Decision Making; Spending Money on Things or Experience

A thought crept into my mind while sitting at my desk at the office last week. I had to take a decision about an expenditure I was about to make. I have been indecisive about it simply because I was taking my time in conceiving how much change or impact my final option would have on my life.

In trying to be decisive, I had a retrospection of last year’s event. The retrospection should aid in taking me out of my current indecisiveness. I went over some of the decisions I took last year, the strategy I used in taking them should help me in deciding what I have at stake. Some of the results of those decisions I took last year stare at me daily in the office.

Standing conspicuously on my office desk are 3 memorabilia; replicas of Eiffel Tower, Pyramid of Giza and wind turbine of the Netherlands. As you will guess, all acquired when I traveled to Paris, Giza in Egypt and the Netherlands.

Occasionally, I did hold these precious items in my hands to glance closer or play with them as I get deep in thinking about office work or whatever that comes to mind. On some instances, I remember the trips to their originating cities. It refreshes my memory and invigorates me.

Back to my indecisiveness, my final decision boiled down to one thing; use my money for a material thing or spend it on an experience I can reminisce on. I thought about all the not needed things but good to have things I could buy with the money; upgrading my car, getting a cozy apartment, new shoes, a new laptop, a new phone, new wrist watches, sunglasses, etc. The consumer culture thing you know.

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The thing is I can manage without those new things. I learned to resist impulse expenditure about 3 years ago from Brian Tracy. Sometimes, it is more about ranking expected expenditure according to needs. Economists call this scale of preference. The idea that you rank a number of things you want to expend time and money on, in order of desperate need. And when you forego one item for the other, it becomes the opportunity cost of the foregone item. Last year, I had a European trip, culminating to be the opportunity cost to many material possessions I could have. Did you miss the story? Read it here again.

And that’s why I often don’t do well to the expectation of people I meet after returning from a trip, when they ask ‘what did you buy from …(insert name of a foreign city I visited)? I did not purchase something worth their 100% attention or societies 200%. Instead, I invested much of my little cash in paying for an experience such as snorkeling, go-karting, new dishes at restaurants, transportation, desert safari etc. and invest the tiniest fraction on a memorabilia such as the ones quoted above or good to have things.

I looked up some hard facts online about whether my decision on spending money on experience instead of on things is congruous to many people. Yes it is. Huffington Post reports about a 20 year research carried out by a Cornell University professor Dr. Gilovich on spending money on experiences instead of things  makes you happier.  Here are the three things that helped him arrive at his conclusion.

One. Getting accustomed to new possessions. At the instant you acquire something new, it’s your high point of excitement. However, this thrill fades away as the earth orbits around the sun. True?

Two. Raising the bar always. When you buy a $100 dollar sunglasses today, an expected value of what cost of sunglasses you will buy next will be higher than $100. Once we get something, we want a better one next time. True?

Three. Keeping up with the Joneses. By nature, Dr. Gilovich says, possessions foster comparison. Very true. The instant you see a friend’s car, it’s about comparing which is better. Truth is, there will always be someone with a better car.

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It is called the paradox of possessions says Dr. Gilovich. The wrongful assumption that buying things will make you happy as long as the item exists is wrong. It defies common sense I know at times. Buying something that will be there for a very long time should sustain the happiness you got earlier. Reality is, no. It won’t and will never.

However, foregoing such material expenditure for experiences such as travels, dining out with friends, donating to fundraisers, signing up for gym or yoga classes, trying out new cafes or restaurants should leave a more lasting happiness for you.

Often times, it is not easy to always think of the opportunity cost while about to spend your money, especially when you have enough of it. But it should be. Often when I hear and see people complain of little or no money to spend on experiences such as a vacation, I am bewildered by their considerations as I observe their material possessions that could cover their dreams.

Why have an expensive car, while suffering from ADD (adventure deficit disorder) and not sell it to buy a cheaper car and get cured.

“Our experiences are a bigger part of ourselves than our material goods. You can really like your material stuff. You can even think that part of your identity is connected to those things, but nonetheless they remain separate from you. In contrast, your experiences really are part of you. We are the sum total of our experiences.” says Gilovich.

It is easier to bond more with people you hiked Mount Kenya with or traveled to Rome with than with someone who has the same car or phone as you. Even if you did not take the trip together, knowing you all had similar experiences will bring you closer. And that’s more reason to ditch retail therapy (material items) for experience soaked expenditure.

What limits you from foregoing spending on things for experiences? What frequently ranks high on scale of preference, purchase of material possessions or expenditure on experiences? Do you always think of the opportunity cost when you come to spending? I would love to hear what is more important to you, things or experiences and why?

Please drop your comments below.

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