"Nobody lies on their deathbed wishing they spent more time with their money."
Eating lunch at a restaurant in Denver's airport, we get an email telling us that after getting delayed three times, our flight to Las Vagas has been canceled. We're dinked. We have to get to Vegas tonight because we have a shuttle coming to pick us up tomorrow at 4 am. We consider renting a car and driving, but we have to drive through the mountains and even without any stops we wouldn't get there until 2:30 am.
Tomorrow we're supposed to be going on a rafting trip through Grand Canyon. We already paid for the trip, and we're unsure what their refund policy is. We're flexible, so we know enough to understand that rainstorms in Las Vegas that cause traffic delays are outside of our control and thus, not worthy of our worry. We've been thinking about this trip for months and don't want to miss out.
We get lucky. Just as we're about to call the company to tell them our situation, we get on a standby flight. We get to Las Vegas with plenty of time to sit in the pool, grab some dinner, and unwind before getting up tomorrow at 3 am.
As we look back on this trip we can't believe how much fun we had. We met so many cool people. We had a lot of fun hiking to places we never thought we'd be able to see. As we look back, it's kind of cool thinking about sleeping outside in Grand Canyon while getting rained on. It's fun thinking about how hot it was at camp trying to keep cool by sitting in the river having a couple of drinks with our new friends.
We didn't know we were doing this at the time, but we did a lot of things that helped make this an amazing memory. First, we spend our money on an experience. Second, we paid for it ahead of time. Third, we researched it for months.
All of these seemingly random happenings helped make us happy about our trip. I'm not saying that you should spend your money on a rafting trip, but I am saying you can use some of these techniques to increase your happiness.
Money Doesn't Buy Happiness
To be sure, not having money can make you miserable, but after your needs are met, more income and wealth don't contribute to our happiness. If you aren't happy without money, you won't be happy with money.
Having and earning money doesn't make us happy, but how we use can, if we do it right.
AEM - Anticipation, Experience, Memory
Some say that 50% of our happiness is genetic. We're all born with a baseline level of happiness. After that, 10% is a result of what happens to us that's outside of our control. That leaves 40% of our happiness that we're responsible for. Designing our lives and using our money to support this aspect can boost our happiness.
I'm going to introduce a framework through which we can think about money and happiness. There are three aspects to our lives that give us happiness. The first is anticipation. Thinking about the future gives us joy. Planning that vacation, thinking about that updated kitchen, imagining that summit of that hike - these provide us with happiness. Setting ourselves up to anticipate positive events is good for us. The opposite is true, as well. If you have to go through a negative experience, set it up so that you don't have much anticipation. For example, when my wife got eye surgery, she made a decision one day and had the surgery a week later. There was less time to imagine the stuff that could go wrong.
As a side note - and this sounds counterintuitive - surprising your loved ones with a trip they didn't get to help plan actually deprives them of happiness since they don't get any anticipation of the trip.
Next, we have the experience itself. This could be doing something, buying something, or some combination. Psychologist Daniel Kahneman thinks about us as having two different selves. The person going through the experience is the experiencing self.
Finally, we have the memory of the event. This is what Kahneman calls the remembering self. As time passes we tend to remember the good parts of the experience and forget about the bad. This is called euphoric recall.
Setting up our lives to take advantage of our anticipation, memories, and experiences themselves can make us happy. Below are several examples.
The End Matters
We tend to remember the end of our experiences more than the middle. We can take advantage of that by setting our experiences up so that there is something memorable at the end. Maybe the last day of the trip is where we go on an amazing hike or go see a famous landmark. Perhaps during a dinner party, we can clean up after dinner but before dessert. This way we end the evening with dessert and conversation rather than having to wash dishes. If there is something negative that has to happen, like you have to deliver bad news to a loved one, put that in the middle of the conversation and close the conversation with good news.
Often times at the end of a vacation we have to do a lot of crumby things, like paying the hotel bill, put up with the hassle of traveling home, or just feeling exhausted. Mentally "ending" the vacation the day before will give the vacation a happy ending and thus the "bad" stuff happens after the vacation is over.
We have an easier time remembering the end, so end your experiences on a positive note, and put negative stuff in the middle.
Part of the reason many people think money will make them happy is that they imagine all the stuff they can buy with money. Unfortunately, buying stuff doesn't make us happy.
If we think of stuff in the context of AEM, the reason is clear. We don't get a memory of stuff. It's always there. We get some initial joy from purchasing stuff (including homes, cars, electronics, and remodels), but that wears off. The longer we have it the more likely it is that we'll see others with newer versions of what we have. Our stuff starts to fall apart. It gets old. It stops working. Better versions come out. And we have no choice but to be constantly reminded of our old and outdated stuff.
We deny ourselves the memory of our experience.