Consumer Decisions: Should we Invest into Possessions or Experiences?

If your finances are limited at all as a consumer, you are constantly faced with the decision: how should you spend your money in order to get the most lasting happiness and satisfaction from your purchases? 

With the holidays and the gifting season coming up for many, this is a particularly important question, because you may be spending money on others, not just on yourself.

Consumer Decisions: Possessions or Experiences?

Photo by Duncan Rawlinson

Should we buy possessions or experiences?

A lot of research shows that spending our money on experiences, such as vacations and concerts, makes us happier than buying material possessions, like clothes and electronic gadgets. For experiences, we’re also more likely to regret inaction, that is the decision NOT to buy, as a missed opportunity. For material purchases on the other hand, we’re more likely to regret action by feeling buyer’s remorse afterwards.

A very recent study shows that we like to delay gratification more if the rewards are experiences, rather than material goods. In other words, when we buy things like clothing or gadgets, we want to use them right away. But when we pay for experiences, like vacations or meals out, we don’t mind some waiting before the event. You might say this makes sense, because once we have the material possessions, we can keep them, so why not get them sooner rather than later?

However, somewhat counterintuitively, the happiness we derive from material goods doesn’t actually last that long. One study asked people how happy they were with material and experiential purchases. Initially, their happiness with those purchases was ranked about the same. But over time, people’s satisfaction with the things they bought went down, whereas their satisfaction with experiences they spent money on went up.

Isn’t it strange that the happiness we get from a physical object, which we can keep for as long as we want, lasts less than the happiness we get from an experience?

Why do experiences make us happier and keep us satisfied for longer?

In the long run, it is perhaps obvious that most material possessions, being physical objects, lose some of their initial value, such as by wearing out, breaking down, or going out of fashion. But even before that, one problem with material things is that we adapt very quickly to them, because of the very fact that they stay with us. In general, we seem to adapt much more quickly to new things and situations than we expect – for better and for worse. Therefore, the very durability of a possession eventually robs it of its power to make us happy – and faster than we think. Experiences on the other hand, being intangible, not only suffer no such decline, but often get romanticized as they live on in our memories and our stories. They therefore often increase, rather than diminish, in value.

There are several other explanations why experiences make us happier and keep us satisfied for longer than possessions.

With this in mind, Happy Thanksgiving!

by Ursina Teuscher (PhD), at Teuscher Decision Coaching, Portland OR

Selected References:
Boven, L. V., Campbell, M. C., & Gilovich, T. (2010). Stigmatizing Materialism: On Stereotypes and Impressions of Materialistic and Experiential Pursuits. Personality and Social Psychology Bulletin, 36(4), 551–563.
Caprariello, P. A., & Reis, H. T. (2013). To do, to have, or to share? Valuing experiences over material possessions depends on the involvement of others. Journal of Personality and Social Psychology, 104(2), 199.
Carter, T. J., & Gilovich, T. (2010). The relative relativity of material and experiential purchases. Journal of Personality and Social Psychology, 98(1), 146–159.
Carter, T. J., & Gilovich, T. (2012). I am what I do, not what I have: The differential centrality of experiential and material purchases to the self. Journal of Personality and Social Psychology, 102(6), 1304.
Carter, T. J., & Gilovich, T. (2014). Getting the Most for the Money: The Hedonic Return on Experiential and Material Purchases. In M. Tatzel (Ed.), Consumption and Well-Being in the Material World (pp. 49–62). Springer Netherlands.
Chatterjee, S., Rai, D., & Heath, T. B. (2016). Tradeoff between time and money: The asymmetric consideration of opportunity costs. Journal of Business Research, 69(7), 2560–2566.
Kumar, A., & Gilovich, T. (2016). To do or to have, now or later? The preferred consumption profiles of material and experiential purchases. Journal of Consumer Psychology, 26(2), 169–178.
Mogilner, C., & Aaker, J. (2009). “The Time vs. Money Effect”: Shifting Product Attitudes and Decisions through Personal Connection. Journal of Consumer Research, 36(2), 277–291.
Rosenzweig, E., & Gilovich, T. (2012). Buyer’s remorse or missed opportunity? Differential regrets for material and experiential purchases. Journal of Personality and Social Psychology, 102(2), 215–223.
Van Boven, L., & Gilovich, T. (2003). To Do or to Have? That Is the Question. Journal of Personality and Social Psychology, 85(6), 1193–1202.

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Posted in Decision-Making, Financial Decisions