Recent research regarding money and happiness, and in particular spending money and happiness has researchers exploring something called “emotional efficiency.” This is the emotional ROI (return on investment) of spending. As an example, one of these scholarly papers is titled: “If Money Doesn’t Make You Happy Then You Probably Aren’t Spending It Right.”
What is being revealed is that buying meaningful experiences such as dinners out, vacations, concert tickets, Italian lessons, hula hooping classes, or a hotel room in Paris, are more emotionally effective than buying things.
Some of the reasons for this are …
- Experiences last in our memories, and can be relived indefinitely, while material purchases fade over time. (Even if you feel better immediately after your purchase, studies show that our satisfaction with material goods decreases over time. Research also shows that although all experiences may not be good, we tend to remember them as so.)
- There is an emotional benefit of anticipating a meaningful event
- We are less likely to regret an experiential purchase
- We don’t get bored with memories the way we can with material items
- Spending money on an event reduces the comparisons of “keeping up with the Jones’s” and therefore leaves us more content. (How are you going to argue that your experience of a wine tasting class was “bigger and better” than your girlfriend’s?)
It turns out that the more money you have, the more this rings true. Studies show that for those who make less than $25,000 a year, experiential and material purchases produce similar gains in well-being. However, as income levels increase, experiential purchases produce two to three times the levels of well-being when compared to material purchases.
However, the law of diminishing returns seems to be at work here. Another study found that having great wealth interfered with one’s ability to savor positive emotions and experiences, because having an “embarrassment of riches” was found to reduce the ability to reap enjoyment from life’s smaller everyday pleasures, like the simple enjoyment of eating a chocolate bar.To clarify a bit, we are talking about spending money on meaningful experience or the things that you need for them. One researcher examining nine major categories of consumption discovered that the only category to be positively related to happiness was leisure: vacations, entertainment, sports, and equipment like golf clubs and fishing poles. So it’s not just about the tennis match, but also spending money on the tennis racket that contributes to our happiness.