Financial Team

Have you ever made a large purchase, such as a couch or a television or, god forbid, a house, and then were left with an utterly empty and unsatisfied feeling as the purchase lost its luster and became just another possession?

This is what commonly happens to many products we buy. It becomes stuff that we own. And we own a lot of stuff: some of it useful, some of it wasteful, a lot of it sentimental and tucked away in the attic.

So why do so many people spend so much money and derive so little happiness from it? That’s the ultimate question that a recent NY Times article attempts to unravel. The answer, it seems, comes down to what we like to spend our money on – things vs. experiences.

The Times piece makes the argument that people get more out of spending on experiences, like a vacation or a concert or a dinner out, than on objects like a new car or a piece of art. That happiness will come from what you do and not what you own seems more dependent upon the person than the type of spending. This does however show that how people spend their money is just as – if not more –important as how much they make.

Through research done by academics, psychologists and neuroscientists, the science of spending has finally addressed what we like to spend money on. Here is a breakdown of how some experts in the field believe spending money should affect our happiness:

Spending money on experiences and leisure

University of Wisconsin professor, Thomas DeLeire, studied nine categories of consumption and found only one had a positive effect on happiness – leisure activities. Vacations, entertainment, sports and equipment like golf clubs, fishing poles and tennis racquets all supposedly engage in interactive social acts, which in turn boosts social bonds and help make people less lonely and happier. Academics agree that people with strong relationships tend to be happier.

Spending on experiences such as a vacation also gives people the time to reminisce and relive that experience, which is something that in reality cannot be accomplished with an inanimate object. Because it takes time to fully absorb an experience, the enjoyment value of the experience is also enhanced.

The article also proposes that even if the experience is negative, the passage of time will wash away much of the negative memories and you’ll in hindsight remember the experience in a more positive light. I bet many of us travelers could endlessly debate this highly contentious notion.

Another aspect of experiences that the Times article does not touch upon is that not all experiences have to cost money. What about volunteering? Doing volunteer work can often be life changing, providing strong memories, friendships, and wholly satisfying experiences without any spending.

Spending money on others

A 2008 study in Science magazine supported the longstanding argument that spending money on others will make you happier than spending it on yourself.

Not that it was necessary to have a few PhD’s figure this out for us, but freely giving to charity or spending money on friends and family clearly works as it also falls in line with why volunteering would make someone happier. It’s in the simple act of giving, whether it be time or money, that is rewarding.

So maybe not all of us can be as happy as Bill Gates or Warren Buffet, if we are to follow this line of thinking, but minor changes in spending habits can indeed make a difference.

Saving up for something

Since the recession, Americans are saving a lot of more. The personal savings rate is currently at 6.4 percent, according to the U.S. Department of Commerce. Credit card debt has also been down for 21 consecutive weeks, according to the Federal Reserve.

The Times article reported that people tend to be happier with a purchase if it’s something they’ve desired and saved up for awhile. And in a world where credit cards allow us to have what we want when we want it, we often forget that saving and waiting will heighten our enjoyment. We forget what it’s like to be a bunch of kids trying to fall asleep on Christmas Eve.

So next time you want something inessential, wait and think about it before making the purchase. In most cases this guideline will also limit impulse buys, another habit of many spenders that most definitely affects their happiness levels.

Money works on the brain like a drug

With credit cards becoming one of America’s most vile vices, it’s good to keep in mind that money – making it, spending it – can act on our emotions like a drug, greatly influencing the way we behave.

Purchasing decisions play a major role in the overall contentment of your life. So be careful, be cautious, and most importantly, be happy.

For more ideas on how to improve your financial health, check out /a>, where you’ll learn how to achieve your credit potential and get home loan recommendations tailored to your unique situation.

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