How to Buy Happiness

I apologize in advance for the inherent humblebraginess of vacation pictures. I did warn you, though.

I am generally a pretty frugal person. Three of my last four posts have been about saving money. I’ve written about cognitive biases that get in the way of saving money. I’ve written about the best way to hit savings goals.

And yet, I just spent a whole bunch of money on a three-week vacation to South Africa and Spain. This came thirteen months after a trip to Peru. Which itself came eight months after a honeymoon in the Bahamas (which, to be fair, was paid for with hotel points).

The sun setting over the Atlantic from Cape Town

This may seem out of character or incongruent with my savings focus. But I don’t save money for the sake of saving money. I don’t intend to be the richest man in the cemetery. And while I would love to reach financial independence, I am not aiming to get there as soon as possible by any means necessary. Instead, I want to live my best (and happiest) life with as little waste as possible.

Strategic Spending

My spending strategy is one that I first recall being articulated by Ramit Sethi in his book I Will Teach You To Be Rich (cheesy name, but solid intro to money): Cut spending mercilessly on things that don’t make you happy and spend freely on things that do.

This makes intuitive sense. Why would we want to spend more money than we need to on things that don’t make us happy? Why wouldn’t we spend more on things that do make us happy?

The problem is that humans are really bad at knowing what will actually make us happy. In addition to (or, perhaps because of) our natural inclination to struggle with this, advertisers have stepped up and spent insane amounts of money to convince us that what they are selling is the true key to happiness. (This includes Lexus ads declaring that “whoever said that money can’t buy happiness isn’t spending it right,” which is so on the nose that pretty much every scientific paper on this topic references it.) So how are we to differentiate between what actually will make us happier and what just seems like it will?

Material Goods and Happiness

The largest purchase of most Americans’ lives is their house. We watch Property Brothers and House Hunters. We think about what we would include in our dream house. We buy starter homes and upgrade to nicer places after a few years.

(You can see where I’m going with this, and it is not going to help my reputation as the homeownership buzzkill in my group of friends.)

In the book Happy Money, Elizabeth Dunn and Michael Norton review the scientific findings on a number of issues related to money and happiness. One thing that they find is that “there is almost no evidence that buying a home – or a newer, nice home – increases happiness.”

The biggest purchase of our lives and it doesn’t actually make us any happier.

Because of hedonic adaptation, this is true for pretty much any material purchase. Upgrading from your Toyota to a Lexus may make you pretty happy for a while. But then the Lexus will become your new baseline, and that happiness boost will disappear. Instead, you’ll just be more unhappy when you have to stoop so low as to drive a Toyota again.

So if material purchases don’t make us happy, what does?

Buying Experiences

You may have guessed at this point that buying experiences makes us happy.

Close your eyes and think back on two purchases, one an item and one an experience, that you thought would make you happy. Which was more effective? If you’re like the majority of Americans, thinking back on the experiential purchase will make you happier than the material one.

There are a number of reasons that experiences make us happier than material goods. Here are some that have been uncovered by research:

  1. A sense of connection with others
Nothing like diving with great white sharks to bring people together

We’ve already looked into how using money as a way of helping others can boost your happiness. It turns out that sharing an experience with someone can bring about a similar social-based boost in happiness. You can get this sense of connection through actually sharing an experience with someone else or through having similar experiences separately that bring you together.

You can even benefit from the telling and retelling of these stories to your friends and family. Which brings us to number two…

  1. Better stories

It is not surprising that stories about exotic and unusual exploits are more fun than stories about our new clothes. It is easy to overlook the happiness boost inherent in this, however. In addition to the social benefit of having these stories to tell, each time you tell the story you get to relive the event or activity in question.

It is 100% worth flying to the other side of the world to be able to tell people that you hung out on the beach with penguins.

And while you don’t need a study from Cornell to tell you that people enjoy telling stories about events more than items (although there is one) you may be surprised to find that the recipients of the stories liked the storyteller more when they were discussing an experiential purchase. They also saw them as more “open-minded, intelligent, and outgoing.”

Another benefit of story-telling is that the negatives tend to disappear with time, while the positives stick with us. In Happy Money, the authors tell the story of a group of students on a three-week bicycle trip through California:

“The trip did not go smoothly. There were mosquitoes. It rained a lot. During the trip, 61 percent of the students reported feeling disappointed with it. Yet after the trip, only 11 percent reported disappointment. As one cyclist put it, ‘All of the complaining that I did seems so silly to me now, because all I can remember is making a lot of great friends.’”

  1. Difficult to compare

Another happiness benefit to experiences is that they are hard to compare against each other.

There is nothing in my experience memory bank to which I can compare seeing a lion in traffic.

To go back to Happy Money, the authors note that one of the problems with material purchases is that “[w]e are happy with things, until we find out there are better things available.” Your iPhone 7 was the envy of all until the 7 Plus came out. More drastically, every time I pulled out my sweet Droid 3 with sliding keyboard, people mentally compared it to new phones and proceeded to laugh at me.

This type of comparison isn’t really applicable to experiences. Going to a Motion City Soundtrack farewell concert did not become less enjoyable because other people went to a Rolling Stones farewell concert, and not just because there have been 78 Rolling Stones farewell tours. Each experience is unique in a way that each phone or car or house is not. This means that when purchasing experiences you are less likely to have buyer’s remorse and more likely to get a happiness boost.

So if you’re looking to get the most happiness you can from your income, find some ways to save on your bills and material purchases and redirect that money into experiences.

What are your happiest purchases? Do they match-up with what the research suggests? Or do you have material purchases that have made you really happy and experiences that have made you unhappy? Let us know in the comments!

14 thoughts on “How to Buy Happiness”

  1. Great pictures, Matt. Glad you had a great time (and saw a lion in the road. How cool is that?)

    The house thing and the idea of setting a new bar after you buy an upgrade are really interesting points. I like having a house, and sometimes I think I’d like a nicer house. Then I realize that having a nicer bigger house would mean more house to clean.

    One philosophical point: We have a small sailboat, and make memories on the boat when we take it out. If we didn’t have the boat, we wouldn’t go sailing probably (although we might do something else.) If a thing (like a boat) allows you to have different experiences, is it a thing or an experience?

    1. Thanks! I actually debated discussing the gray area between things and experiences. Maybe that will get an article at some point in the future. There is a lot of research and debate on where the line should be drawn. It looks from the research like buying a thing (like your boat) that allows you to have different experiences has similar happiness benefits to buying experiences.

      Thanks for stopping by, Emily!
      Matt recently posted…How to Buy HappinessMy Profile

  2. I love the photo of the lion in traffic. Terrific points here, Matt, especially about not wanting to be the richest man in the cemetery. If we don’t use our money to create experiences, it’s only paper. I’m glad to see you are living life to its fullest – which makes you very rich, indeed!
    Mrs. Groovy recently posted…Six Ways to Become an Opportunity SlutMy Profile

  3. Oh my goodness, Matt! That trip looks amazing! Great whites, penguins and lions…oh my. 🙂

    I love this post! And I like the point made on stories – even disappointing or difficult experiences (at the time) don’t turn out to be all that disappointing after the fact. We have so many tales from traveling with our kids – and most of the stories we remember and retell the most were actually difficult and somewhat unpleasant at the time (for example, when it hailed on us on a long hike in Rocky Mountain National Park).

    I recently listened to Tim Ferriss’ interview with Mr. Money Mustache. MMM makes some excellent points on happiness (very similar to what you say in this post). His method of deciding whether or not to spend on a purchase is invaluable – does it remove negativity? is one of the main questions he asks. This alone can put many of our material purchases in a whole new light.
    Amanda @ centsiblyrich recently posted…Frugal Food: Vegetarian Ramen Midwest Stir FryMy Profile

    1. Thanks, Amanda! It was a blast!

      I’m sure adventure stories with the kids are a lot of fun. While I can’t imagine enjoying getting pelted with hail while hiking, I’d imagine you get a lot of laughs out of the story for years.

      I found the MMM episode really interesting, as well. I kind of expected it to be a rehash of the same stuff he’s said in all of his other interviews, but the removing negativity criteria was one that I had never heard before. It’s a really intriguing framework.
      Matt recently posted…How to Buy HappinessMy Profile

  4. Some points to live a life with happiness.
    .Make others happy
    .Turn money into profit
    .Spend it on yourselves
    .Avoid being sad

  5. My wife and I love spending money on creating memories instead of spending money on stuff. We love taking memorable vacations. With a 1 year old at home, I am hoping to get back to doing some fun traveling.

    I would love to go on a three adventure like you all did. I checked out some of the instagram photos that your wife put up and I was wow’d!!! It looked like a great time.
    Mustard Seed Money recently posted…Clarity Money ReviewMy Profile

  6. Love the pictures, sounds like a really fun trip. I so agree and identify with buying experiences over material, but sometimes they blur. I have a sports car I bought almost a decade ago. It was definitely extravagant and something I wouldn’t repeat. Financially it has had minimal impact over the long haul, especially since at the time I was weighing it against a real estate purchase. Still it’s also something I wouldn’t sell at its current valuation. The fun of driving that car with my wife across country, counts for me as one of the experiences. Working on it with my son when he gets older will probably be similar. I.e. In some manners my little red sports car is a material. But in others it’s about the experience I have in it with my family. It’s a balancing act to determine if your buying a material alone (a Lexus over a Toyota) or and experience with a material (say a sports car for a car hobby or a home with space for a garden for someone who likes planting). It’s relative to the person.

    1. You are definitely right, and Emily touched on a similar point above. Buying a thing that leads to experiences can certainly provide similar happiness benefits to buying an experience outright. If you are buying a Porsche for your work commute, it is more of a material purchase. If you are buying it because it will make you go out for more family drives together or to work on it and tinker with it, then you are buying more of an experience.

      Great point, and thanks for the comment!
      Matt recently posted…When Buying Happiness, Pay Up FrontMy Profile

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