time to time that our most valuable assets are things that cannot be bought. Family and friends would certainly apply to this category. So would your health, time, and knowledge. It would be impossible to put a price tag on any of the above.
So let’s step back from discussion about saving, investing, and accumulating money, and let’s talk about how we spend our money. When it comes to spending your dollars wisely, some purchases may be wiser than others–at least as far as happiness is concerned.
Let’s say you get a bonus at work. Do you spend it on a new toy (whatever your “toy” of choice might be) or a vacation? If you want to be happier, you should spend it on the latter. People receive more enduring pleasure and satisfaction from investing in life experiences than material possessions.
Taken from a practical perspective, this seems to make sense. If your house was burning down and you only had time to grab one material possession, what would it be? For many, it would be their photo album. The memories of different experiences that those photos conjure up are priceless.
A national survey involving more than 12,000 participants, conducted by Harris Interactive on behalf of Northwestern Mutual Financial Network, found similar results. When asked which made them happier, an experiential purchase or a material one, most people chose the experiential purchase.
Here’s some of the reasons why:
Experiential purchases are more open to positive reinterpretations. For example, if you go on a hiking trip, and the weather is terrible, you might not view it as a pleasurable experience in the here and now. Instead, you may view it as a challenge, and over time remember the positive aspects of the experience more than the negative aspects. With material things you can’t do this, because they are what they are.
Experiential purchases are a more meaningful part of a person’s identity. Our culture highly values accomplishing goals and challenging oneself. We strongly value accomplishments. Experiences tend to be associated more with deeper personal meanings than possessions.
Experiential purchases contribute more to successful social relationships. Experiences foster relationships because you tend to do things with other people, so there is a great social aspect to it. Furthermore, we often share stories about experiences because they’re more fun to talk about than material possessions.
So when you are out spending your hard earned money remember that spending on things you can do, as opposed to things you can have, will make you happier in the long run.