Money and happiness: What can make you more happy,  buying experiences or possessions?
February 2009

Most of us believe that money will make us more happy. However wealth and wellbeing do not always go together. Although many countries have become more developed and wealthier during the past century, drug addiction, crime, psychological ailments such as depression, stress and frustration have also increased significantly.

It is true that money only is not sufficient to make us happy. However it is also true that poverty does not help to make us happy. An important question is how can we better spend money in order to be more happy. This issue is even more crucial when money is scarce and available resources should be used in the most fruitful way.

Do experiences or material goods make us happier?

Should I spend money on a vacation or a new computer? Will an experience or an object make me happier? A new study in the Journal of Consumer Research says it depends on different factors, including how materialistic you are.

Even though conventional wisdom says choose the vacation, authors Leonardo Nicolao, Julie R. Irwin (both University of Texas at Austin), and Joseph K. Goodman (Washington University, St. Louis) say the answer is more complicated than previously thought.

"The sentiment has been that individuals will be happier if they spend their money on experiences (theatre, concerts, and vacations) as opposed to material purchases (fancy cars, bigger houses, and gadgets)" write the authors.

The authors say this advice holds true for purchases that turn out well. But when it comes to negative purchases (a disappointing sofa, a bad vacation), their research shows that experiences decrease happiness more than material goods.

"In other words, we show that the recommendation should include a caveat: Purchases that decrease happiness are less damaging when they are material purchases than when they are experiential purchases," the authors explain.

Highly materialistic individuals, the authors found, were equally happy with their positive purchases and equally unhappy with negative purchases whether they were experiences or material goods. The researchers also found that emotional intensity decreases more quickly after material purchases than experiential ones.

Consumers should be especially cautious when choosing among experiences, say the authors, because making a negative choice can lead to lasting unhappiness with the experience. Risky material purchases, on the other hand, are less potentially damaging.

Overall, the authors agree with conventional wisdom: "Given a good probability of a positive experience, our research echoes past research in suggesting that money is well spent on vacations, concerts, amusement parks, and restaurants over comparably priced objects and trinkets" they conclude.

Buying experiences, not possessions, leads to greater happiness?

Can money make us happy if we spend it on the right purchases?

Another psychology study suggests that buying life experiences rather than material possessions leads to greater happiness for both the consumer and those around them. The findings were presented at the Society for Personality and Social Psychology annual meeting on 07.02.2009.

The study demonstrates that experiential purchases, such as a meal out or theater tickets, result in increased well-being because they satisfy higher order needs, specifically the need for social connectedness and vitality -- a feeling of being alive.

"These findings support an extension of basic need theory, where purchases that increase psychological need satisfaction will produce the greatest well-being," said Ryan Howell, assistant professor of psychology at San Francisco State University.

Participants in the study were asked to write reflections and answer questions about their recent purchases. Participants indicated that:

1. Experiential purchases represented money better spent and greater happiness for both themselves and others.
    
2. Experiences produce more happiness regardless of the amount spent or the income of the consumer.
    
3. Experiences lead to longer-term satisfaction.

"Purchased experiences provide memory capital," Howell said. "We don't tend to get bored of happy memories like we do with a material object.

"People still believe that more money will make them happy, even though 35 years of research has suggested the opposite," Howell said. "Maybe this belief has held because money is making some people happy some of the time, at least when they spend it on life experiences."
 

Bibliography

1. Economic & Social Research Council
2. Happiness for Sale: Do Experiential or Material Purchases Lead to Greater Happiness? Journal of Consumer Research, August 2009.
3. University of Chicago Press Journals
4. The mediators of experiential purchases: Determining the impact of psychological need satisfaction, Society for Personality and Social Psychology, Annual meeting 2009.
5. San Francisco State University