Speaker 1: Welcome to Brainstuff from house Stuff Works dot com where
Speaker 1: smart happens. Hi Marshall Brain with today's question, to maximize
Speaker 1: your happiness, should you spend your money on stuff, on
Speaker 1: experiences or on assets? In America, many people tend to
Speaker 1: spend their money on stuff. This is why the savings
Speaker 1: rate in America is now negative. Forty years ago, people
Speaker 1: saved an average of eleven percent. Think about that. The
Speaker 1: average American used to put eleven percent of their income
Speaker 1: in the bank. Today we save nothing and instead spend
Speaker 1: everything we make, usually on stuff nice apartments or houses,
Speaker 1: nice cars, nice furniture, nice clothes, nice electronics, nice restaurants,
Speaker 1: and so on. My daughter, Arena and I are having
Speaker 1: an ongoing discussion about this over the iPhone four. She
Speaker 1: has an iPod Touch, but she wants an iPhone so
Speaker 1: she can do cool stuff like make movies, make video calls,
Speaker 1: and do whatever else you can do with the iPhone.
Speaker 1: For I've been trying to help her understand that over
Speaker 1: the course of two years, the iPhone four costs two
Speaker 1: thousand plus dollars, and as much as I love her,
Speaker 1: she's not getting one. I'm not getting one, and for
Speaker 1: the exact same reason, two thousand bucks is a lot
Speaker 1: of money. After you own an iPod for two years
Speaker 1: and spend your two thousand dollars, what have you got? Nothing?
Speaker 1: Absolutely nothing. If you want to make movies, you can
Speaker 1: buy a flip for a hundred dollars. Does anyone need
Speaker 1: video calling? If so? Irena has access to a laptop
Speaker 1: that came with a free camera, and Skype is free
Speaker 1: to But the iPhone looks cool, she says, sort of
Speaker 1: smoking to some, and it costs even more after a
Speaker 1: year of smoking. What have you got? Lung cancer? Most
Speaker 1: of the stuff we buy is like this. You buy it,
Speaker 1: use it, and then throw it away. At the end,
Speaker 1: you have no thing. Really. The New York Times is
Speaker 1: proposing a different path in an article entitled but will
Speaker 1: it make you happy? You can find this On the
Speaker 1: bright side, the practices that consumers have adopted in response
Speaker 1: to the economic crisis ultimately could, as a raft of
Speaker 1: new research suggests, make them happier. New studies of consumption
Speaker 1: and happiness show, for instance, that people are happier when
Speaker 1: they spend money on experiences instead of material objects, when
Speaker 1: they relish what they plan to buy long before they
Speaker 1: buy it, and when they stop trying to outdo the Joneses.
Speaker 1: It's a long and fascinating article well worth reading, but
Speaker 1: the article largely neglects a third option for spending money,
Speaker 1: and that option is assets. Let's say you have two
Speaker 1: thousand dollars that you might spend on an iPhone. You
Speaker 1: could buy a nice experience with it instead, like a trip,
Speaker 1: But the third option is to either put it in
Speaker 1: the bank or buy an asset it With two thousand dollars,
Speaker 1: you could buy stock in a company you admire, or
Speaker 1: you could buy gold, coins or whatever. These kinds of
Speaker 1: things tend to retain their value. Not always. Stocks can
Speaker 1: go down and gold can fall in value, but they
Speaker 1: have that tendency to retain value two years from now.
Speaker 1: Unlike an iPhone, you can sell them and get your
Speaker 1: money back out of them. Money in the bank you
Speaker 1: can always access, and it tends to keep its value
Speaker 1: throughout time. After you buy some assets or put money
Speaker 1: in the bank, several times, you would accumulate enough money
Speaker 1: for a down payment on, say a small rental house.
Speaker 1: The advantage of stocks and rental houses is that you
Speaker 1: can cash flow them and make money every month from them.
Speaker 1: With the money you make, you can buy more assets,
Speaker 1: and pretty soon you first have a lot more experience
Speaker 1: collecting assets, so you get better at it, and second
Speaker 1: you have enough assets to be a lot more financially secure.
Speaker 1: Let's say that you save up a hundred thousand dollars
Speaker 1: in assets. If you were to then lose your job,
Speaker 1: you would feel a lot better about it. You would
Speaker 1: be happier than you might otherwise. So there are three
Speaker 1: options to consider, the normal path of buying stuff, the
Speaker 1: New York Times path of spending less on stuff and
Speaker 1: buying experiences and trips instead, and then finally, the asset
Speaker 1: buying path. Consider all three the next time you have
Speaker 1: spare cash. For more illness and thousands of other topics,
Speaker 1: visit how stuff works dot com and don't forget to
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