Daniel Shin of The Darwinian Doctor explains why buying experiences are better purchases than material items to achieve greater, more long-term happiness. I’ve written a little bit about this in the past.
The world of personal finance is full of advice about what not to buy. For example: “Don’t buy a new car, and certainly don’t lease it!” Also: “Never fly first class (unless it’s with frequent flier miles)!”
There’s also a ton of writing and podcasts about what you should be buying, at least if you’re talking about investments. Mutual funds, bonds, individual stocks, gold, and (my favorite) real estate… the list goes on and on.
I really don’t have a problem with this, because the target audience of most personal finance writing is an early investor just getting started. For example, back in 2019 before the pandemic, Bankrate found that almost a third of the time, Americans don’t even have an emergency fund.
So clearly, personal finance writers are right on target with their central mantra of “save more, spend less”.
Success means having disposable income
But if we as a community are successful in our goal of financial education, eventually our audience will have emergency funds, retirement funds, and even excess capital.
I’ve used my relatively high salary as a surgeon to cover our fairly substantial recurring costs of SoCal living. My excess capital has gone less to tangible things, and more to retirement funds and real estate investing.
But as I project my spreadsheets into the future, I anticipate a time when we’ll have ample cash flow, with all the personal finance buckets nicely brimming with capital. In fact, I hope to be financially independent by 2028, with $4.6 million of investments and $130,000 of cash flow from real estate.
But when we get to financial independence, what will we spend our money on then? It seems like a ridiculous, self-congratulatory question, but please bear with me.
If you also see yourself eventually having excess capital, it’s really something you should think about too. Because at some point, you’ll have all your basic needs accounted for. At that point, your focus will shift from investments to more fundamental questions, like how to get the most out of life.
With that in mind, I’d like to rephrase the question: How should you spend your money in the pursuit of happiness?
Here’s the answer: Spend your money buying experiences, not things.
To explain why, let’s set the stage by discussing an important concept:
Hedonism says that “pleasure is the highest good and proper aim of human life.”
When we think of hedonists, we think of the ancient Romans before the fall of their empire. The robed aristocrats would gorge themselves on delicious foods, then visit the vomitorium so they could continue their feasting.
But how did they feel the next day, or the next week, after continued hedonism? I bet they eventually got bored of this pastime. Even though the concept of the vomitorium is a myth, the point is that even the pleasure of eating food can become boring.
Because as scientists have found, humans have a remarkable ability to adapt to their circumstances. This phenomenon is called “hedonic adaptation.” This term is usually applied to situations where new things suddenly lead to an improvement in your life, but this concept actually applies to both positive and negative changes.
Hedonic adaptation, Darwinian style
In my own life, I remember that I experienced a big increase in happiness and satisfaction when I moved into my “doctor house” in 2017, when the Dr-ess was pregnant with our second child. But after that initial jump in happiness, it didn’t take long before I returned to my baseline level of happiness. I became used to the extra rooms and space (and also the higher maintenance costs).
The same thing happened when I bought my Tesla Model 3. It was a huge luxury purchase — in fact it was the most money I’d ever spent on anything except for my housing and my education. It immediately made a big positive impact on my commute and my stress level. But as I enjoyed the acceleration and Autopilot every day, those initial feelings of happiness also faded back to my baseline.
This is true for almost all new purchases. Think of the last time you got a new iPhone. That shiny glass rectangle of precision engineering probably made you feel pretty high on life for a while. But by the second month of ownership, it was just another phone.
Psychologically, this makes sense. It wouldn’t be so great to have happiness be permanently linked to material possessions. Then people would spend their lives just collecting the maximum number of these happiness doodads, and society would degrade into chaos.
But how should we spend our extra money, if not on material goods?
Buying experiences instead of things can better benefit your happiness
According to Cornell University professor Dr. Thomas Gilovich and Dr. Leaf Van Boven from the University of Colorado, we should be seeking greater happiness through the collection of new experiences. Their research paper’s basic finding is that you can achieve greater happiness from “experiential purchases” over “material purchases.”
According to their research, spending money on concert tickets or a delicious meal is much more valuable in the long run than another doodad from Amazon Prime.
I mean, two-day shipping is nice, but that means that new possessions get to your doorstep that much faster. You don’t even get to anticipate that new physical item for very long! Before you know it, the new phone is in your pocket, and you’re adapting to its sparkly newness.
Why buying experiences are the better purchases
The mere anticipation of an experience, on the other hand, can be powerfully beneficial to your happiness.
Think of the last time you planned out a really great vacation. It was probably before Covid-19, back when you didn’t have to worry about Delta variants and negative test results just to enter other countries. What was it, a beach vacation? Maybe a trip to Europe?
That vacation gave you a triple whammy of happiness. You got benefit from:
- The anticipation of the trip
- The trip itself
- The memories you gained from the trip
Memories are the dividend payment of experiences
The memories you receive from experiences add to your memory bank. And just like index funds, their benefits compound over time. You can think fondly of good experiences again and again, with the recollection of the event growing ever rosier through the lens of time.
Even a bad experience might turn into a good story over time. Ever have an epically horrible adventure with a friend? Maybe your car broke down, or you missed a flight and both had to sleep in the airport. As awful as it might have been at the time, for the rest of your lives, you’ll get to laugh and reminisce about those memorable experiences.
We still need material things
I won’t go so far to say that material things are the enemies of happiness. Obviously, we need stuff to exist in today’s world. Perhaps you don’t need the latest smartphone, but a functioning phone and reliable transportation are fairly important items to be a part of modern society. You need to have some amount of material objects to take care of your basic needs for food, water, warmth, and rest (especially during intern year of residency).
But for me, the message is clear:
Go for experiential purchases over material purchases
Do you have a choice between a useful material item or an opportunity to gather more life experiences? Go for the life experiences once in a while. Maybe spring for a better hotel room, or visit that nice restaurant. Your future, happier self will thank you.
But what if you have a ways to go before you have the excess capital to invest into experiential consumption? Don’t worry. The good news is that meaningful experiences don’t have to break the bank.
Social interaction with friends and outdoor activities can be cheap and easy ways to generate amazing experiences. A nice hike with friends to a beautiful vista is a healthy and inexpensive way to make great memories.
In fact, leveraging new experiences with different people is a great way to expand your social relationships. This will pay dividends down the road as well.
So while I don’t expect to immediately start blowing all our money on first class plane tickets, I am going to feel more comfortable with spending money to buy memorable experiences. From now on, I’ll be viewing these experiences as valuable investments into the bank of happiness.
After all, at the end of the day we are not the balance of our retirement funds. We are the sum total of our experiences. Experiences with loved ones, with family, friends, and ourselves. So let’s make those experiences memorable. Spend your money buying experiences, not things.
What do you think? Is buying experiences better?
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