Moving Forwards: Money can buy happiness...

...but experiences, not stuff, are the key.

May 28, 2010 17:11
4 minute read.

Money. (photo credit: AP)


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In a study conducted in the 1970s psychologists interviewed some lucky individuals who had won between $50,000 and $1 million in the Illinois State Lottery. Strikingly, less than a year after receiving the potentially life changing news of winning the lottery, they reported being no more happy than regular folks who had not experienced the sudden windfall. They returned to the same level of happiness or unhappiness they had before. This led to a belief that happiness came from within. It was the belief that you have a naturally happy disposition or not, and changing your financial status would not affect your happiness.

Yet through substantive research, positive psychology has proven that there are things you can do to live a happier life. For individuals with severely limited financial resources, happiness is not a relevant factor. They worry more about satisfying basic needs such as food, shelter and clothing with little concern for life happiness. But it has been proven that once you have attained a level of income above poverty level, it is what you do and not increases in money that will contribute to your greater happiness.Therefore, for many of us deciding how to invest our resources to maximize happiness becomes our challenge. In his book Luxury Fever, Robert Frank wrote about this challenge. He wondered why, as nations rise in wealth, their citizens become no happier. He examined why we are devoted to spending money on luxuries and other goods which we quickly take for granted, rather than on things that would make us happier for the long term.

For Frank it is a question of how you spend your money. Whether you spend it on “conspicuous or inconspicuous” consumption. Conspicuous consumption refers to things that are visible to others and that can be used as markers of a person’s relative success. Their value sometimes comes as much from the statement they make about their owner as it does from their objective value. It is the difference between driving a Chevy Aveo, Ford Focus, Honda Accord, Lexus 350, BMW 740 or a Porsche Targa 911. The differences are tangible, measurable and conspicuous to all.

Inconspicuous consumption refers to activities that are valued for themselves. They are usually consumed more privately and are not bought for the purpose of achieving status, because it is much more difficult to compare their value to those of others.

Two examples of conspicuous versus inconspicuous consumption relate to our salary and vacation at work. Frank asked, would you prefer a job in which you earned $90,000 a year and your coworkers earned an average of $75,000 or one in which you earned $100,000 and your coworkers earned on average $120,000? Many people chose the first job, thereby revealing that the relative social position and conspicuous value has a financial cost.

Another question is whether you would rather work for a company that gave you a two-week vacation each year, but other employees were given only one, or one that gave you a four-week vacation but other employees were given on average six? The great majority of people choose the longer absolute time. Time off is primarily an inconspicuous consumption.

Frank’s conclusions are bolstered by recent research by psychologists Leaf Van Boven and Thomas Gilovich who identified the benefits of “doing versus having.”  Their primary conclusion suggests that we derive more enjoyment when we use our discretionary income on experiential purchases than from discretionary material purchases.

They gave some interesting reasons why experiential purchase make people happier.

Experiences are happier because they have great social value and are more pleasurable to talk about than material purchases. Furthermore, people like listening to and telling stories. Experiences are more likely to have a typical story narrative structure, with a beginning, middle and end. Both listeners and storytellers enjoy conversations about experiences more than about possessions.

Experiences are more open to positive reinterpretations when we reflect back and think of them. We are not limited by reality in our evaluations of past experiences as we are with material possessions. We tend to forget incidental annoyances and distractions that detract from the experience. Friends or family members we know who are great storytellers intuitively take the opportunity to embellish and reconfigure the past experiences to create a much rosier and entertaining memory of the event. All of us tend to do it when thinking of a past memory, even if we are not trying to impress someone. The word memory itself has a positive connotation.

Experiences are also more central to our identity. A person’s life is quite literally the sum of his or her experiences. The accumulation of rich experiences thus creates a richer and happier life. When I am counseling parents and there is a choice between buying something for a child or planning a fun entertaining experience together, the experience wins out all the time. It is a positive investment in the relationship.

When you invest your money, remember that “doing” beats “having” all the time. Make sure to choose the family vacation over the bigger car, ski trip over the bigger TV or the outdoor adventure over the extra suit on sale. The choice is yours.

The writer is a positive clinical psychologist who helps clients in his Jerusalem office and gives workshops on positive psychology to businesses and organizations.

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