Spending Money on Experiences vs. Things

28 Sep    Uncategorized

Research shows that people generally tend to be happier when they spend more money on experiences and less money on things. It can sound a little hippie and new-agey to those who are trained to look at the appreciation rates of commodities and other hard assets, but in my opinion, there’s an even more fundamental truism at work here: Time, not money, is life’s most precious commodity.


Taking a Second Look

If this advice sounds over-simplified, that’s because it is. The primary study for this claim comes from San Francisco State University and looks like sound science to us, but it suggests that people generally undervalue how much experiences have to offer their happiness compared to things. In other words, this doesn’t mean that all experiences are worth the price or that a purchase of a material thing can’t be a smart buy. It’s also worth pointing out that many purchases, including some major life purchases, seem to straddle the line between an experience and a material thing. Part of the value in buying a car or a house is the time and experiences you’ll have living and driving, but then where do you draw the line? Both gold and memories can last a lifetime, but do weekly trips to the shopping mall really make your life better if you end up swamped in consumer debt.


Moving the Needle

Even still, the research is provocative and reinforced by plenty of anecdotal evidence. And since we all face complex financial decisions, it doesn’t hurt to see what the hard evidence has to say on the subject. Again, finding a balanced approach is best—or at least an approach that’s balanced with your own personal priorities and living your best life possible. To this point, we like to think making wiser financial decisions involves moving the needle slightly more toward experience and slightly away from things.


Being smart financially doesn’t have to be a complex order. Watch famed financial scholar Harold Pollack discuss how all the financial information you will ever need can fix on an index card: