Soha wanted to know what I thought about the differences between spending on stuff and experiences. This took me several drafts to figure out, and I don’t think I’m all the way to a clear understanding yet, but I’m trying to say something I haven’t really found in the personal finance books and blogs I read.

Stuff or experiences? Neither. It’s a false dichotomy, and one that often starts with the wrong question: “What will make me happy?” If you aren’t happy, it’s very difficult to buy happiness. Probably impossible.

“What will make me happier than I am now?” – is that a better question? Not really. What’s “happier”, anyway, but something that draws an ever-moving line between you and some ideal?

I like this question instead: “What do I want to learn more about?” No guarantee of happiness, no pursuit of happiness, just curiosity. Happiness doesn’t have to be pursued. It just is. Happiness can be a chosen, developed response. So what I decide to spend money or time on is determined more by what I’m curious about.

I confess to having a strong distrust for people trying to sell me ways to happiness. A designer handbag won’t make me happy (or happier). Neither will a three-week vacation of idle relaxation on a pristine beach. Quite possibly even an enlightening weekly course on meditation wouldn’t do the trick. My life will be a good life even if I never stay in the best suite in a five star hotel, see the aurora borealis, or learn to fly a plane (ideas from Richard Horne’s “101 Things to Do Before You Die”, which does have amusing forms). It will simply be different if I do, and that only matters if I can do something with the experiences and ideas I pick up and recombine.

In fact, I’d rather spend on stuff – the raw ingredients of an experience – than on pre-packaged experiences. I’d rather spend on groceries for experiments than on a fancy meal at a restaurant or a cooking class with a famous chef. I’d rather spend on lumber and tools to build a chair, than spend on a cottage rental. Turns out this is based on sound psychological principles: we value what we work on more than what we buy. (For more on this, read Dan Ariely’s “The Upside of Irrationality.”)

You can’t untangle good stuff from experiences. The bag of bread flour I buy leads to the experience of making home-made buns, the experience of enjoying them with W-, and the lasting enjoyment of developing skills and relationships. Fabric and thread become simple gifts accompanied by stories.

Besides, it doesn’t have to be the question of what you want to spend money on. That’s just a matter of budgeting. Many things are possible, but you may save up a little longer for things that require more money. What it really comes down to is a question of time: do you want to do this more than other things you could do? (For example: yes to cooking and gardening; a theoretical yes to improv, but it’s not as high as other things on my list, so I focus on other things; no to the massage deals I see on dealradar.com when I wander by.) If yes, then budget appropriately. Don’t get distracted by low-cost, low-value activities or expenses. (Or worse: high-cost, low-value ones.)

If you feel you’ve made a mistake about spending, don’t beat yourself up over it. Learn and make better decisions next time. Not saddling yourself with consumer debt helps, as debt has a way of multiplying regrets. Stuff can be second-guessed more than experiences can, but it’s even better to break the habit of second-guessing yourself. Think of your sunk costs as tuition. You’ve paid for the learning, now go and use it.

Money can be considered in terms of time, too. Is the incremental benefit you might get worth the opportunity cost of enjoying other things earlier, the compounding growth you may give up, or the corresponding days of freedom in the future? (For me: yes to some wedding photography in order to reduce friction, but no need to get the top wedding photographer; yes to a wonderful bicycle I feel comfortable with; no to the latest version of the Lenovo tablet, although I may reconsider in a year or two.)

Stuff or experiences? Start with what you want, not what other people want to sell you. Treat it as an ongoing experiment. Evaluate your purchases and improve your decisions. Think about what you want to spend your time on, not just money. Good luck!

2011-04-24 Sun 16:45