Investing in Experiences

It’s important to make room in your budget for “fun” stuff when possible. Budgets without room for things like going to see a movie, buying a pair of shoes, or going on vacation are more likely to fail. So, how should that “fun” money be prioritized in order for it to have the greatest impact? Should you try spending more on experiences or things? According to one psychological study, “experiential purchases (money spent on doing) tend to provide more enduring happiness than material purchases (money spent on having)” (Kumar, Killingsworth, & Gilovich, 2014).

The wait leading up to an experience or event (such as a vacation or concert) generally brings more excitement than the wait before purchasing a material possession. And while many often experience a temporary “rush” after buying an item, such experiences aren't typically recalled as happy memories later on. Instead, we quickly become accustomed to a new object being in our possession. Without even thinking about it, we can even begin a cycle of buying bigger and better things in order to stay satisfied.

Experiences, on the other hand, tend to become a part of who we are. Sporting events, vacations, game nights, going to plays, or parties with family or friends tend to leave longer-lasting impressions than acquiring material possessions. If events like these provide us with good experiences, they have a greater chance of being recalled as happy memories down the road, and the positive emotions felt during those times can be replicated for a greater period of time. Experiences also don’t have to be extravagant or expensive (and can even be free), and can involve as few or as many people as you like.

Placing greater focus on experiences rather than objects can also help to reduce the “keeping up with the Joneses” state of mind that many of us experience every so often. While you can easily compare an item such as car, it's impossible to compare the feelings that experiences can bring.

So, while you may not be able to have it all, you can make sure your money is going toward what matters most. Just remember to leave room for fun whenever you create a budget.