When we spend money on ourselves and the people we care about, we’re likely doing more than simply buying things. On a deeper level, our ultimate goal is to create feelings of happiness, satisfaction and well-being. 1
But are we actually spending our money in the best ways to achieve those results? Many of us spend in ways that do little to help us get what we truly want. Researchers say that there is a relationship between how we spend money and happiness, so the good news is that we have the opportunity to shift our spending patterns to help increase our happiness and help us create more meaningful lives. So, where do we begin?
Here are two keys: First, focus more on experiences and less on material goods. Second, other people matter.
Our culture tells us that buying lots of stuff will make us happy. And that can be true, but only up to a point. Research published in the Journal of Positive Psychology reveals that people who spent money on experiences rather than on material goods were happier because the excitement we often get from purchasing things tends to diminish quickly as we get used to them and start taking them for granted. However, the joy and memories experiences bring can give us stronger feelings of satisfaction. That can be true even if the experience doesn’t last nearly as long as the physical item that we purchased.
Think of it this way: A material item like a car or a TV is an item that is separable from you. Experiences are more likely to become part of who you are as a person. Also, purchasing an item is often a solitary action, especially when buying online. When we participate in experiences with friends, family, co-workers and others, those experiences may strengthen and enhance the relationships that are most important to us. Memories from shared experiences can later be recalled among the people who took part in them, as well as told to others who weren’t part of the experience.
Tips for Experiential Spending
So, what can you do to get the most out of your experiential spending?
Here are a couple of ideas:
1: Think smaller and more frequent. It’s easy to think that only big and expensive experiences, such as a grand vacation every year or two, are the way to go. But, spending on smaller experiences more frequently may give you more satisfaction and bang for your buck.
2: Give gifts that enhance the experience. One key to getting the most pleasure and happiness from an experience might be to give gifts that help facilitate meaningful experiences. For example, buying a better camera or binoculars to use during a unique outdoor travel experience or buying high-end sporting equipment for the family can lead to better outdoor experiences in fun, interesting locations. Gifts that help create happy social experiences can be money very well spent.
Spending Money on Others Promotes Happiness
According to a research study published by Dunn, Aknin, and Norton, “personal spending was unrelated to happiness, but higher prosocial spending was associated with significantly greater happiness.” In addition, the study “provides initial evidence that shows how people spend their money may be as important for their happiness as how much money they earn, and that spending money on others might represent a more effective route to happiness than spending money on oneself.”2 For example, giving to charities that you are passionate about on a regular basis promotes happiness. Also, if you have ever helped out a stranger or someone in need, you have likely experienced the happiness that this “pay it forward” behavior can bring.
Spending money on shared experiences and also spending money to benefit others can lead to increasing our own happiness – sometimes even more than when we spend money on ourselves. We would love to hear from you about any shared experiences or things that you have done to help others that have been meaningful to you and brought you happiness. If you have any questions, or if there is any way we can help, please contact your Atlanta Financial advisor.
1 John Bowen and Russ Alan Prince, VFO Inner Circle Report August 2020 AES Nation LLC
2 “Spending Money on Others Promotes Happiness” Elizabeth Dunn, Lara Aknin, and Michael Norton, www.sciencemag.org March 21, 2008