What do you spend your money on?
I, personally, spend my money on books, Netflix and technology. Unfortunately, the books I buy sit on my shelf collecting dust, my Netflix account has a wide array of recommended television shows I don't have the time to watch and the technology I buy has to be replaced every couple years because new, updated products come out.
We all spend money on different things. Obviously there are the constants in society: taxes, housing and healthcare, but what about the other "stuff"? Jewelry sales increased for 25 months straight, and smartphones purchases have been growing for years. (For more, see: Why Retirement Optimism is Slipping for Many Americans.)
So the question I pose to you is this: Why do we spend money on all of this miscellaneous "stuff?" It’s because we think these objects will make us happy. The new iPhone will have a better camera, which will make our selfies better, and that will make us happy. The new BMW will have a better radio, which will make us happy. We associate materialistic goods with happiness, but science has proven that is not actually the case.
Research has found that spending money on experiences makes us happier than buying "stuff." This is because when we anticipate a trip we’ve planned we have the excitement that increases with each day leading up to it. When we want "stuff," we experience only impatience until we can actually buy and use it. (For related reading, see: Can You Afford a Financial Advisor?)
Experiences, Not 'Stuff'
This is why I spent 2015 spending my hard-earned money on experiences instead of "stuff." Now, obviously I can't go a year without spending money on necessary things, like food and drinks, but I exercised my growing self-control when it came to things like clothing and books. By doing this, I realized two things:
-First, this "stuff" is not going to be a budget buster for most people. These materialistic goods add up to about $2,000, which isn't an obscene amount of money.
-Second, spending money on experiences for myself and for the people I care about makes me exponentially happier than spending it on material goods for myself. Not that spending money on ourselves will make us less happy; it just won't make us happier. For instance, spending money on a necklace for my mother's birthday was a much better purchase than spending money on a new shirt when I have plenty of shirts in my closet already. (For more, see: How Much is a Financial Planner Worth?)
Granted, I didn’t fully succeed with resisting material goods all year. I ended buying new air filters for my HVAC system, a replacement battery for my headset and paper and ink for my printer. But there were expenses I thought I would need, but surprisingly didn't. Like shampoo. I managed to survive on one tub of shampoo all year, without being dirty.
Correlating Money to Happiness
Spending money on others and buying experiences are just two of the five key principles that lie in money correlating to happiness. The other three include: limiting access to our favorite things, which allows us to appreciate them more; focusing on time over money, therefore yielding wiser spending; and delaying our consumption of purchased goods, which leads to increased enjoyment when we do use it.
Now, when I say spend money on experiences, I don't necessarily mean that I recommend spending $400 a night on a deluxe suite hotel room. I encourage you to instead do something you've never done but have always dreamed of, like parasailing or visiting Windsor Castle in England. The experiences will outweigh the hotel room forever, and the memories you create will (at the risk of sounding cliché) be priceless.
I concede that this system isn't a perfect fit for everyone. However, if everyone took the opportunity, even if just for a month instead of a year, I strongly believe that they will come to see just how little the purchases that are at the center of their budget actually mean in the long run.