The Experiential Value of Money
Most of us have fond memories of summer: the family road trips, visits to national parks, beach vacations - you name it. Through these experiences, summer has earned a special place in our hearts, remaining with us, or even shaping us for decades to come.
I remember sitting by the lake beach one summer, feeling the sun's warmth on my skin, and watching the kids running back and forth with a bucket from the lake to the little hole they dug in the sand, trying to make their own tiny lake. The sense of wealth that I felt had nothing to do with money. Instead, it was born out of the richness of the moment - a moment that was about experience, connection, and joy.
The trip didn't cost us an arm and a leg. We stayed at the A-frame an hour from the St. Louis metro area, and we packed a lot of food to cook. That's almost all our expenses, a little over $1,000. I can remember things we buy that cost the same amount of money that blended into my surroundings that I don't even "see" anymore.
That got my financial planner brain thinking about the experiential value of money, specifically how experiences could give you a better bang for the buck in terms of happiness compared to material possessions. Like the April issue of my newsletter, the experience could be one of the ways to get more "orange juice" out of your "orange."
This concept of experience over things is not entirely new. There has been a lot of research in the past couple of decades on why experience gives people more joy than things. Notably, through a series of research, Thomas Gilovich, a psychology professor at Cornell University and others have pointed out people tend to get more out of experiences instead of material possessions.
Experiences are like a three-course meal:
Appetizer: the anticipation and planning
Main course: the experience itself
Dessert: the reflection and memories after
Appetizer
Consider the anticipation and planning stage. There's a thrill in looking forward to a summer concert, a camping trip, or a much-awaited vacation. The period leading up to the experience, filled with preparation and eagerness, brings its own form of happiness.
Gilovich’s paper "Waiting for Merlot" pointed out that we tend to be less impatient, even happy when we wait for experiences. It could be because we don't have a concrete picture of how the experience will turn out and that experiences are harder to compare, not like material goods.
Main Course
Next comes the experience itself - the main course. Experiences often engages our senses, emotions, and sometimes even our physicality much more intensely than material possessions ever could. Experiences are fleeting, forcing us to be more in the moment. We also tend to choose experiences that align with our identity.
Also, shared experiences help us form community and connection - I can't be the only person to watch a TV show just so that I have common topics with my friends right?
Dessert
Finally, we have the reflection and memories stage. Long after the experience has passed, it brings us happiness through cherished memories.
How often have you gathered with your family during the holidays, sitting around the dinner table, reliving memories that start with "Do you remember that one time....?" These experiences often become integral parts of our identity.
What about experiences that turned sour?
Are there bad experiences? Sure, just like there are bad purchases, there are bad experiences. However, in reflection stage, some bad experiences can even turn into good story and become more enjoyable in hindsight.
Take my husband and I’s trip to Puerto Rico in 2015, for instance.
Quite a few things didn’t work out so well for us, like the passenger door on our rental car wouldn’t lock, missing our Ferry to the Isla Culebra in the wee hours for two days in a row, or getting lost in a hilly neighborhood because our GPS mistook it for the rainforest park.
At the time, none of these experiences were exactly pleasant, but we remember more of how we overcome it rather than how frustrating it was at the time being. We still reminisce on how I hung on to the passenger door so tightly to it so it doesn’t flap around on the highway like a dog’s ear when running, how we found another small airplane to take us to Isla Culebra and how we managed to find our way back to the rainforest after piecing together information in front of some random person’s house when we got lost.
Together with the San Juan nightlife, the relaxing beach visit, the delicious “pork highway” visit and the bioluminescent bay excursion, our Puerto Rico trip became one of the most memorable trips that we’ve ever taken. Even the unpleasant bits and pieces turned out to be a great story that we share over and over again.
A word of caution
Now, please don't take experience all the way to the other extreme. Understanding money's experiential value doesn't mean disregarding savings, retirement plans, or financial security. It's not about irresponsibly splurging on first-class flights or 5-star hotels for a 3-month vacation around the world, if you can’t afford it.
Rather, it requires a shift in our spending habits and attitudes toward money. It prompts us to ask, 'Will this purchase enrich my life with memorable experiences?'. This approach could mean prioritizing a family vacation over upgrading to a new car or attending a concert instead of buying the latest tech gadget.
The point is also not that everyone should pursue a life devoid of material enjoyment, pursuing a monk-like life. It’s more about the balance and a framework to help guide your choice when you have to make one.
Parting Words
As we head into the season of sun-soaked days, I hope everyone will enjoy this special season and create memories with their loved one and bring into focus what true wealth means: a balance between material enjoyments as well as richness in experience.
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