Subscribe to Money & Life

Family and life events

Have a happier new year

25 January 2018

A really happy new year

Money & Life team

Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.

Does having more money to spend on stuff make us happier? Take a look at the latest research and get tips to change your spending habits and boost your happiness in 2018.

With Christmas done and dusted for another year, you’re probably feeling more aware than usual of how much stuff you own. Or maybe you didn’t manage to score that longed-for gadget, device or object from Santa, or in the January sales. Before you work on a wish list of things to buy in the coming year, you might want to take a look at the growing body of research into what we should spend our hard-earned cash on to bring us happiness.

Dr Thomas Gilovich, a professor of psychology at Cornell University in the US, has been exploring the relationship between spending and happiness for more than 20 years. After publishing a number of studies and reports, he offers important insights about how much happiness we can expect from buying stuff compared with spending on experiences.

Adaptation ­­ and comparison ­­ are the thieves of joy

Research undertaken by Dr Gilovich has convinced him that spending on experiences, rather than objects makes us happier for longer. At first glance it might be hard to see how this claim makes sense. You’ll enjoy using that shiny new car you’ve just bought day after day. Hiking trails in Tasmania, while exhilarating and rewarding, is something you’ll recall only once in a while once it’s over and done.

According to Dr Gilovich, it’s the constant presence of our flat screen TVs and new shoes that takes the shine off them so quickly. “There’s a lot of work in the area of well-being and happiness showing that we adapt to most things,” Gilovich said. “Therefore, things like a new material purchase make us happy initially, but very quickly we adapt to it, and it doesn’t bring us all that much joy. You could argue that adaptation is sort of an enemy of happiness. Other kinds of expenditures, such as experiential purchases, don’t seem as subject to adaptation.[1]

When you put together our tendency to adapt with that other very human trait of comparison, you can really end up regretting your purchase instead of enjoying it. But this is much less the case when it comes to experiences. ““The tendency of keeping up with the Joneses tends to be more pronounced for material goods than for experiential purchases,” says Gilovich. “It certainly bothers us if we’re on a vacation and see people staying in a better hotel or flying first class. But it doesn’t produce as much envy as when we’re outgunned on material goods[2].”

Experience changes who we are

So why do the experiences we buy bring us a better happiness return than our new possessions? According to Dr Gilovich, our experiences become a much more important part of our identity than possessions ever can. Although advertising and marketing campaigns work very hard to convince us that a new piece of furniture can have an impact on who we are and how we feel about ourselves, it’s a change that won’t last. “Our experiences are a bigger part of ourselves than our material goods,” says Gilovich. “You can really like your material stuff. You can even think that part of your identity is connected to those things, but nonetheless they remain separate from you. In contrast, your experiences really are part of you. We are the sum total of our experiences.”

What kind of experience?

If experiences define who we are, how can we determine what sort of experiences we should be having to make us happiest? Author and leading expert in positive psychology Martin Seligman divides experiences that bring us happiness into two categories: pleasures and gratifications[3]. Pleasures bring us immediate contentment and enjoyment –  things like a delicious meal or glass of wine, a massage or relaxing in a warm bath. There’s no doubt we’ll enjoy these experiences in the moment and remember them with appreciation, but they won’t bring us an enduring sense of satisfaction the way gratifications can. By challenging and engaging us, things like rock-climbing, dancing or restoring an old armchair can have a much longer lasting impact on our happiness. 

Getting the best from experiences on a budget

The good news is that many gratifications don’t cost us much, especially when compared with pleasures like expensive restaurant meals and holidays. In his more happiness bang for your buck blog, Chairman of the Australian Government Financial Literacy Board, Paul Clitheroe offers a couple of useful tips for discovering new ways to experience happiness without spending big:

The $50 test

Take time to plan three activities costing less than $50 each during the next month. Ideas include going to the movies, buying art supplies, doing a cooking class or planting a small vegetable garden. For each activity rate how happy you think it will make you, how happy it makes you immediately after and how happy it makes you a month later. You’ll soon start to learn which experiences are contributing more to your overall happiness.

Keep a happiness diary

During the next month write down everything you buy and do in a notebook. Include how much it costs and how happy it makes you both immediately after and a month later. Now look at what you’re spending most of your money on. Does it match up with what makes you most happy?

When you take stock of what you’re spending money on and how happy you end up being as a result, you’ll have the insights you need to make changes to your budget and invest more wisely in your happiness.

Looking for more ways to budget for a better life in 2018? Discover 8 tips to boost your family finances in the year to come.

[1] Cornell Chronicle, Glee from buying objects wanes, while joy of buying experiences keeps growing, George Lowery, 31 March 2010, http://news.cornell.edu/stories/2010/03/study-shows-experiences-are-better-possessions

[2] Fast Company, The Science Of Why You Should Spend Your Money On Experiences, Not Things, Jay Cassano, 30 March 2015, https://www.fastcompany.com/3043858/the-science-of-why-you-should-spend-your-money-on-experiences-not-thing

[3] IPAC Financial Planning Blog, more happiness bang for your buck, 29 October 2010, https://ipac5.wordpress.com/2010/10/29/more-happiness-bang-for-your-buck