1 00:00:00,520 --> 00:00:03,800 Speaker 1: Welcome to Brainstuff from house Stuff Works dot com where 2 00:00:03,840 --> 00:00:16,120 Speaker 1: smart happens. Hi Marshall Brain with today's question, to maximize 3 00:00:16,120 --> 00:00:20,200 Speaker 1: your happiness, should you spend your money on stuff, on 4 00:00:20,440 --> 00:00:26,279 Speaker 1: experiences or on assets? In America, many people tend to 5 00:00:26,320 --> 00:00:29,880 Speaker 1: spend their money on stuff. This is why the savings 6 00:00:29,960 --> 00:00:33,360 Speaker 1: rate in America is now negative. Forty years ago, people 7 00:00:33,400 --> 00:00:36,639 Speaker 1: saved an average of eleven percent. Think about that. The 8 00:00:36,720 --> 00:00:39,680 Speaker 1: average American used to put eleven percent of their income 9 00:00:39,720 --> 00:00:43,160 Speaker 1: in the bank. Today we save nothing and instead spend 10 00:00:43,200 --> 00:00:47,640 Speaker 1: everything we make, usually on stuff nice apartments or houses, 11 00:00:47,760 --> 00:00:51,880 Speaker 1: nice cars, nice furniture, nice clothes, nice electronics, nice restaurants, 12 00:00:51,880 --> 00:00:54,720 Speaker 1: and so on. My daughter, Arena and I are having 13 00:00:54,760 --> 00:00:58,640 Speaker 1: an ongoing discussion about this over the iPhone four. She 14 00:00:58,800 --> 00:01:01,960 Speaker 1: has an iPod Touch, but she wants an iPhone so 15 00:01:02,040 --> 00:01:05,720 Speaker 1: she can do cool stuff like make movies, make video calls, 16 00:01:05,880 --> 00:01:08,160 Speaker 1: and do whatever else you can do with the iPhone. 17 00:01:08,200 --> 00:01:11,119 Speaker 1: For I've been trying to help her understand that over 18 00:01:11,160 --> 00:01:14,160 Speaker 1: the course of two years, the iPhone four costs two 19 00:01:14,200 --> 00:01:17,360 Speaker 1: thousand plus dollars, and as much as I love her, 20 00:01:17,400 --> 00:01:20,440 Speaker 1: she's not getting one. I'm not getting one, and for 21 00:01:20,480 --> 00:01:23,520 Speaker 1: the exact same reason, two thousand bucks is a lot 22 00:01:23,600 --> 00:01:27,000 Speaker 1: of money. After you own an iPod for two years 23 00:01:27,000 --> 00:01:30,320 Speaker 1: and spend your two thousand dollars, what have you got? Nothing? 24 00:01:30,440 --> 00:01:33,280 Speaker 1: Absolutely nothing. If you want to make movies, you can 25 00:01:33,280 --> 00:01:36,280 Speaker 1: buy a flip for a hundred dollars. Does anyone need 26 00:01:36,400 --> 00:01:40,160 Speaker 1: video calling? If so? Irena has access to a laptop 27 00:01:40,200 --> 00:01:42,720 Speaker 1: that came with a free camera, and Skype is free 28 00:01:42,760 --> 00:01:46,560 Speaker 1: to But the iPhone looks cool, she says, sort of 29 00:01:46,680 --> 00:01:49,960 Speaker 1: smoking to some, and it costs even more after a 30 00:01:50,040 --> 00:01:53,560 Speaker 1: year of smoking. What have you got? Lung cancer? Most 31 00:01:53,600 --> 00:01:56,520 Speaker 1: of the stuff we buy is like this. You buy it, 32 00:01:56,880 --> 00:01:59,400 Speaker 1: use it, and then throw it away. At the end, 33 00:01:59,440 --> 00:02:02,120 Speaker 1: you have no thing. Really. The New York Times is 34 00:02:02,200 --> 00:02:05,960 Speaker 1: proposing a different path in an article entitled but will 35 00:02:06,000 --> 00:02:09,760 Speaker 1: it make you happy? You can find this On the 36 00:02:09,760 --> 00:02:13,240 Speaker 1: bright side, the practices that consumers have adopted in response 37 00:02:13,280 --> 00:02:17,040 Speaker 1: to the economic crisis ultimately could, as a raft of 38 00:02:17,160 --> 00:02:22,320 Speaker 1: new research suggests, make them happier. New studies of consumption 39 00:02:22,360 --> 00:02:26,040 Speaker 1: and happiness show, for instance, that people are happier when 40 00:02:26,080 --> 00:02:30,720 Speaker 1: they spend money on experiences instead of material objects, when 41 00:02:30,720 --> 00:02:33,520 Speaker 1: they relish what they plan to buy long before they 42 00:02:33,560 --> 00:02:37,200 Speaker 1: buy it, and when they stop trying to outdo the Joneses. 43 00:02:37,760 --> 00:02:41,520 Speaker 1: It's a long and fascinating article well worth reading, but 44 00:02:41,600 --> 00:02:45,160 Speaker 1: the article largely neglects a third option for spending money, 45 00:02:45,160 --> 00:02:48,639 Speaker 1: and that option is assets. Let's say you have two 46 00:02:48,680 --> 00:02:52,000 Speaker 1: thousand dollars that you might spend on an iPhone. You 47 00:02:52,040 --> 00:02:55,560 Speaker 1: could buy a nice experience with it instead, like a trip, 48 00:02:55,919 --> 00:02:58,360 Speaker 1: But the third option is to either put it in 49 00:02:58,400 --> 00:03:01,880 Speaker 1: the bank or buy an asset it With two thousand dollars, 50 00:03:01,880 --> 00:03:04,560 Speaker 1: you could buy stock in a company you admire, or 51 00:03:04,639 --> 00:03:07,880 Speaker 1: you could buy gold, coins or whatever. These kinds of 52 00:03:07,960 --> 00:03:12,119 Speaker 1: things tend to retain their value. Not always. Stocks can 53 00:03:12,200 --> 00:03:15,120 Speaker 1: go down and gold can fall in value, but they 54 00:03:15,160 --> 00:03:18,760 Speaker 1: have that tendency to retain value two years from now. 55 00:03:18,840 --> 00:03:21,280 Speaker 1: Unlike an iPhone, you can sell them and get your 56 00:03:21,280 --> 00:03:23,680 Speaker 1: money back out of them. Money in the bank you 57 00:03:23,720 --> 00:03:26,600 Speaker 1: can always access, and it tends to keep its value 58 00:03:26,680 --> 00:03:30,760 Speaker 1: throughout time. After you buy some assets or put money 59 00:03:30,760 --> 00:03:33,960 Speaker 1: in the bank, several times, you would accumulate enough money 60 00:03:34,000 --> 00:03:36,880 Speaker 1: for a down payment on, say a small rental house. 61 00:03:37,320 --> 00:03:40,200 Speaker 1: The advantage of stocks and rental houses is that you 62 00:03:40,240 --> 00:03:43,680 Speaker 1: can cash flow them and make money every month from them. 63 00:03:43,720 --> 00:03:46,360 Speaker 1: With the money you make, you can buy more assets, 64 00:03:46,560 --> 00:03:49,800 Speaker 1: and pretty soon you first have a lot more experience 65 00:03:49,880 --> 00:03:53,200 Speaker 1: collecting assets, so you get better at it, and second 66 00:03:53,520 --> 00:03:56,960 Speaker 1: you have enough assets to be a lot more financially secure. 67 00:03:57,560 --> 00:03:59,840 Speaker 1: Let's say that you save up a hundred thousand dollars 68 00:03:59,840 --> 00:04:02,800 Speaker 1: in assets. If you were to then lose your job, 69 00:04:03,200 --> 00:04:05,640 Speaker 1: you would feel a lot better about it. You would 70 00:04:05,680 --> 00:04:09,280 Speaker 1: be happier than you might otherwise. So there are three 71 00:04:09,360 --> 00:04:13,280 Speaker 1: options to consider, the normal path of buying stuff, the 72 00:04:13,280 --> 00:04:16,640 Speaker 1: New York Times path of spending less on stuff and 73 00:04:16,680 --> 00:04:21,680 Speaker 1: buying experiences and trips instead, and then finally, the asset 74 00:04:21,760 --> 00:04:25,320 Speaker 1: buying path. Consider all three the next time you have 75 00:04:25,400 --> 00:04:30,599 Speaker 1: spare cash. For more illness and thousands of other topics, 76 00:04:30,800 --> 00:04:33,160 Speaker 1: visit how stuff works dot com and don't forget to 77 00:04:33,240 --> 00:04:35,080 Speaker 1: check out the brain stuff blog on the house stuff 78 00:04:35,080 --> 00:04:37,640 Speaker 1: works dot com home page. 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