Most people are under pressure to earn more money. They have fallen prey to the false conventional wisdom that the more money you make the happier you are. In actuality, recent studies have shown that in the United States, earning more than $75,000 a year has little effect on daily happiness.
Once your basic needs are accounted for, it becomes not so much how much you make, but how you spend your money. As it turns out, buying experiences, or experiential purchases, instead of material purchases can dramatically increase your happiness.
For most people, buying nice “things” is the goal when one starts earning more money. There is a natural tendency to want to buy a larger house, a nicer car, and finer clothing. This behavior is driven by our culture of consumerism. In fact, we are also driven by our physiological response to purchasing large ticket items. We experience a rush of dopamine building up to the purchase of an expensive item. Think of the first time you bought a car – what a rush!
But this purchasing cycle presents a problem. The problem with purchasing material goods is that the novelty of the purchase quickly subsides. “New things are exciting at first but then we adapt to them.” says Thomas Gilovich, a psychology professor at Cornell University.
Research suggests that if you buy experiential and leisure purchases – trips, sporting events, movies – over material goods, you will be more satisfied with your life. To get the biggest bang for your buck, the experience should link to your identity, be memorable, be unique, and foster a social connection.
Experiences give us a way to tell the world who we are. They provide texture to our life. In fact, people are much more likely to want to give up a material purchase than the memory of an experience. Our attachment to our memories is rooted in the fact that the development of who we are is directly related to our life experiences.
Moreover, experiences allow us to tap into the pleasure of the experience for years to come. Unlike buying a Rolex watch or Chanel handbag, the experience of a trip to Mexico with a group of friends can provide a source of pleasure to draw from. Not only will the vacation be an enjoyable experience, but also several years from the trip, you can reflect back on the vacation and bask in its memory.
Furthermore, that memory will get better over time. The value of experiences appreciates over time due to their abstract nature. According to sociologist Fred Davis, nostalgia “reassures us of past happiness and accomplishment”.
Not only do experiences last longer than material items, they are terrific for building social connections. Given the social aspect of experiential purchases, such as going to a sporting event, you will most likely develop friendships along the way, thus increasing your sociability. As social creatures, this sense of camaraderie is a critical part of building a solid social fabric and increases our well-being.
How you spend your money can make all the difference in how “rich” and “happy” we feel. Put this knowledge to use and build an experience rich life. Instead of accumulating material items, remember that purchasing your next trip or adventure may be the better use of money. Draw upon your memories, and they will serve as lifelong companions. By increasing your sociability you will have more chances to participate in experiences to come. Now get out there and enjoy the world