These 5 Research Studies Will Forever Change The Way You Spend Money

For nearly ten years, we do the same exact thing every New Year’s Eve – we rent a large vacation house with our friends.

It started as a reunion of sorts and, as each of our families grew, evolved into a four-day vacation rental. The first year we rented a house that had just four bedrooms – it was actually the Frank Lloyd Wright-designed Duncan House in Pennsylvania. This past year was spent near Deep Creek Lake at one of just a handful of 10+ bedroom vacation homes in the area.

Our annual trip is not necessarily “cheap” but it’s not extravagant either. Each family is expected to chip in for snacks, beverages and meals, which we cook ourselves. After so many years, we pull it together without too much fuss or drama and it’s a lot of fun.

Does the trip always go without incident? No. Lock ten kids under seven in a house together for 4 days and see how that goes. 🙂

We look forward to it every year and now, as our kids grow up, they look forward to it too.

The old adage of “the best things in life are free” is true but in cases like our trip, not the whole picture. Things in life are not free but many of the things we do enjoy can be made better if you spend our money and our time wisely.

How do we spend it better? I have research to share!

Below, I’m going to share a handful of research studies that will change the way you spend money.

1. Rituals help you value things more

Think back to your childhood – what are your fondest memories?

Chances are it involved some kind of “ritual.” By ritual, I don’t mean you got dressed up in robes at midnight, lit some candles, and chanted … well, unless you did.

Rituals are where you do a set of prescribed steps in the process of doing something. Rituals can be very complicated or they can be very simple. Always pouring your morning coffee into your morning coffee mug – that’s a ritual.

It turns out that rituals can help you value your everyday things even more.

Rituals make us value things more. Research out of the Carlson School of Management at University of Minnesota and Harvard Business School has shown that rituals changed the experience you have when you are eating. It was a series of studies that looked at how people consumed something like chocolate – whether they had instructions (a “ritual”) or whether they just ate it.

Those who had a ritual seemed to enjoy it more. And would pay more for it. With the study involving chocolate, people said they’d be willing to pay almost twice as much for the same piece of chocolate!

They also found evidence that the level of personal involvement in the activity played a big role. The more involved you are, the more you value it.

So the next time you’re doing anything you enjoy, think about the rituals you’ve built up around it. If you don’t have any rituals, consider how you might build some in to increase your enjoyment without having to spend a little more.

2. Don’t Make Something Special into a Routine

One of the reasons why birthdays are so special is because they’re not every single day.

It’s based on an idea known as hedonic adaptation and has been studied extensively. It’s also come under fire, since it’s not exactly “provable,” so this is hardly etched in stone. The basic premise is that you get used to things. Especially nice things.

As you get nicer things and improve your lifestyle, you get used to them (lifestyle inflation anyone?). Your happiness might get a quick bump up but gradually it drifts back down to your set point. You adapt to the nice stuff. Whether or not you can find data to support this, I think you’ll agree you feel this intuitively. When it’s 60 degrees in our house in the winter, everyone is cold. When it’s 60 degrees in our house in the summer, it’s fantastic.

For one day each year, you are the center of your family’s world. You get some presents, you get the first slice of cake, and you might even have a party with some of your friends. Maybe you get sugary cereal. Ice cream. The works.

When a kid is the center of the family’s world every day of the year, you end up with little emperors. That’s what they call the progeny of families living under China’s one-child policy. The kids are “less altruistic and trusting, more timid, less competitive, more pessimistic and less conscientious.”

All the great things in life are boring because you’ve been getting them your entire life.

When I get into my car in the morning, it turns on. I’m used to it. I don’t think about how stunningly amazing it is I can go 60 MPH with the press of my foot.

So if you do have something you really enjoy, don’t ruin it by making it routine. Whether this is something as mundane as ice cream every night or more lavish like dining in Michelin star restaurants, make sure you keep the special things in your life special.

3. Spend on Experiences, Not on Things

When I asked you to think back to your childhood and to your fondest memories, did you think back to things you owned or things you did?

Chances are it your fondest memories involve experiences. I know mine are almost all experiences and that’s because experiences tend to appreciate while things depreciate (in our minds).

First, your memories of experiences tend to improve with age because you remember the good parts and forget the bad parts. In a November 2012 paper in Psychological Science, Benjamin Storm and Tara Jobe studied this idea in a paper titled “Retrieval-Induced Forgetting Predicts Failure to Recall Negative Autobiographical Memories.“

The gist of the paper was that we tend to have positive self-images and to reinforce this, we tend to forget negative memories while enhancing positive memories. Our memories actually appreciate.

Next, there’s enjoyment in the anticipation of the experience itself. You bought tickets to see a concert and your thoughts on that concert leading up to the concert are all good. You’re excited. You’re getting enjoyment and the event hasn’t even happened yet!

In 2014, again in Psychological Science, we find support in a paper titled Waiting for Merlot: Anticipatory Consumption of Experiential and Material Purchases by Amit Kumar, Matthew A. Killingsworth and Thomas Gilovich. In their study, they saw that experiential purchases (money spent on doing) tended to provide more enduring happiness compared to material purchases (money spent on having). That isn’t what makes it stand out, at least to me, because this has been studied before.

What they learned was that not only were your memories of an experience better, but the anticipation of the consumption was higher if it was an experience rather than a material good.

So not only do you remember experiences more fondly, but you anticipate them more. Win-win!

4. Nurture Supportive Warm Relationships

If you want to improve your well being, it’s not how you spend your money. It’s about how you spend your time.

In the 20th century, there were two powerful studies on well being worth taking a deeper dive.

The first study is the Grant Study, part of the Study of Adult Development at Harvard Medical School. It’s a longitudinal study that started in 1938 when researched followed 268 Harvard undergrads for 75 years (there was a second cohort of 456 men starting in the 1940s). The study, which is still going on today, evaluates the men every two years!

The Grant Study has discovered a lot of things (outlined beautifully in this 2009 article in The Atlantic) but one that jumps out, especially for a money blog, is that happiness depends on quite a bit on the warmth of the person’s relationships. There are certainly a lot of different factors but one that seems to repeat itself is “social aptitude” and the ability to form warm connections with friends, family members, mentors, and other people around you.

The men’s relationships at age 47, he found, predicted late-life adjustment better than any other variable, except defenses. Good sibling relationships seem especially powerful: 93 percent of the men who were thriving at age 65 had been close to a brother or sister when younger. In an interview in the March 2008 newsletter to the Grant Study subjects, Vaillant [director of the study, George Vaillant] was asked, “What have you learned from the Grant Study men?” Vaillant’s response: “That the only thing that really matters in life are your relationships to other people.”

The second study, The Longevity Project by Hoard S. Friedman and Leslie R. Martin, discovered something even more direct about well-being and relationships – “Beyond social network size, the clearest benefit of social relationships came from helping others. Those who helped their friends and neighbors, advising and caring for others, tended to live to old age.”

Despite what Jimmy Soul may have sung, if you want to be happy for the rest of your life, nurture supportive and warm relationships.

5. Go Outdoors

Seriously, go outdoors. Breathe fresh air. Bask in the warm glow of the sun. But not for too long.

Exposure to Greenness and Mortality in a Nationwide Prospective Cohort Study of Women, authored by Peter James, Jaime E. Hart, Rachel F. Banay, and Francine Laden, used data from a US-based Nurses’ Health Study of 108,630 women and observed 8,604 deaths between 2000 and 2008. What they discovered was that even after you adjusted for mortality risk factors, women living in the highest quintile (250m area around their home) of “cumulative average greenness” had a 12% lower of all-cause nonaccidental mortality (95% confidence interval).

It’s hard to find the causation but intuitively this all makes sense. If you live in an area that’s green, with plenty of vegetation and fresh air, you’re likely to live longer. Perhaps you’re more likely to outside more often and that will contribute to a longer life.

Not convinced because you’re not a woman? OK here’s another paper that shares the same results – “Rest improves performance, nature improves happiness: Assessment of break periods on the abbreviated vigilance task.” by KM Finkbeiner, PN Russell, and WS Helton. The gist of the paper is that taking regular breaks improves performance. It also saw that there was a benefit to natural stimuli in the promotion of well being and stress relief.

Whatever the reason, living in a greener area helps you live longer and better. And going outdoors doesn’t cost a penny. 🙂

6. Volunteer

Here’s a bonus study – it’s similar to the supportive relationships idea from The Longevity Study.

Volunteering can be good for your health – there’s observational evidence that there’s a 20% reduction in mortality in volunteers compared to non-volunteers. Volunteers had lower rates of depression, higher rates of life satisfaction and well-being.

For this analysis, we turn to Dr. Suzanne Richards at the University of Exeter Medical School. She published a paper in the BMC Public Health journal titled “Is volunteering a public health intervention? A systematic review and meta-analysis of the health and survival of volunteers.”

It’s important to note that this isn’t a clinical study or a longitudinal study. It’s a review of existing data involving the physical and mental health outcomes of different groups. It was also made clear that “there was insufficient evidence to demonstrate a consistent influence of volunteering type or intensity on outcomes.”

I’m sure you can appreciate that these types of studies are difficult to prove. The reality is that volunteering feels good. It’s pseudo-free, in that you typically don’t pay to volunteer, and you can help an organization you care deeply about.

So to recap – if you need to spend money, spend it on experiences you can share with close friends. Then just go outside and/and volunteer.