Why are you saving and investing your money?
One reason, of course, is to accumulate funds to maintain your lifestyle after you retire and no longer have income. Yet it’s just as important to lead a fulfilling life today, and for that you need to decide how to spend discretionary income.
Chances are you’ve already realized that buying “stuff” doesn’t bring lasting happiness. Sure, that new CD — or dress or car or house — makes you happy at first, but the glow wears off as your new possession fades into your surroundings.
Rather than buying more new things, consider buying experiences instead. Several studies have shown that experiences provide happy feelings that last far longer than simply obtaining the newest smartphone model.
You may realize that a cool vacation with friends or family provides positive memories and shared adventures. Still, there’s a psychological hurdle that many people face: It is human nature to believe a material object has more intrinsic value than a life experience. After all, you can hold to an object forever, and some objects gain value over time.
Don’t tell that to Thomas Gilovich, a psychology professor at Cornell University who has conducted numerous studies in this field.
“Although people are often tempted to invest a great deal of money in high-status luxury products … research has shown that consumers’ disposable income might be better spent on trips to the beaches of Barbados or the restaurants in Barcelona rather than a new Mercedes or the latest and greatest electronic gadget,” Gilovich wrote in a 2015 study published in Advances in Experimental Social Psychology, “We’ll Always Have Paris: The Hedonic Payoff from Experiential and Material Investments.”
Experiences such as trips, museum visits, music lessons and the like offer more social rewards and are less likely to be tainted by comparison with other people’s experiences or possessions, he writes.
Buying things can make you happy at first, but once you own something you eventually take it for granted, and you need to go out and buy something else. Experiences don’t work that way, because they tend to provide more lasting happy feelings.
In fact, Gilovich’s surveys and studies have shown that satisfaction with major material purchases goes down over time while satisfaction with life experiences actually goes up. Experiences become a part of you, whereas objects remain outside of you, he notes.
His conclusions are backed up by a 2013 book, “Happy Money: The Science of Smarter Spending,” which lays out its first principle as “Buy Experiences.”
So the next time you are considering how to spend some discretionary income, ask whether you really need that new 50-inch, flat-screen TV or would be better off booking a weekend trip to a new destination.
Eric Tashlein is a Certified Financial Planner™ and Principal of Connecticut Capital Management Group LLC, 67 Cherry St. in Milford. He can be reached at 203-877-1520 or through www.connecticutcapital.com. This is for informational purposes only and should not be construed as personalized investment advice or legal/tax advice. Please consult your advisor/attorney/tax advisor. Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors Inc., A Registered Investment Advisor. Cambridge Investment Research Inc., and Connecticut Capital Management Group LLC are not affiliated.