The Value (and Cost) of Experiences

the 4 hour workweekOne major theme I’ve observed in a large number of recent personal finance books and articles is the idea of valuing experiences over things. For example, it’s more financially sensible to lead a spartan life filled with many memorable experiences than it is to subscribe to the consumer lifestyle. I’ve hinted at this concept several times recently, in my discussion of saving to splurge as well as my review of The 4-Hour Workweek.

On one level, this makes a lot of sense. In your final years, you won’t want to look back on a life that was spent accumulating stuff. Instead, you’ll want to look back on a life well lived, one filled with all kinds of interesting and valuable experiences. Life isn’t about the stuff you have, it’s about the things you do.

There’s only one problem with this philosophy. It’s just as prone to overspending as accumulation of stuff is.

I think back to the amazing honeymoon I had with my wife in the summer of 2003. We went to London, stayed in a hotel room overlooking Hyde Park for a week, and strolled to everything we wanted to see in the city. Then we stayed in Manchester for a few days, then a few days in Inverness, then a final night in London. It was unforgettable, but we spent money like it was water on the whole trip – the total bill ended up being in the low five figures. The summer after that, we spent about a week and a half in the Seattle and Victoria, B.C. areas, spending about $4,000 on a very memorable trip.

In short, the “experience”-based lifestyle is just as prone to overspending as the “stuff”-based lifestyle. You can just as easily blow thousands of dollars on your home entertainment center as you can on a memorable trip.

The key to keeping the experience-oriented lifestyle within reason is the same as keeping the item-oriented lifestyle in reason – frugality. Just as with shopping for the best deals on items, you can also do some careful planning and get the maximum value for your dollar when it comes to memorable experiences. Here are some ideas.

Don’t set the bar for enjoyment beyond what’s reasonable. My wife and I were in great danger of doing this with our London trip – we set the bar for memorable experiences pretty high with that one and we tried to compete with it for the next two summers. While it’s great to occasionally have a truly monumental experience, don’t try to make every other experience match up to it.

What really worked for us was spending three straight summers since then with only extremely modest trips – a camping trip to the Great Lakes in 2006, nothing at all in 2007, and a week along the shores of a nearby lake in 2008. Those experiences were highly enjoyable but didn’t break our finances, either.

Use the peak-end rule to your advantage. The peak-end rule states that your later judgment of an experience is mostly made up of the peak of the experience as well as how you felt at the end of the experience. That means that a trip where you jam every day full of activities isn’t really going to build a ton of great memories. Instead, make the days more leisurely and focus on having two great experiences – one in the middle of the trip and one at the end.

This actually works. My memories of the Seattle trip are really defined by two experiences – visiting (peak) and visiting an (end). My memories of our London trip are mostly defined by visiting Parliament (peak) and a long train ride from Inverness to London where my wife slept on my shoulder and I looked at the countryside (end).

Fill your life with lots of enjoyable smaller experiences. Instead of blowing huge amounts on jaw-dropping experiences, fill your spare time with experiences that fulfill you deeply without emptying your bank account. Spend more time with your kids. Explore the nature near you. Go on shorter trips and discover the beauty and activities available in your own state that you’ve never discovered. Try some new activities that are outside of your comfort zone wherever you are.

For me, the most memorable experiences of this summer are ones that cost very little: playing Calvinball with my son, rolling over and over in the grass with my infant daughter, going to dozens of little community festivals and participating in the cultural activities, biking to the park regularly for family picnics, and so on. These things didn’t have much cost at all, but they’ll be what I remember from this summer and they’ll be very happy memories, right along that top shelf with visiting Parliament with my wife.

Why? The real key to making memorable experiences isn’t in blowing wads of cash on amazing peak experiences. It’s in figuring out what truly makes you happy and making that central in your life. I can name on one hand the things that make me the happiest – writing, playing with my kids, cooking and enjoying good food, and reading. Those things make me happier than anything else, and when I surround myself with them, I find tons of great and memorable experiences without spending much at all.

In the end, then, the real key is to find the elements of your life that make you happiest and make those elements the center of your experiences. The best part is that it doesn’t have to cost much at all and it will put you on the path to leading a memorable life.

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