When I was younger, I made a weekly effort to count the money in my piggy bank. Okay, so it wasn’t a real piggy bank – I shoved my $10 allowance into a drawer in my desk, then recounted it every week to remind myself how much money I had. Then, I would take out a handful of cash to embark on a shopping spree at one of my favorite three stores of the 90s: Hollister, Abercrombie or American Eagle. And what do I have to show now for all of that “saving” and spending I did in my earlier years?
Just a couple faded tops I can still squeeze into and a savings account I only started building a couple years ago. Around ten years later, when I realized how much money I owed in student loans, I cursed my younger and stupider self for being so frivolous. Why didn’t I save my money? I could use it right now. You would think I would have learned my lesson, but when my family gave me money for my 27th birthday, I didn’t put a dime of it toward paying off my loans. Instead, I went skydiving.
Are you terrified yet? First off, I will tell you I am planning to pay off my loans. I would love nothing more than to have them eliminated from my life. But I still seem to be spending tons of my money — funds I should be saving to pay off my loans — on crazy things like skydiving.
I’m sure you remember how that allowance you had also paid for something other than trendy t-shirts? You went to movies with your friends, had dinner with your high school sweetheart or paid for gas you used to drive your friends around. Yep, you still have memories of those fun experiences you spent money on, and research now says that’s what really matters.
Yes, you read that right.
The teenage you (and let’s be honest, 20- or 30-something you) may have been onto something when you ignored the lesson to “save up.” Here’s what they found: Spending money can actually make your life better. Assuming that one’s basic biological, physiological and emotional needs are met, it’s actually possible to find fulfillment in things only money can buy.
Maslow’s Hierarchy of Needs, something we all remember from school, I know, consists of a five-stage model of basic motivations essential to the human experience. At the peak of this hierarchy is self-actualization, which may be achieved in several ways. According to Maslow’s research, the kind of “behavior leading to self-actualization involves trying new things instead of sticking to safe paths” and experiencing life “like a child, with full absorption and concentration.” So what better way to experience life like a child and stray from a safe path than to spend money on a trip to a new place you’ve never been? Why not try out a new restaurant that offers an unusual type of food? Neither of these activities, of course, comes for free. The good news is that there are other, entirely free ways to achieve self-actualization, including hard work and being responsible, but part of the process of creating a meaningful life is about getting out there and living life. And let’s face it – living life costs money.
Envision yourself saving all of your money with plans to retire, or purchase a house when you’re married or setting aside money for investments in the stock market or even your 401k. These are all good things to do, please don’t get me wrong. But if you are so focused on saving money all the time, when will you actually do all the things you planned in order to be a complete person? What about continuing your education, traveling the world, or even taking fitness classes? It seems like now is the time to spend, right? There just might not be time later, when children come along, etc.
According to Meg Jay, an assistant clinical professor at the University of Virginia in Charlottesville, 20-somethings should “go out with people you don’t usually go out with” and “accept some invitations you normally turn down.” Jay explained, in a Forbes article, “the brain doesn’t fully mature until your mid-20s, particularly the parts that plan for your future and manage emotions.” What this means that you “experience in your 20s becomes hardwired into your brain, and this is the best chance you have to rewire your brain and change how you think and react.” If you spend your 20s doing what you think matters, do things that matter for your mind and body. For example, it is a perfect time to open up more career options through further education, which can cost on average between $23-46k annually. You can travel the world while you’re young, and learn about other cultures. Enjoy working out while you still look great in yoga pants. Here’s the best part: Spending money now on some of these things can bring you more money, and save you money later on. According to The Economist, depending on your degree, you can earn about $17.5k more annually than peers who only have a high school diploma. And with a master’s degree, you can earn about 20-30% more annually than peers with just a bachelor’s.
Living a healthier lifestyle also pays off.
Health insurance companies often offer cheaper insurance for individuals who exercise. In addition, staying in shape often alleviates costly medical expenses. Economist and University of Southern California Professor Richard Easterlin says that spending on your health, as well as your education, leads to increased levels of happiness.
So let’s see…spending money can help you achieve self-actualization, save you money in the long run and enable you to have experiences that make you happier. So why not spend, spend, spend?
Well, before you remove that new kindle from your Amazon cart, put down the new tube of lipstick. There is a very important stipulation to this great news. That is, money only buys happiness when it’s spent on the right things, namely, non-things. Cornell University researchers found “purchasing an experience tended to improve well-being more than buying a possession, in part because people are more prone to comparisons and buyer’s remorse with goods.” So Easterlin’s paradox emphasizes the danger that comparison poses to overall happiness and satisfaction with income. In essence, not only are you more likely to get upset with your new car when the neighbors next door buy an even fancier car; you might just get sick of it. Sonja Lyubomirsky, PhD, psychology professor at the University of California Riverside, argues that delight with a new item, say, furniture, eventually fades as the item itself becomes a part of your norm. Once something new no longer seems extraordinary, it becomes an ordinary part of your reality. And so therein lies the magic of spending money on experiences rather than tangible things. Doing so creates memories and establishes valuable social connections with others! Spending money on, say, a trip for a friend or loved one, you will likely experience some kind of emotional reward.
So next time you feel a guilt trip for booking that massage, or regret buying a ticket for a summertime jaunt to the beach, you can rethink your remorse. You might have been onto something in your earlier years when you spent your allowance on nights out with friends.
Just don’t buy a bunch of t-shirts from Abercrombie again!