Best Happiness Return on Investment

I like to read a lot of research about happiness and meaningfulness in life.  It certainly leapfrogs experience alone and I see the pursuit of happiness and a meaningful life as central to living my life outside the maze.  In the past, I mentioned that research shows that money can buy happiness up until a point and that point is $75K in annual household income. Beyond that point, people tend to acclimate quickly and not feel greater happiness from finances. I have come to understand that there is also a whole corroborating body of research around what has become known as the Easterlin Paradox which initially found that happiness in the USA went up along with income until the 1970s.  However, from the 70s until 2014, happiness (as measured in the study) actually plateaued or even went down a little as incomes tripled.  Additional research looked to see if the USA was unique and found that this plateau happened consistently in over 40 countries along the path from developing, to emerging, to advanced economy:

Why This Should Blow Your Mind

This finding is actually groundbreaking when you think about it in that it essentially challenges the assumption of neoclassical economics that higher income always correlates to higher levels of utility and economic welfare.  It has given rise to a new way of economic thinking called “Happiness Economics” which suggests that rather than focusing on GNP or GDP as metrics for national success, we should be focusing on quantitative metrics that actually increase our happiness, well being, quality of life, and life satisfaction as a population.  Now I realize that I just used the word neoclassical and I better segue to cute puppies, sex, or free beer really quickly because economic policy is boring as hell but the cool part of it is that this knowledge can make you rich!  Not rich like more dollars GDP rich but rich like happiness economics rich = more life satisfaction and better quality of life.

How To Use Money To Be Happiness Rich

If no additional happiness comes from more dollars alone, then we have 3 choices of what to do with those dollars, spend more on stuff, spend more on experiences, or save more for financial independence.  I advocate aggressively pursuing that financial independence because of the flexibility and freedom that not having to work to live provides as well as the empowerment that knowing how to get there from having done it builds. However, what if you are already financially independent or just looking for a purchase that will give you a good happiness return? While spending money on anything is not a substitute for the contentedness and daily gratitude that one must build from within, research does show that there are better and worse ways of spending money if happiness return is a goal.

Experiences are the new Yacht Darling!

You’ve probably heard the advice that it is better to buy experiences than things right?  But did you know that this is supported by research.  Some research indicates that experiences make people happier than material purchases retrospectively and some additional research indicates that waiting for experiences tends to be more positive than waiting for possessions as well.  While we tend to reason that buying something will last longer and hence be a better value than an experience this may be just plain wrong.  It turns out that we very rapidly adapt to a new purchased item and it becomes commonplace (hedonic adaptation).  Have you ever heard someone sincerely say that a purchase changed their life forever?  What about that trip around the world or that experience backpacking in Nepal?  I have certainly had several life changing experiences but never a life altering purchase of a new car or piece of furniture (even if that rug really tied the room together). Part of the value of experiences is that they become a part of us and our identity while possessions never do.

I just followed my own advice of buying excess capacity for pennies on the dollar and took my brothers to Vegas mid-week during the off season. As a result, our hotel was 70% off and had an amazing view of the strip:

We had meals and saw shows at 50-70% off as well.  We are not big into casino games (or other vices) hence Las Vegas can be a surprisingly entertaining and affordable warmer weather getaway. This was a great value and I strive for value, however, what I remember most was not the cash or the souvenirs I bought for my kiddos.  It was sharing amazing experiences with my brothers:

Seeing Le Reve (wow cirque du soleil keeps getting better and there is real artistry together with the blood sweat and tears of these performers

Hiking up Red Rock Canyon (perhaps the real best view of the strip).

Value?

Sure I could have bought them a gift but, sharing time with people that I care about while doing fun things proved a better value for me. Las Vegas may not be your thing (heck it ceases to be my thing after about 2.5 days) but the point is that if one is looking to spend some cash, experiences can yield a long term satisfaction greater than things. Still not convinced?  Not to kill you with data, but additional research also shows that even though we are told that experiences are better purchases than physical goods, we still don’t tend to believe it until after the experience when we can reflect back on its value.

What do you think, do you believe the research? What are some of the best experiences you’ve purchased? Were they a good value? What do you think about Happiness Economics? I’d love to hear from you in the comments below. Also consider subscribing below to get new articles and updates directly from me.