Many have touted the millennial generation as materialistic, focusing their spending habits on of-the-moment purchases and material goods instead of saving for the future. But research tells a different story about millennial spending habits—discretionary spending on travel and experiences has increased during the last 10-15 years, while spending on physical goods has decreased.
Nowadays, many people would rather spend their hard-won income on a trip abroad than on the perfect matching dining room set. But what cultural shifts are behind this development?
A Shift Toward Experiences vs. Things
Due to the rise in student loan debt and the stagnation in salaries, the millennial generation’s discretionary spending power is generally more limited than previous generations. This means that millennials have to prioritize where they want their money to go in a more calculated, conservative fashion.
Add a plethora of uncertain economic factors and the cost of maintaining those big ticket items, and it’s no wonder that many millennials seem hesitant to buy a house, complete with appliances, furniture and other material goods.
“When I buy things, I create an obligation,” said wealth coach Rocky Lalvani of Richer Soul. “For example, if I buy a car, I might be thrilled the day I drive off the lot. But two years later, my monthly payment is still the same and my car might be dented and scratched. In addition, I know I have to spend money to maintain the car so it’s still costing me even more money with less happiness to offer.”
Is Spending Less the Key to Happiness?
Not only is recent data pointing to an increase in spending on experiences, but research now shows that buying an experience leads to greater satisfaction and happiness than buying a consumer good.
“When I spend money on an experience, I enjoy the time and make memories,” Lalvani said. “Take, for example, a trip to Italy. Two years after the trip, as I look back on pictures of the experience or talk with those who went with me, I recall wonderful memories and the happiness of the adventure continues to be a positive experience in my mind.”
Sometimes using your money wisely doesn’t necessarily mean you’re spending less; it might mean you’re simply using your money in a more intentional way. For example, if your favorite pastime is driving down State Route 1 in California, buying a car might not a bad purchase as it enables an experience you’re passionate about. But if you’d rather use your money to travel and visit family, then you might need to route more funds to a vacation fund than to that car dealership.
Match Spending to Value in Your Life
If you’re worried that you’re spending money on the wrong things, make a list of the things that make you truly happy—whether that be spending time with your book club, enjoying an afternoon at the zoo with your children or watching the latest environmental documentary.
Think about what’s keeping you from doing those things and whether you can allocate your money in a way that will allow you to enjoy those experiences more often. For example, could you outsource cleaning your house so you have more time to spend with your kids? Can you downsize your house so you have more money to devote towards a date night with your spouse?
Time and money are the two most important resources—and both are finite. Consider how you can make the most of your money with reward credit cards or cards with no international transaction fees, and whether you might benefit from scaling back—or ramping up—spending in one area to increase your satisfaction in another.