Monday, August 29, 2011

Personal Wealth Redefined by Experiences

A lot has changed for Rachel Aydt in the past two years. Since the magazine she worked for shut down in 2008, she’s been faced with plenty of financial uncertainty. Aydt now blends freelance work with teaching to make ends meet. But she and her family—a husband and son—still have to watch the pennies. Though money is tight, what the New Yorker and her family get in return for their spending has made them richer in unexpected ways.

Joining her young son’s local karate group is a case in point. Aydt, 38, has had to cut back on certain things, but her son’s karate lessons haven’t been one of them. In fact, she’s joined, too, and mother and son do karate twice a week at a local center. Karate has brought with it a sense of “neighborhood community we didn’t have before,” she says.

Similarly, picking her food upstate instead of buying it at a grocery store has meant the family gets more satisfaction from their purchases. And being around more means less money spent on child care when her son isn’t at school, leaving more for picnics at the beach. For Aydt, the aim these days is “putting the dollar more toward life-enriching things."

But in some respects, our collective plunge in net worth has led to a rise in a different kind of personal wealth, prompted by a more thoughtful approach to consumption that emphasizes experience over excess and community over commerce. Insights from psychology and behavioral economics suggest that when it comes to happiness, what you spend your money on can matter more than how much of it you have. Studies have shown that putting more cash toward experiences rather than stuff, buying a gift for someone else rather than yourself and even simply anticipating a purchase longer make us happier.

It may have taken a recession to remind us of this, but the lesson seems to be taking hold. “People are shifting from mindless to mindful consumption,” says John Gerzema, chief insights officer at global marketing services firm Young & Rubicam and co-author of Spend Shift: How the Post-Crisis Values Revolution Is Changing The Way We Buy, Sell and Live. Read the entire article.

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