Contrary to the lovely cliche stating otherwise, money can buy happiness. As financial therapist Steven M. Hughes told Big Think, “There are things that we want, there are goals that we have, there are things that we want to see in life, that money can help us achieve.”
So, how should people spend their hard-earned cash to maximize happiness?
In a culture that values material possessions, perhaps new clothes, a nice car, or a new gadget pop to mind. But years of research show that experiential purchases — say, brunch with friends or a vacation with family — are more likely to boost your happiness.
We are wired for material consumption
Our brains: Put simply, we are hardwired to want new things. Certain brain regions, like the substantia nigra and amygdala, are drawn to novelty and influence what we predict will be rewarding.
When we see something that could provide a reward — like a cozy new sweater or a fancy kitchen gadget — our brain releases a neurotransmitter called dopamine. Dopamine motivates us to get that reward. This was likely helpful for our ancestors: Dopamine acted in a similar way to ensure they would pursue food, romantic partners, and basic needs in an uncertain world.
However, the dopamine system tends to prioritize quick rewards and instantaneous gratification, often at the expense of more important long-term goals and well-being. Neuroscientist Dr. Moran Cerf told Big Think that people tend to spend their money “on things that we think are going to make us happy, but are not.”
Our culture. Cultures across the world exacerbate the desire to obtain material possessions. Across cultures, material goods signal social status; advertising increases materialism, even in children; and social media increases materialism and consumption.
Watch our full interview on experiences vs. possessions:
Material experiences provide a short-term happiness boost
Material possessions can provide a quick boost to enjoyment and happiness. Playing with a new phone is fun, and getting a new watch might boost your confidence. But such enjoyment tends to be fleeting. Your brain quickly readjusts to the new normal, and in time those goods lose their ability to incite happiness.
This is called “hedonic habituation.” As financial psychologist Dr. Brad Klontz told Big Think, “That shiny new object will lose its luster, and you will not have a long-lasting happiness associated with that.”
Additionally, material purchases are often subject to comparison. Your fancy gadget is likely harder to appreciate when an updated version is released; your new watch probably seems less great when you see your coworker’s even nicer one.
The tendency to compare is natural and common, and it results in your material purchases losing their ability to spark enjoyment over time.
Experiential purchases improve happiness and well-being over the long-term
Experiences, on the other hand, provide more substantial long-term benefits.
In one study, people thought of both a material purchase and an experiential purchase. Regardless of their background, people reported that their experiential purchase made them happier than their material one. Moreover, people reported better moods after being reminded of their experiential purchases, compared to their material ones.
Financial therapist Dr. George James told Big Think: “Every time you connect back to that, you experience a little bit of the happiness.”
Experiences connect people. Experiences increase happiness by facilitating connection with others. People are social creatures. Meaningful interactions and relationships with other humans are crucial to happiness and well-being.
First, experiences often require spending time with others. Concerts, fairs, ball games, and vacations are all social events, often involving friends, family, or those who share your interests. Even after the actual event ends, reflecting on shared experiences makes us feel closer to others.
Experiences also provide fodder for stories and conversation. For example, people talk more about their experiences than their possessions, and talking about past experiences increases satisfaction with them. Moreover, other people would also prefer to hear about your recent fishing trip or that new restaurant than your new car. Research finds that people enjoy conversations and like other people more when they discuss experiences rather than material items.
Mr. Hughes told Big Think:
“There are very few stories that you are going to be able to share of this coffee maker that you just bought or this car that you finally got in your driveway. So, think about a concert that you’ve been to…the best dinner that you’ve had, the best vacation that you’ve been on. These are experiences that pay dividends time and time again.”
Experiences enhance our sense of self. Although ephemeral in time, experiences live on in our memories and make up the sum of our lives. They create our autobiographies and bestow meaning to our existences.
One study, for example, asked people to list their five most important material and experiential purchases. The participants then wrote a short summary of what their life is about. Results showed that participants were nearly twice as likely to include their important experiential (versus material) purchases in their life story.
Identifying all the sources of happiness and wellbeing
So, what kind of experiences are most likely to improve happiness? This likely varies based on your individual personality and preferences. Financial psychologist Kathleen Burns Kingsbury suggests spending a week reflecting on what makes you happy: “What are the things that I absolutely love to do? What are the things where I lose myself in doing them? And what feels important to me?”
Of course, this does not mean that people should lose focus on other important, non-experiential uses for money. Money also increases well-being in other ways — by increasing your access to healthy life choices, ensuring you have a roof over your head, and buffering against emergencies.
When making a decision about a purchase — whether it’s experiential or material — consider how it fits into your overall well-being. Mr. Hughes suggests considering:
“Will this financial decision bring me closer to my wellness? The way that you’re spending your money, is it going to improve your life when it comes to your finances, your emotions, your physical health? You want to bring utility to your life.”
