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If you had to choose between buying a brand-new flat-screen TV or a four-day trip to the beach, which one would you pick?
Recent research says that people tend to prefer buying material things even though, in the long run, experiences make them happier. So while a new television might seem like a more lasting value, the beach trip with your family would provide more memories—and more happiness.
Ryan Howell, an associate professor of psychology at San Francisco State University, is one of the primary researchers behind this study.
"What we find is that there’s this huge misforecast," he told The Wall Street Journal. "People think that experiences are only going to provide temporary happiness, but they actually provide both more happiness and more lasting value." Despite that, people continue buying stuff, not experiences, because they’re more tangible and will be used for a longer period.
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Professor Thomas Gilovich from Cornell University found similar results in his research.
"People often make a rational calculation: I have a limited amount of money, and I can either go there, or I can have this," he told The Wall Street Journal. "If I go there, it’ll be great, but it’ll be done in no time. If I buy this thing, at least I’ll always have it. That is factually true, but not psychologically true. We adapt to our material goods."
So, after a while, the television isn’t that new anymore and has lost its luster. Meanwhile, the memories from last summer’s vacation are still as strong as ever—with another vacation on the way this summer.
Sonja Lyubomirsky, a psychology professor at the University of California, Riverside, says "Human beings are remarkably good at getting used to changes in their lives, especially positive changes. If you have a rise in income, it gives you a boost, but then your aspirations rise too. Maybe you buy a bigger home in a new neighborhood, and so your neighbors are richer, and you start wanting even more."
That’s the always-present temptation to keep up with the Joneses—but the Joneses might be underwater on their mortgage, buried in car payments, or up to their eyeballs in student loan debt. Or maybe they’re actually doing really well and really can afford all their stuff. You just don’t know. But it doesn’t matter anyway, because it doesn’t change your situation.
So what’s the fix? How do you get out of the cycle of wanting more and more stuff and start focusing your life and money on what matters?
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Elizabeth Dunn, associate professor of psychology at the University of British Columbia, says the key to happiness with money is giving it away. In a study she conducted on the relationship between happiness and generosity, she gave cash to her students, telling some to spend it on themselves and some to spend it on others. The students who spent the money on others were happier. She’s repeated the same experiment in other countries—with both rich and poor—and has seen the same results.
"The fact that we were able to observe the same effect that we’d seen in Canada in places like South Africa and Uganda was probably the biggest surprise of my career," she told The Wall Street Journal. "A lot of us think we’ll give to charity one day, when we’re richer, but actually we see the benefits of giving even among people who are struggling to meet their own basic needs."
Professor Dunn says the amount of happiness has no relation to the amount you give. As long as you feel like you’ve made a difference in someone else’s life, you’ll be happy even if the amount you give is small.
That’s one reason we always tell people to make giving the top line item in their budget. When you give, you’re happier—it affects you just as much, if not more, as the receiver. Giving changes your spirit.
When your debt-free day finally comes, you can look back and see how your journey affected more than just you. And whether you buy more stuff or more experiences, you’ll realize the ultimate happiness comes in making a difference in the lives of others.
Want to learn more ways money can be a tool to create happiness in your life? Sign up for Financial Peace University today!