Study: Money can buy happiness -- if spent wisely

Need some happiness-inducing retail therapy? Go for the family vacation, and forget the flat-screen TV.

Satisfaction with "experiential purchases," such as a massage or a vacation, starts high and increases over time, according to researchers at Cornell University. But spending on material goods -- though it feels good at first -- eventually makes people less happy.

"The Relative Relativity of Material and Experiential Purchases," by Thomas Gilovich, a Cornell professor of psychology, and Travis J. Carter, appeared in a recent issue of the Journal of Personality and Social Psychology. The National Science Foundation funded the research, which consisted of several related studies including dozens of participants.

The act of buying experiences, the researchers said, provides greater satisfaction as time goes on because of our selective memory and the fact that the experience is highly subjective, making it more difficult to compare to other people's experiences. It's also easier for consumers to decide on experiential purchases, often choosing to spend on the first option that meets a set of expectations, the paper said, rather than comparing all possible options.

The paper went on to say that shoppers tend to second-guess their material purchases, weighing their decisions against those of others and considering better deals that they missed. But, the researchers said, satisfaction is also linked with the way the consumer perceives the purchase. For example, are they shelling out cash for an expensive boxed CD set or for hours of great music?

Here's how the researchers summed up their findings:

A new car does not stay new for long, and trips to the mechanic only become more frequent. Eventually, the car is less a source of happiness than of annoyance -- something to be replaced. A satisfying experience, in contrast, often becomes even more positive over time as it is embellished in memory. A wonderful weekend with friends can live on in happy reminisces and rich stories for years to come.

Carter, T. J., & Gilovich, T. (2010). The relative relativity of material and experiential purchases. Journal of Personality and Social Psychology, 98, 146-159. doi: 10.1037/a0017145

This post was originally published on Smartplanet.com