PHUKET: I recently read a study about buying experiences versus material things and their relative effects on happiness. Interestingly, studies show that money only increases happiness up to a certain point, and buying experiences can have a longer effect on happiness than buying material things, even though the ‘things’ will be around for a substantial amount of time.
The reason behind this is that we quickly adapt to the new material item and it just becomes part of the new normal for us.
“One of the enemies of happiness is adaptation,” says Dr Thomas Gilovich, a psychology professor at Cornell University who has been studying the question of money and happiness for more than two decades.
This is why slowly increasing your wealth over time leads to more happiness than getting rich too quickly. You quickly adapt to the new levels of wealth and revert to about the same level of happiness as you had before you were rich.
Slow progress toward a worthy long-term goal gives you a constant supply of new reasons to be happy as you reach one milestone after another.
They say being rich usually just exaggerates what somebody already is. If someone is happy, kind, and caring, he or she will usually become a generous wealthy person who uses the newly found freedom of to do good things for humanity. And if someone was a jerk before getting rich, he or she will usually end up being a rich jerk.
Experiences can get the upper hand on a material purchase even if it is something as fleeting as one special day, for instance a rock concert from the artist you have loved since you were a kid, because the memory stays with you, but without the adaptation effect of seeing a material object every day.
Hearing a certain song often triggers feelings we had forgotten were inside us. The memories we build up from buying experiences, such as special holidays with our loved ones, are often the things that add the most real meaning to our lives.
Keep in mind it is not only money that needs to be budgeted toward buying experiences; many of the best ones are free but need time. Budgeting time for your loved ones is making great use of the most valuable asset we have to buy one of the best assets in existence.
Memories with loved ones are priceless when you think about it.
So, given the above, how do you plan exactly how much of your hard-earned income to put toward experiences rather than that new Benz? This is a very personal decision, but I would advise finding a comfortable middle ground between extremes.
I recently read a story of a professional baseball player in the United States who lives out of a Volkswagen camper van and spends most of his time in the off-season driving up and down the coast looking for waves to surf.
On the other extreme I know a rich local who has millions in real estate, but has never been outside of Thailand.
I don’t have any good quantitative approach to determining how much cash to use for traveling each year, but as with everything, make it so that no matter what comes to pass you are not with regrets. If you died next year, which of those things from the top of your bucket list would you be most disappointed about not having done?
Start to make a plan to cross a few off of your list in the coming year, if you can do so without making it difficult to pay your kids’ school fees or pay down your mortgage, that is.
When your body finally fails, as my grandfather’s is starting to do at 94 years old, you are essentially left with nothing but the memories of your life’s experiences. You can’t take the hard assets with you, although you can leave them behind to your loved ones.
When thinking about your annual budget for purchases, don’t forget to set aside something each year (time, money or both) to add to your list of memories.
David Mayes MBA resides in Phuket and provides wealth management services to expatriates around the globe, focusing on UK pension transfers. He can be reached at firstname.lastname@example.org or 085-335-8573. Faramond UK is regulated by the FCA and provides advice on pensions and taxation.
— David Mayes