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From Mark Ford, founder, Palm Beach Research Group: Many times, the things/experiences that give us the greatest joy are free.
But oftentimes, money is involved. Then, we have to weigh the cost of the thing/experience against the pleasure we’ll get from it.
One example: owning a home…
In my book Automatic Wealth, I argued one of the most important things you can do to become rich is to get off the “moving-on-up train” and be satisfied with the house you have.
This conclusion was based on two observations. First, your house—although usually the most expensive thing you’ll buy in your lifetime—is an imperfect investment. As the center of your family’s universe, it’s likely you’ll spend money on it that won’t provide market-level returns.
Plus, the costs associated with owning a house go well beyond the cost of the house itself. They include taxes, insurance, and upkeep (which rise in direct relationship to the cost of the house).
They also include things you would normally consider separate line items—e.g., schooling, vacations, and furniture.
By keeping the house you have—and investing the money you would’ve spent to “move up”—you’ll end up far richer over 10 or more years.
That’s a matter of dollars and cents. But there’s another reason to follow this advice—an interesting psychological fact I became aware of by reading a good book titled Happy Money.
The book’s authors, Elizabeth Dunn and Michael Norton, compare spending $200,000 on a house to spending the same amount of money on a flight to outer space. Spending $200,000 on a six-minute space flight might seem crazy. And even crazier if you aren’t wealthy… and could’ve bought a house with that money.
But research, according to Dunn and Norton, suggests this isn’t necessarily true. “Remarkably, there is almost no evidence that buying a home—or a newer, nicer home—increases happiness.”
They argue spending the money on the space trip would provide more long-term satisfaction.
How can that be?
Dunn and Norton tell us:
Between 1991 and 2007, researchers tracked thousands of people in Germany who moved to a new house because there was something about their old house they didn’t like. Immediately after settling into their new abodes, these movers reported being much more satisfied with their new homes than they’d been with their old ones.
As time passed, satisfaction with the new house didn’t diminish all that much.
But the purchase of a new home did nothing to increase their satisfaction with their lives.
“Their overall happiness didn’t improve at all.”
In another study, researchers found a group of Harvard students—who were lucky enough to get rooms in the dorms they wanted—were no happier with their overall school experience than students who had to settle for lodging they initially didn’t like.
As recently as 2011, 90% of Americans said they believed home ownership to be a “central component of the American dream.” Yet, in study after study, homeownership doesn’t seem to correlate to happiness.
To understand what’s going on here, Dunn and Norton suggest the following mental exercise:
Think of purchases you’ve made with the goal of increasing your own happiness. Consider one purchase that was a material thing—a tangible object that you could keep, like a piece of jewelry or furniture, some clothing, or a gadget.
Now think about a purchase you made that gave you a life experience—perhaps a trip, a concert, or a special meal. If you are like most people, remembering the experience brings to mind friends and family, sights, and smells.
According to one study cited in the book, 57% of the participants said the experiential purchase made them happier. Other studies show even when people spend only a few dollars, they get more lasting pleasure from buying an experience as opposed to a thing.
Sometimes even an unpleasant experience can provide happiness afterward…
Dunn and Norton cite studies in which people on trips reported they were having a less-than-enjoyable time. But when asked about the trips later, they remembered them being good.
This makes sense. I have competed several times in national grappling meets. My nervousness prior to the events, and the actual experience of fighting, was anything but fun. But I’ve drawn enormous pleasure from remembering and recounting these experiences.
This was also true of the challenge of climbing Mount Kilimanjaro. The experience itself was excruciating. Yet I enjoy the memory of it more with each passing year.
My two years in West Africa were half pleasure and half pain. But thinking about them has provided me with a great deal of happiness over the 30 years since.
Veterans often remember their wartime experiences nostalgically. Nostalgia turns out to be a very beneficial emotion, some scientists say. It allows us to convert difficult times into positive memories. And that helps us cope with tough times ahead.
It seems, then, the actual pleasure you get from an experience isn’t the most important criterion for determining its ultimate value.
The criterion seems to be one of intensity. The more challenging the experience, the more happiness it brings.
The bottom line: Experiences provide more happiness than material goods.
There are many reasons why this is so.
Experiences tend to involve most—if not all—of the senses. Experiences often bring you in contact with other people. And experiences—especially intense ones—tend to stay in your memory for a long time.
When Cornell University researchers asked groups of people to discuss purchases with one another, the groups that discussed experiential purchases reported enjoying their conversations more than those that talked about material goods.
Another series of studies focused on feelings about trips and vacations. Overall, people remembered having more fun than they reported having during the experience itself. And the further back in time the experience was, the more happiness they remembered.
In my 30s and 40s, I had a very different view of this. I felt money spent on vacations was largely wasted. The experience itself was finite. I thought it made much better sense to spend $10,000 on a used car or a handful of gold coins than on a family trip.
My good friend Eddie agreed with me. But his wife, Barbra, and my wife had a very different idea. They thought money spent on trips to Europe was a good investment. And so we went. Year after year, for more than a decade.
Looking back now, they were right. I value those trips not just for the good times I remember, but also for what I learned during our travels. And for how it deepened our mutual friendship.
For more than 20 years, K and I have sponsored a sort of extended family reunion. We call it “cousin camp.” We pick a destination where about 40 of us congregate to have an adventure for several days or a week. These camps have become more expensive over the years. Now, each one costs us more than $100,000.
My former self would’ve thought it smarter to invest that money in some tangible assets… perhaps divvying up those assets among the same people. But I don’t feel that way now.
And neither do the family members who’ve been enjoying these experiences.
Relative values
An interesting question not addressed in Dunn and Norton’s Happy Money is this: Is there a relationship between how much you pay for an experience and how much happiness you get from it?
Since I have no studies from which to draw conclusions, I’ll research my memory banks instead.
Off the cuff, these are the 10 experiences that have given me the greatest overall happiness:
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The European vacations were the most expensive of these experiences. Each of them cost, on average, about $10,000. Next would be the trip to Africa to climb Mount Kilimanjaro. That was about $6,000. I spent several hundred dollars per month on jiujitsu lessons. Everything else on my list cost me little or nothing.
Now, if I were to make a list of the material purchases I’ve most enjoyed, it’d include my present house, several of my cars, my art collection, and my cigars. I can’t say the pleasure I’ve gotten from these things measures up to the pleasure I’ve gotten from my experiential purchases.
But when I think about them more, I realize the material purchases that gave me the greatest pleasure were much more than things. They were—in their own ways—experiences.
The cars I most enjoyed, for example, were the old cars I restored and drove on special occasions. The reason I love my house so much is because it’s been an ongoing project of restoration and improvement.
For me, art isn’t just an investment. My art collection crowds every room I live and work in. I’ve spent countless hours admiring those objects.
So I think the argument Dunn and Norton make is a solid one. Money spent on experiences, by and large, can be well-spent… if the criterion you’re judging them by is how much happiness they give you during your lifetime.
What can we take from this?
First: It’s a mistake to think as I did when I was a young man. Just because experiences end doesn’t mean the pleasure they provide does.
The opposite is true, at least with intense experiences. They seem to provide more happiness than the purchase of material things.
Second: The satisfaction you have with the purchase of material goods isn’t directly related to happiness. You may feel the purchase of a house or a boat or a car was a good one. But it might not add a drop of happiness to your life.
Third: The amount of money you spend on an experience has nothing to do with the amount of happiness you draw from it. Many experiences that cost nothing can produce abundant, lifelong dividends.
To have a rich life, you need a rich mind.
And the rich mind recognizes spending money on things will not automatically add to its lifetime store of happiness. It prefers to spend money on experiences… recognizing very little money needs to be spent.
It also recognizes when money is spent on a material object, that object can bring happiness… if it’s used and enjoyed over time.