WEBVTT - To maximize happiness, what should you spend money on?

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<v Speaker 1>Welcome to Brainstuff from house Stuff Works dot com where

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<v Speaker 1>smart happens. Hi Marshall Brain with today's question, to maximize

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<v Speaker 1>your happiness, should you spend your money on stuff, on

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<v Speaker 1>experiences or on assets? In America, many people tend to

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<v Speaker 1>spend their money on stuff. This is why the savings

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<v Speaker 1>rate in America is now negative. Forty years ago, people

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<v Speaker 1>saved an average of eleven percent. Think about that. The

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<v Speaker 1>average American used to put eleven percent of their income

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<v Speaker 1>in the bank. Today we save nothing and instead spend

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<v Speaker 1>everything we make, usually on stuff nice apartments or houses,

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<v Speaker 1>nice cars, nice furniture, nice clothes, nice electronics, nice restaurants,

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<v Speaker 1>and so on. My daughter, Arena and I are having

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<v Speaker 1>an ongoing discussion about this over the iPhone four. She

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<v Speaker 1>has an iPod Touch, but she wants an iPhone so

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<v Speaker 1>she can do cool stuff like make movies, make video calls,

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<v Speaker 1>and do whatever else you can do with the iPhone.

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<v Speaker 1>For I've been trying to help her understand that over

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<v Speaker 1>the course of two years, the iPhone four costs two

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<v Speaker 1>thousand plus dollars, and as much as I love her,

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<v Speaker 1>she's not getting one. I'm not getting one, and for

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<v Speaker 1>the exact same reason, two thousand bucks is a lot

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<v Speaker 1>of money. After you own an iPod for two years

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<v Speaker 1>and spend your two thousand dollars, what have you got? Nothing?

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<v Speaker 1>Absolutely nothing. If you want to make movies, you can

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<v Speaker 1>buy a flip for a hundred dollars. Does anyone need

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<v Speaker 1>video calling? If so? Irena has access to a laptop

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<v Speaker 1>that came with a free camera, and Skype is free

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<v Speaker 1>to But the iPhone looks cool, she says, sort of

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<v Speaker 1>smoking to some, and it costs even more after a

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<v Speaker 1>year of smoking. What have you got? Lung cancer? Most

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<v Speaker 1>of the stuff we buy is like this. You buy it,

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<v Speaker 1>use it, and then throw it away. At the end,

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<v Speaker 1>you have no thing. Really. The New York Times is

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<v Speaker 1>proposing a different path in an article entitled but will

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<v Speaker 1>it make you happy? You can find this On the

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<v Speaker 1>bright side, the practices that consumers have adopted in response

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<v Speaker 1>to the economic crisis ultimately could, as a raft of

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<v Speaker 1>new research suggests, make them happier. New studies of consumption

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<v Speaker 1>and happiness show, for instance, that people are happier when

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<v Speaker 1>they spend money on experiences instead of material objects, when

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<v Speaker 1>they relish what they plan to buy long before they

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<v Speaker 1>buy it, and when they stop trying to outdo the Joneses.

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<v Speaker 1>It's a long and fascinating article well worth reading, but

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<v Speaker 1>the article largely neglects a third option for spending money,

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<v Speaker 1>and that option is assets. Let's say you have two

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<v Speaker 1>thousand dollars that you might spend on an iPhone. You

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<v Speaker 1>could buy a nice experience with it instead, like a trip,

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<v Speaker 1>But the third option is to either put it in

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<v Speaker 1>the bank or buy an asset it With two thousand dollars,

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<v Speaker 1>you could buy stock in a company you admire, or

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<v Speaker 1>you could buy gold, coins or whatever. These kinds of

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<v Speaker 1>things tend to retain their value. Not always. Stocks can

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<v Speaker 1>go down and gold can fall in value, but they

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<v Speaker 1>have that tendency to retain value two years from now.

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<v Speaker 1>Unlike an iPhone, you can sell them and get your

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<v Speaker 1>money back out of them. Money in the bank you

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<v Speaker 1>can always access, and it tends to keep its value

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<v Speaker 1>throughout time. After you buy some assets or put money

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<v Speaker 1>in the bank, several times, you would accumulate enough money

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<v Speaker 1>for a down payment on, say a small rental house.

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<v Speaker 1>The advantage of stocks and rental houses is that you

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<v Speaker 1>can cash flow them and make money every month from them.

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<v Speaker 1>With the money you make, you can buy more assets,

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<v Speaker 1>and pretty soon you first have a lot more experience

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<v Speaker 1>collecting assets, so you get better at it, and second

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<v Speaker 1>you have enough assets to be a lot more financially secure.

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<v Speaker 1>Let's say that you save up a hundred thousand dollars

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<v Speaker 1>in assets. If you were to then lose your job,

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<v Speaker 1>you would feel a lot better about it. You would

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<v Speaker 1>be happier than you might otherwise. So there are three

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<v Speaker 1>options to consider, the normal path of buying stuff, the

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<v Speaker 1>New York Times path of spending less on stuff and

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<v Speaker 1>buying experiences and trips instead, and then finally, the asset

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<v Speaker 1>buying path. Consider all three the next time you have

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<v Speaker 1>spare cash. For more illness and thousands of other topics,

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<v Speaker 1>visit how stuff works dot com and don't forget to

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