Material possessions versus experiences
It’s no secret we live in a society driven by consumerism and the desire for more, more, more. We are constantly bombarded with messages encouraging us to buy something, whether it’s through ads on our phones, commercials on streaming services, or influencers pedalling their latest find. You also have things like credit cards and buy now, pay later programs that suggest you can have more, even if you can’t afford it. With an increasing number of choices and ways to spend, it can be hard to save money.
How do we know if we are spending on an experience or a material item? There is no clear-cut definition for what constitutes a material or experience purchase—is there ever anything clear-cut with human behaviour? Yet, in the book Happy Money: The Science of Happier Spending (Simon & Schuster, 2014), Elizabeth Dunn and Michael Norton explore the contrasting effects of experiences and material purchases on happiness.
The two authors focus on the identifiable characteristics of these two forms of spending. Although the two authors don’t explicitly define the two types of purchases, it can be inferred that experiences include intangible events or activities that engage you and fulfill you. They often involve active participation and social connections, creating lasting memories and a sense of shared enjoyment. While you can try to convince yourself that a daily coffee during the morning rush is an “experience,” the truth is that it can lack the engaging, active and social elements that would make up an “experience.” However, that outdoor coffee session with friends or coworkers can certainly be considered an experience. Certain activities, such as dining out, ordering in or buying coffee, can fall into either category depending on the context. On the other hand, material purchases refer to the acquisition of tangible possessions.
Dunn’s research suggests that experiences tend to contribute to greater happiness as they offer opportunities for social bonding, personal growth and a sense of novelty. In contrast, material purchases often result in diminishing returns, as their initial gratification fades over time and can lead to a cycle of comparison and wanting more.
By understanding the differential impact of experiential and material purchases, we can make more informed choices in our spending habits to increase our overall well-being and satisfaction.
Where did the idea of spending on experiences come from?
While there are no one-size-fits-all rules, scientific research suggests a general guideline for spending our money wisely: material possessions alone may not bring lasting happiness. Gilovich’s research on consumers’ material and experiential purchases provides fascinating insights that can help us make better financial decisions. Here are two of his theories on spending:
- The Hedonic Treadmill: Many material possessions, like a new couch or watch, may initially bring joy, but we quickly adapt to its presence (and the next generation for the latest thing), resulting in a diminishing impact on our overall happiness over time. In contrast, experiences have the potential to create lasting memories and provide ongoing satisfaction, as we can relive them through memories, photos and stories.
- Anticipation and Adaptation: Experiences also create anticipation. Sure, you might be excited for an Amazon delivery, but research shows that the thrill soon subsides as you use the item you bought. The memories just don’t feel the same with a material purchase. On the other hand, from planning a dream vacation to eagerly awaiting a concert, the excitement leading up to an experience can enhance our well-being. Additionally, we tend to adapt less to positive memories of experiences compared to material possessions, making experiences a wise investment for long-term happiness.
Why experiences are so powerful
In a study on experiential consumption and the pursuit of happiness, Gilovich and researchers Amit Kumar and Lily Jampol uncover compelling insights into the impact of experiences on well-being. Here is how buying experiences can help with making better financial decisions:
- Beyond material possessions: Experiences offer more than just fleeting moments of pleasure. They contribute to personal growth, provide opportunities for self-expression, and evoke positive emotions that contribute to happiness. Our experiences shape who we become, as we are an accumulation of our experiences.
- Present-moment engagement: Being in the present allows us to be mindful and grateful. It gives us greater satisfaction and meaning from our experiences.
- Identity and authenticity: Investing in experiences that align with values and interests enables people to feel authentic. By crafting a life filled with experiences that reflect who we truly are, we cultivate a sense of purpose and fulfillment.
- Social connection: Experiences often involve shared activities with friends, family and/or a partner, which fosters deep social connections and strengthens relationships. These bonds contribute significantly to our overall happiness and well-being.
That said, there are limits to buying experiences, as you could also become just as indifferent to them as you would succumb to the Hedonic Treadmill of material possessions. Just because something is an experience, doesn’t mean you have the budget for it, either. Which nicely leads into…