“People first. Then money. Then things.”
Sound familiar? This is the mantra of Suze Orman, and whether you love her or hate her, she has a point here.
Are your financial priorities in order? Do you follow Suze’s mantra and put relationships first? Or is the struggle for money and things the focus of your life?
If you’ve been thinking about shifting your spending toward experiences and people instead of stuff, you’re on the right track. Let’s explore why investing in experiences and relationships is more valuable than spending on stuff.
Does Money Truly Buy Happiness?
We hear it all the time -- money doesn’t buy happiness. You can have all the money in the world, but if you’re alone and miserly, you’re probably not going to be very happy. Need proof? Academic researchers have conducted numerous scientific studies regarding money and happiness.
One such study was conducted in in 2008 by Dr. Elizabeth Dunn and her colleagues. They wanted to see if there was a correlation between income and happiness among Americans.
The results concluded that “how people spend their money may be as important for their happiness as how much money they earn.” Additionally, the study went on to prove that spending on others generates greater levels of happiness. Just spending $5 on someone else was enough to increase happiness.
While money doesn’t buy happiness in the truest sense, it can lead to happiness when used to help others.
Another study, conducted by Daniel Kahneman and Angus Deaton in 2010, found that happiness levels plateau once households earn $75,000. They concluded that “high income buys life satisfaction but not happiness.”
What Happens When You Invest in Experiences
Take a moment to think about the things you’ve spent a lot of money on. What purchases have made you the happiest? Are these purchases focused on experiences that are fleeting in nature, or are they focused on practical items that last a long time?
For example, you could take a trip overseas for a few thousand dollars, or you could use that money for a down payment on a new car. Your trip would only last a week or two, but your new car would (hopefully) last for at least ten years.
Using this logic, you might think putting the money toward the car would bring you lasting happiness, right? After all, you’re getting more use and value out of it.
Professor Howell, associate professor of psychology in San Francisco, disproved this way of thinking. He discovered that when people look back on their purchases, they actually find spending on experiences to be more valuable than spending on stuff:
As you can see, there might be more anticipation around purchasing a material item than there is with an experience, but after the item arrives, or after you’ve been through the experience you purchased, you’re more likely to favor the experience.
A similar study conducted by Matthew A. Killingsworth and Thomas Gilovich reinforces these findings: “Experiential purchases (money spent on doing) tend to provide more enduring happiness than material purchases (money spent on having).”
What Can We Take Away From the Research?
From these studies, we know that:
- We’re happier when we spend on experiences and on others as opposed to spending on things
- The anticipation surrounding purchasing material items can be bad for our finances.
Of course, it’s easy to get excited about a new purchase. Many of us enjoy going shopping and taking home something new and shiny. However, that happiness doesn’t have any lasting power. Most of the time, our material purchases turn into clutter that we end up throwing away, selling, or donating. They’re reduced to background noise after the first few times we’re exposed to them.
While experiences aren’t tangible, they do create lasting happiness. We’re able to create amazing memories by investing in things like travel, concerts, festivals, and conferences.
Beyond that, it’s worth treating your loved ones from time to time. Spending on others has been proven to bring us more joy than spending on ourselves. Take your parents out to dinner one night; buy your grandparents tickets to a show they love; bring your siblings and close friends along with you on your next trip.
Relationships are always worth investing in -- they pay great dividends in the form of memories and happiness.
Additionally, don’t forget about charitable giving. If you have the means, invest in others in the best way you can: through organizations that seek to improve the lives of those less fortunate. You can also invest in businesses and organizations that want to make a positive difference in society. It’s a win-win situation for everyone involved.
Can Having Too Much Stuff Lead to Unhappiness?
We’ve covered why it pays (literally) to invest in experiences and relationships. But is it really so bad to spend on stuff?
It is when your spending doesn’t align with your values. Spending money for the wrong reasons, such as to impress others or look like someone you’re not, can lead to unhappiness. Not being authentic is stressful, and playing a part isn’t worth your energy or your money!
In the words of Will Rogers, “too many people spend money they haven't earned to buy things they don't want to impress people they don't like.”
Don’t get caught up in the rat race of the Joneses. Always spend your money in a way that’s meaningful to you. Take the time to evaluate your spending and your values to ensure you’re prioritizing the right things.
Prioritize your spending accordingly and invest in experiences and relationships. Stop spending on things that don’t matter to you, and happiness will follow.