3 Drawbacks of Spending Your Money on Experiences
Experiences can be mundane and awful. Sometimes saving money is more important.
Posted May 14, 2018
Over the last couple of years, I am sure you’ve seen a headline like one of these:
- Buy Experiences, Not Things
- Why You Should Spend Your Money On Experiences, Not Things
- 7 Reasons Why Spending Money on Experiences Makes Us Happier Than Buying Stuff
- Why You Should Spend Your Money On Experiences, Not Material Things
This advice is based on rigorous consumer psychology research spanning a decade. Research studies have found that after purchase, we tend to adapt very quickly to material, tangible things like a car or a house. Once the novelty wears off, the shiny car or new house becomes same old, same old. But experiences tend to be unique. As one research paper pointed out, “seeing a baby cheetah at dawn on an African safari” is likely to provide us with joyful memories for a lifetime. People also think more about experiences than they do about things. They savor the thought of the experience before its occurrence and recall it afterward to a greater degree than the purchase of material possessions.
Even though the research-based advice on spending on experiences instead of things is helpful in certain situations, it sets up the buying decision in a narrow way. In this blog post, I want to point out three shortcomings of purchasing experiences that you should consider.
1) The advice sets up the consumer’s decision as “spend on experiences vs. spend on things” instead of the more relevant decision of “spend on experiences vs. not spend at all.”
By arguing that buying experiences produces more happiness than purchasing tangible things, the social psychology research sets up the consumer’s decision misleadingly. The tradeoff of experiences vs. things is only relevant to those who have already made up their minds to spend money.
However, as I have written in other posts, most Americans are spending far beyond their means and are not saving enough money for retirement. Their problem is not how to spend money, but how to avoid spending altogether. Unfortunately, the “buy experiences or buy things” research doesn’t give any insight into which of the two options is better for the consumer’s health and well-being, spending money on experiences, or not spending it at all and saving it instead. The comparison group in these research studies is “buy a thing” instead of “not spend at all.”
For a significant number of people, buying experiences will give some, or even a lot, of pleasure. However, it will also lead to a worsening of their already precarious financial condition. Not spending on anything is the smart choice.
2) Most consumer experiences are mundane, variable, and even downright unpleasant.
In endorsing the purchase of experiences, researchers implicitly focus on extraordinary, memorable experiences like going on an African Safari, visiting the Van Gogh museum, or watching a Broadway show. The reality is that such experiences are rare, once-in-a-lifetime occurrences and they are consumed by relatively few people.
Most of us consume mundane, repetitive experiences most of the time. We go to a dentist to have our teeth cleaned, stop at a diner for a quick lunch, and get our car’s oil changed and tires rotated at a repair shop. What’s more, such experiences are not always pleasant. A waiter may give you the fish eye, or a mechanic may forget to tighten the oil drain valve, causing aggravation during the experience, and annoyance and frustration afterward.
The much-touted benefits of experiential purchases obviously will not accrue. In one study, for instance, researchers found that when participants recalled an experiential purchase that ended badly (they were instructed to recall a $300 purchase that “Unfortunately, … did not turn out well and you did not enjoy the purchase”), there was no difference in happiness ratings between purchasing experiences and tangible things.
3) Repeated consumption of any experience diminishes our pleasure.
The third significant aspect of experiences is that they are not immune to hedonic adaptation. People get accustomed to any stimulus that produces an emotional response. Repeated exposure reduces emotional intensity. While the first visit to Disney World in Florida may feel amazing, the third, fourth or fifth time will be a bit of a drag for most people. A member called Real Mad Hatter explained this nicely on the WDW Magic forum:
“Now don't get me wrong, I am not jealous of those of you who go [to Disney World] every year or go several times a year, honest. Even if I could afford to go to WDW every year for 14 nights, I wouldn't.…Just curious about the folk who go more than once a year, is it not a bit like De Ja Vu. Like "here we go again" same rides, same sights, same shows, etc.”
As I have written on this blog, if you get tired of a favorite restaurant, or even of constantly eating out, the best solution to boost your future pleasure is to consume the experience infrequently and abstain from it for a significant time period.
My main point is that when considering the purchase of experiences, the smart thing to do in many situations is to step back and say no. For many of us, having the money in a retirement savings account will be more useful in a few years than recalling the cry of a baby cheetah.