The fallacy of spending money on "experiences" vs hard assets

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gotester2000
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Re: The fallacy of spending money on "experiences" vs hard assets

Post by gotester2000 » Mon Nov 27, 2017 9:28 am

Asset or experience - you should spend money on what brings joy to you and your family without the need to do it to showcase it to the world.
The entire point IS to "enjoy" some of those special things/experiences, rather than continually putting them off.
It's not at all to "do more" or "get more" just for the sake of doing more and more or buying more and more.
Agree.

randomguy
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Re: The fallacy of spending money on "experiences" vs hard assets

Post by randomguy » Mon Nov 27, 2017 9:32 am

Wildebeest wrote:
Sun Nov 26, 2017 9:13 pm

Hi randomguy,

Thanks for your input. I love a book which makes me question my perceptions and my beliefs especially when I consider mine and Hariri's educated opinions. I do not hold freakonomics as an educated opinion. I do believe that the more you read outside your comfort zone and the more you are exposed to different points of view, the more the world opens up and you experience (and this is without having to go on vacations to far off places).

Wildebeest
It is important to think about why you consider someone an educated opinion. Is it because it matches your world view, because you believe the guys credentials, or because you believe the other 100 guys that vouch for them, and so on. And of course you have to remember experts are wrong (i.e. the belief that stress causes ulcers or that things like ego depletion exists) just often enough to make you question their authority.:)

randomguy
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Re: The fallacy of spending money on "experiences" vs hard assets

Post by randomguy » Mon Nov 27, 2017 9:51 am

alfaspider wrote:
Mon Nov 27, 2017 9:12 am

One might draw a contrast between something like a mountain bike and a luxury watch. There's no real experience a Rolex grants you that materially differs from a Timex- other than for real or imagined comments about the watch. That being said, I imagine there are folks for whom looking a certain way carries psychological benefits that are hard to measure.
Basically you are discounting the experience of owning a luxury watch because you don't value it.:) Or lets take your example. Is there a material difference between mountain biking with a 100 dollar walmart special anda 5k bike? After all both more or less get you to the bottom of the hill so the experience is the same right? For me it might be true since my experience would be falling constantly:). For the expert there is vast difference in terms of handling and the like. The watch is no different. For me a 5k watch would look stupid with my 50 dollar pants and polo shirts. But for the guy with a 5k suit, the watch fits and allows him to complete his experience.

In the end you will end up rating various experiences and they are vastly different. The experience of traveling to africa for 2 weeks is not remotely the same as going to the same beach you have been going to for the past 30 years. Both are travel. Both can be enjoyable. Only one is really horizon expanding.

MiddleOfTheRoad
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Re: The fallacy of spending money on "experiences" vs hard assets

Post by MiddleOfTheRoad » Mon Nov 27, 2017 9:52 am

Valuethinker wrote:
Mon Nov 27, 2017 9:17 am
alfaspider wrote:
Mon Nov 27, 2017 9:12 am
I'd point out that many assets allow experiences. For example, owning a mountain bike allows one to have the experience of mountain biking. Sure, you could rent and get that experience, but I imagine you will probably be mountain biking a lot more often if you own- and there's the aspect of the experience of riding a bike tailored to your exact preferences. Alternatively, one of my assets is a vintage car. It is a hobby in and of itself- I have a great time tinkering with it, taking it to club events, and taking it out on the track- none of those experiences could be had without the asset. I find these types of assets to be high on the "bang for buck" scale compared to vacation spending- which is a one-and-done experience rather than a whole universe of experiences.

One might draw a contrast between something like a mountain bike and a luxury watch. There's no real experience a Rolex grants you that materially differs from a Timex- other than for real or imagined comments about the watch. That being said, I imagine there are folks for whom looking a certain way carries psychological benefits that are hard to measure.
Precisely.

With this proviso. Any modern compact car will allow you to enjoy the same experiences as owning an $80k sports car or a big SUV.

Now it may be you use aforesaid car a lot on empty highways, and so you get cruising experience that you really love. If you spend your life in greater NYC traffic jams? Not so much.

It is all about decreasing marginal utility of expenditure.

A car opens up a lot of options. An expensive car does not open up many more options than a cheap one. Fixing up a classic car is an activity separate from how much it cost.

The same is true about travel, once you hit a certain minimum standard of comfort and safety. I can tell you I often choose Premier Inn (budget travel chain) for my business travel in the UK. The beds are clean, the rooms have wifi and everything you want. I have been in "posher" hotels that cost a lot more money and have significantly disappointed (the Novotel chain is a particular pet hate).

But if you want to go to Antarctica, it's going to be $10k bucks, more or less, no matter what you do. Yes you can have a nicer trip no doubt with $20k bucks, but your minimum step is high.
The common theme I see is that people keep imposing what they value over what others value. It is fine to have an opinion but it does not make you right. I am relatively frugal, but I am happy and still remember all the times I spend extra for quality that matter to me, be it for assets or experience.
What may seem wasteful in your opinion may offer great value for others. Now, if people just spend money to show off or just spend for the sake of spending, that is on them.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by alfaspider » Mon Nov 27, 2017 10:02 am

randomguy wrote:
Mon Nov 27, 2017 9:51 am
alfaspider wrote:
Mon Nov 27, 2017 9:12 am

One might draw a contrast between something like a mountain bike and a luxury watch. There's no real experience a Rolex grants you that materially differs from a Timex- other than for real or imagined comments about the watch. That being said, I imagine there are folks for whom looking a certain way carries psychological benefits that are hard to measure.
Basically you are discounting the experience of owning a luxury watch because you don't value it.:) Or lets take your example. Is there a material difference between mountain biking with a 100 dollar walmart special anda 5k bike? After all both more or less get you to the bottom of the hill so the experience is the same right? For me it might be true since my experience would be falling constantly:). For the expert there is vast difference in terms of handling and the like. The watch is no different. For me a 5k watch would look stupid with my 50 dollar pants and polo shirts. But for the guy with a 5k suit, the watch fits and allows him to complete his experience.

In the end you will end up rating various experiences and they are vastly different. The experience of traveling to africa for 2 weeks is not remotely the same as going to the same beach you have been going to for the past 30 years. Both are travel. Both can be enjoyable. Only one is really horizon expanding.
I'm not necessarily discounting the luxury watch- I admit that some people may value the luxury watch. I'm just saying that it doesn't unlock new or different experiences. If you subscribe to the "experiences over things" theory, then I'm just saying that the distinction is not necessarily clear, though that's true for certain items more than others.

As for the $100 walmart bike. Such bikes can actually be a bit dangerous if used in heavy-duty trail riding situations. Here's a youtube video of a Walmart bike being used on a downhill mountain bike run:

https://sploid.gizmodo.com/pro-mountain ... 1782806600

Spoiler alert- the handlebars bent after the first jump and the brakes were basically gone halfway down. Ability to withstand abuse aside, riding a difficult uphill on a 50lb Walmart bike would be considerably less enjoyable than on a 25lb remote-lockout suspension carbon fiber wonderbike. Rather tangential to this debate, but I do think there's a minimum quality standard for "experience items" under which enjoyment suffers significantly. On the other hand, there is certainly a zone of diminishing marginal returns, and a hedonic treadmill issue when buying such items.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by avalpert » Mon Nov 27, 2017 11:18 am

Lynette wrote:
Mon Nov 27, 2017 8:40 am
avalpert wrote:
Sun Nov 26, 2017 8:32 pm
DrGoogle2017 wrote:
Sun Nov 26, 2017 7:56 pm
Lynette wrote:
Sun Nov 26, 2017 7:09 pm
I know someone who has returned from South Africa with his wife, son and another quadriplegic adult son from South Africa, Zimbabwe and Zambia. They went primarily to game parks as well as the Victoria Falls. He raved about his vacation. Incidentally there are 54 countries in "Africa". I'm always amazed at Americans who think that Africa is one country.
I refer to the general area. Let’s not insult us all that we don’t know that Africa is more than one country. I refer to Europe the same. I’m too amazed by your sweeping generalization. Do you know America has more than one state?
Heck, America has more than one country (more than one continent too).
Its common usage in the US, to refer to the country as "America". Many Hispanics call them "gringos" and are highly insulted by the usage of the term "America" to refer to US citizens.
Yes, I understand it is common. And as a proud American, when you understand that we have no problem reducing the name of two entire continents to refer just to us it is no surprise at all that many of us lack an appreciation for the variety of Africa, or have an irrational fear-based view of other lands that vastly overstates dangers and understate the value of experiencing them, or can think the value of equity diversification magically ends at our border...

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by randomguy » Mon Nov 27, 2017 12:09 pm

alfaspider wrote:
Mon Nov 27, 2017 10:02 am


I'm not necessarily discounting the luxury watch- I admit that some people may value the luxury watch. I'm just saying that it doesn't unlock new or different experiences. If you subscribe to the "experiences over things" theory, then I'm just saying that the distinction is not necessarily clear, though that's true for certain items more than others.

As for the $100 walmart bike. Such bikes can actually be a bit dangerous if used in heavy-duty trail riding situations. Here's a youtube video of a Walmart bike being used on a downhill mountain bike run:

https://sploid.gizmodo.com/pro-mountain ... 1782806600

Spoiler alert- the handlebars bent after the first jump and the brakes were basically gone halfway down. Ability to withstand abuse aside, riding a difficult uphill on a 50lb Walmart bike would be considerably less enjoyable than on a 25lb remote-lockout suspension carbon fiber wonderbike. Rather tangential to this debate, but I do think there's a minimum quality standard for "experience items" under which enjoyment suffers significantly. On the other hand, there is certainly a zone of diminishing marginal returns, and a hedonic treadmill issue when buying such items.
Sure but then a civic isn't the same as porsche 911 as only one of them can drive 150mph:) And that 5k watch isn't the same as a timex either since only one looks good.:)

But in the end it comes down to me that 5k bike is a paperweight. For a mountain biker it opens up some fun experiences. The 5k watch is also a paperweight to me. For some watch guy, it is a fun experience. And yes a lot of stuff has rapidly declining value. The gap between a 100 dollar bike and a 1000 one is pretty huge. 1k to 5k is a lot smaller. And 5k to 10k is even smaller.


Buying a 5k watch when you don't enjoy watches is stupid. buying a 100k car when you just want to go from point a to b is stupid. Spending 10k to go to africa when you hate plane travel and have no desire to the country is also stupid. And so on. At a high level the OP is pointing out how some expenses are acceptable (travel/education) on this board while others (luxury cars and watches) aren't. I tend to go that the extremes of either end tend to be suboptimal for most people.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by Lynette » Mon Nov 27, 2017 12:11 pm

Thanks, yes I see. I've been in the US for over 35 years and many of my friends think I'm brave/foolish/fearless because of the places I visit. I came to realize how the media overstates dangers during the Apartheid era. While many Americans thought South Africa was exploding my South African friends and relatives were playing golf, tennis, golf and swimming. South African I know who visited the US during this period said they did not think it was the same country portrayed on TV as the one in which they lived. For the most part, unless you are involved in protest, don't go to the place where it is taking place.

I became interested in the Native Americans (Indian tribes) in the Americas so I went to Guatemala and Peru. I wanted to go to Mexico City to learn more about the Aztecs. I could not find any tour company willing to go to Mexico City. When I was there earlier one of the tour guides told me he was more worried about Americans slipping on the uneven sidewalks than being subject to drug violence. Eventually I found a course/tour by Roadscholar. I'm trying to learn Spanish and want one-on-one immersion instruction. I will likely choose Antigua in Guatemala.

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eye.surgeon
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Re: The fallacy of spending money on "experiences" vs hard assets

Post by eye.surgeon » Mon Nov 27, 2017 12:39 pm

As the OP, let me chime in to clarify my initial remarks.

I wasn't attempting to compare the emotional value of lifestyle experiences, like travel, vs things, like luxury cars. I was placing an objective financial value on the two and comparing them.

A luxury car, when you get bored with it, is worth the residual value of the car. Travel or vacations, when you're done with it , is worth zero.

Objectively, and strictly financially speaking, you're better off being a "things" person than an "experience" person.

What actually makes you happy or satisfied is a completely different discussion.
Last edited by eye.surgeon on Mon Nov 27, 2017 12:56 pm, edited 1 time in total.
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Re: The fallacy of spending money on "experiences" vs hard assets

Post by Da5id » Mon Nov 27, 2017 12:47 pm

eye.surgeon wrote:
Mon Nov 27, 2017 12:39 pm
A luxury car, when you get bored with it, is worth the residual value of the car. Travel or vacations, when you're done with it , is worth zero.

Objectively, and strictly financially speaking, you're better off being a "things" person than an "experience" person.
But why is this a useful perspective? I just don't get it. This logic would not merely say no vacations, it would say no experiences that cost money period. Don't go to the movies, don't go to a show, heck, don't drive anywhere just for a fun experience as the depreciation on your car decreases the value of a tangible asset for only zero cost benefit of the good experience. Given that nobody actually applies the logic above this way, the real question is how to balance purchases vs experiences to optimize happiness, and that balance point presumably is different for different people. When I personally think of the things that stick with me and made/make me happy, they largely involve experiences. YMMV.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by lotusflower » Mon Nov 27, 2017 12:48 pm

eye.surgeon wrote:
Mon Nov 27, 2017 12:39 pm
I wasn't attempting to compare the emotional value of lifestyle experiences, like travel, vs things, like luxury cars. I was placing an objective financial value on the two and comparing them.

A luxury car, when you get bored with it, is worth the residual value of the car. Travel or vacations, when you're done with it , is worth zero.

Objectively, and strictly financially speaking, you're better off being a "things" person than an "experience" person.
I don't even get this. What's financially beneficial about owning "things"? There was just a recent thread expressing mild surprise that used furniture has basically zero value. Manufactured goods are at historically low prices when indexed for cost of living and inflation. Once you buy something, it's value drops to near zero. The exception is homes and cars, and it's dubious for cars, and hotly debated on BH for homes. I suppose precious metals hold their value, but that's an investment, so it's not relevant to a question about spending.

I don't see the difference between getting an expensive couch and enjoying it versus taking an expensive vacation and enjoying it and the memory of it. When you are done with them, both have about the same value to others, and thus have negligible effect on your net worth going forward.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by lotusflower » Mon Nov 27, 2017 12:55 pm

eye.surgeon wrote:
Mon Nov 27, 2017 12:39 pm
A luxury car, when you get bored with it, is worth the residual value of the car. Travel or vacations, when you're done with it , is worth zero.
Even the car is not a good example. After you have sold the luxury car and then you calculate the costs, there can be no doubt you would have saved money with a Toyota Corolla (a perfectly fine conveyance, I must add). So the upcharge you paid for your stint in the fancy car is totally equivalent to a vacation.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by H-Town » Mon Nov 27, 2017 12:58 pm

eye.surgeon wrote:
Sat Nov 25, 2017 11:50 am
The trendy thing these days is to talk about spending money on "experiences", basically a new-age description of a vacation, and how it's better than spending money on "things", basically a new-age description of hard assets. The news is full of pop-science articles touting the benefits of this, most of which I think are junk science.

I bring this up as a thought exercise for bogleheads. If you look objectively at spending on vacations, it's the worst money you will ever spend. It depreciates immediately. You have literally nothing left to show for it within a couple weeks. Objectively it's a much poorer purchase than even the most frivolous luxury sports car, which will never be worth zero.

I'm not discounting the psychological and emotional benefits of taking time off work, going on vacations, spending time with family. These have real merit. I'm just rejecting the pop-science notion that spending $10k going to Thailand for 3 weeks is somehow psychologically more beneficial than buying a more expensive car or installing a home theater. For me, either of those would provide more lasting enjoyment than a vacation. Not only do I enjoy them much longer, but they have a tangible value when I'm done with them.

Mind you, my wife has accused me of being the worst vacationer in the world as I get bored after about 3 days.

If I already save at least 33% of gross income and I want to spend xxx amount of money for myself and family, consider all else is equal, then I would rather spend on experience and traveling more than material things such as clothes, accessories, technologies, TV, household items, and expensive cars. My wife and I don't enjoy material things. We travel, do activities outdoor, be active, and create memories.

But I agree that it's totally personal decisions and it's never black or white. We spent $75k annually and never all of it on experience, nor on material things. But the inclination is always on experience.

At the end of the day, we are working towards to goal to be financial independence. All spending decisions, more or less, must put us closer to that goal we set.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by chevca » Mon Nov 27, 2017 1:09 pm

OP, I see your point... I'm one of the few, I think. :happy

OP isn't talking about going out to dinner or the movies as experiences, nor are they talking about a Lazy-Boy you're going to sit in until you wear it out. I believe OP is talking about dropping >$10k on a vacation/experience vs. dropping >$10k on a thing/toy/car. The MANY other smaller examples probably need not be talked about in this one.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by Da5id » Mon Nov 27, 2017 1:16 pm

chevca wrote:
Mon Nov 27, 2017 1:09 pm
OP, I see your point... I'm one of the few, I think. :happy

OP isn't talking about going out to dinner or the movies as experiences, nor are they talking about a Lazy-Boy you're going to sit in until you wear it out. I believe OP is talking about dropping >$10k on a vacation/experience vs. dropping >$10k on a thing/toy/car. The MANY other smaller examples probably need not be talked about in this one.
I totally disagree with what you say. I think dropping $800 to see Hamilton vs buying an i-pad is a very similar evaluation myself. The amount of money isn't the issue, it changes the magnitude of the decision of stuff vs experiences, but not its fundamental nature.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by MrNewEngland » Mon Nov 27, 2017 1:18 pm

I would live in a hut if it was near a coral reef that I could freedive/scuba/spearfish all the time.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by MidwestMike » Mon Nov 27, 2017 1:24 pm

Lynette wrote:
Sun Nov 26, 2017 8:19 pm
One guy asked me if I knew someone in "Africa". I asked him where that person lived - said it was Nigeria - about 8,000 miles from where I lived.
You mean kilometers not miles.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by H-Town » Mon Nov 27, 2017 1:25 pm

MrNewEngland wrote:
Mon Nov 27, 2017 1:18 pm
I would live in a hut if it was near a coral reef that I could freedive/scuba/spearfish all the time.
This summer, we visited a small surfing town called Santa Catalina in Panama and met a couple who decided to get away from corporate world in New York and moved there to manage a resort. They make less than what the get from working in New York city but they do what they love everyday: surfing, diving, fishing, paddle-boarding. It really gave me a whole new perspective.

On a unrelated note, I learned how to surf the first time in my life. That feeling when I stood on the surf board and rode those waves is priceless.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by avalpert » Mon Nov 27, 2017 1:40 pm

eye.surgeon wrote:
Mon Nov 27, 2017 12:39 pm
As the OP, let me chime in to clarify my initial remarks.

I wasn't attempting to compare the emotional value of lifestyle experiences, like travel, vs things, like luxury cars. I was placing an objective financial value on the two and comparing them.

A luxury car, when you get bored with it, is worth the residual value of the car. Travel or vacations, when you're done with it , is worth zero.
This is objectively false - and the research supports that. Financial value isn't the only form of value and from the perspective of an economically rational human being it isn't the primary value objective - economically you are seeking to maximize utility and research has shown the residual utility value of experiences exceeds the ongoing utility value of owning things.

Speaking strictly in financial terms as an individual (as opposed to say as a 'company' which is not a person) is irrational from the perspective of economics.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by eye.surgeon » Mon Nov 27, 2017 1:45 pm

I'm not sure you understand what "objective financial value" means . It's a literal monetary value. It ignores anything you cannot sell to another person. If you can't sell the happy memories from your hiking trip, it has no objective financial value.
Last edited by eye.surgeon on Mon Nov 27, 2017 1:47 pm, edited 1 time in total.
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Re: The fallacy of spending money on "experiences" vs hard assets

Post by MidwestMike » Mon Nov 27, 2017 1:46 pm

MidwestMike wrote:
Mon Nov 27, 2017 1:24 pm
Lynette wrote:
Sun Nov 26, 2017 8:19 pm
One guy asked me if I knew someone in "Africa". I asked him where that person lived - said it was Nigeria - about 8,000 miles from where I lived.
You mean kilometers not miles.
BTW Lynette, was this a test? LOL 😃

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by avalpert » Mon Nov 27, 2017 1:46 pm

MrNewEngland wrote:
Mon Nov 27, 2017 1:18 pm
I would live in a hut if it was near a coral reef that I could freedive/scuba/spearfish all the time.
We spend Thanksgiving week every year on Bonaire (got back Saturday evening) - every year I try to convince my wife to cash it in and move down there for good. Of course I also tried to convince her to cash it in and settle in to any number of other locations we have experienced over the years (Ngepi in Namibia may have been the first). Truth be told, I think if I did that it wouldn't be long before I wanted to hit the road again for something different.

But I have met many over the years who made it work, a guy who took me diving off St. John moved down there onto a small boat and scraped by taking the occasional diver out and doing carpenter work around the island (I should check in with him to see how he survived the hurricane). The divemaster who did my advanced open water course many years ago opened the first dive shop in Vietnam and settled in to it - I always thought being the first to open a certified outfit on the Burma Banks would be a lucrative way to go.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by duckcalldan » Mon Nov 27, 2017 1:47 pm

The most illuminating part of this quite interesting thread is the realization that, just like our world, there is hardly a “typical” Boglehead. We tend to view the world through our own quite individual lens and, as such, tend to think most of our BH peers think and believe in a similar manner as we do. True, some of us are just beginning their asset accumulation phase. Many more of us are close to retirement or enjoying retirement ourselves.

But, just as in life, there are neighbors that are homebodies, neighbors that love their boat and use it constantly, neighbors who are constantly traveling and sharing their travel stories with us, and neighbors that don’t fit into any of these stereotypes.

For me, we are enjoying the first year of our retirement and looking forward to downsizing to a smaller, age-in-place home in the next couple of years. As such, monthly trips to Goodwill are giving my wife and I great pleasure as we see our “hard assets” get smaller and smaller. When assets need replacement, we buy smartly (a geniune iPad rather than a cheap knockoff I might have been tempted to purchase in the past) but reluctantly. My 12 year old road bicycle needs replacement. I will probably look to buy a gently used or last year’s model, even though I could afford to buy a more expensive bike. I get great pleasure when saving money, as long as the quality of that item is not compromised. It doesn’t need to be top of the line though. I love cycling, so I’m going to spend $2-4K on it. I don’t watch much TV, so when my old one bit the dust, I bought a 50” non-4K model for less than $200. It’s all situational.

Traveling gives me great joy. We are independent travelers who have rented apartments and villas for years before Airbnb existed. When we travel, we try hard to be temporary locals, shopping at local supermarkets and farmers markets. We look for low priced airfares and, once we book them, we ask ourselves what we can do when we’re there. It’s a strategy that has worked well for us. We’ve taken our kids to Europe nine times, and the experiences and memories we have are priceless. Now that we’re retired and soon to be empty nesters, we’ll be using our points occasionally to splurge on business class...but not staying at posh hotels. We zig when others zag.

We also feel a strong urge to give back. I recently travelled to Rwanda with a group of six to drill a water well. I saw the sights, went for a sunset kayak tour of Lake Kivu, went for a bike ride. But the main purpose of the trip was to make a difference in the lives of some rural villagers. That experience will remain with me for a lifetime, and it has changed me. Our next giving back trip will be to Haiti.

In conclusion, I would hope that, when asking the question of spending money on assets vs experiences, y’all would consider that both of those choices focus on our own enjoyment rather than someone else. Victor Frankl felt strongly that, to find purpose in life, one needs to find something bigger than ourselves to focus on. For some it’s grandkids, for some it’s a thirsty Rwandan village. Just my two cents.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by avalpert » Mon Nov 27, 2017 1:50 pm

eye.surgeon wrote:
Mon Nov 27, 2017 1:45 pm
I'm not sure you understand what "objective financial value" means . It's a literal monetary value. It ignores anything you cannot sell to another person.
I get what objective financial value means - as a sole measure it is the wrong one to use when evaluating the value of how you spend your money. Your premise in using it that way is incorrect - that needs to be pointed out. You weren't pointing to any fallacies in spending money on experiences versus hard assets, you are committing one.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by avalpert » Mon Nov 27, 2017 1:55 pm

Lynette wrote:
Mon Nov 27, 2017 12:11 pm
Thanks, yes I see. I've been in the US for over 35 years and many of my friends think I'm brave/foolish/fearless because of the places I visit. I came to realize how the media overstates dangers during the Apartheid era. While many Americans thought South Africa was exploding my South African friends and relatives were playing golf, tennis, golf and swimming. South African I know who visited the US during this period said they did not think it was the same country portrayed on TV as the one in which they lived. For the most part, unless you are involved in protest, don't go to the place where it is taking place.
To be fair, the media overstates the dangers of staying home too. The disconnect between how dangerous people thin the world has become (say in terms of violent crime, or kidnapping or shark attacks) and what it actually is is pretty wide and that is at least partially the result of media focus on the scary events.

But yes, I've often had people react with shock at some of the places I've been.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by bligh » Mon Nov 27, 2017 2:06 pm

Wildebeest wrote:
Sun Nov 26, 2017 7:38 pm

I am curious as to what you are reading now.
I am currently reading The Rise and Fall of the Third Reich by William Shirer. It's a slow read due to all the details and the German names/places, but I am still enjoying it very much.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by nimo956 » Mon Nov 27, 2017 2:12 pm

I think it's important to avoid boredom and repetition by engaging your mind and learning new things that are difficult. Personally, I've taken up learning an instrument and studying maths in my spare time. Things like mindless internet surfing, or watching TV leave me feeling unsatisfied, because I'm not doing anything new. I even need to take a break from Bogleheads sometimes because a lot of the posts are similar to what I've read before!
50% VTI / 50% VXUS

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by chevca » Mon Nov 27, 2017 2:15 pm

Da5id wrote:
Mon Nov 27, 2017 1:16 pm
chevca wrote:
Mon Nov 27, 2017 1:09 pm
OP, I see your point... I'm one of the few, I think. :happy

OP isn't talking about going out to dinner or the movies as experiences, nor are they talking about a Lazy-Boy you're going to sit in until you wear it out. I believe OP is talking about dropping >$10k on a vacation/experience vs. dropping >$10k on a thing/toy/car. The MANY other smaller examples probably need not be talked about in this one.
I totally disagree with what you say. I think dropping $800 to see Hamilton vs buying an i-pad is a very similar evaluation myself. The amount of money isn't the issue, it changes the magnitude of the decision of stuff vs experiences, but not its fundamental nature.
It's fine to disagree with that, but I don't think the OP was talking about <$1000 experiences vs. items. Who cares about those little things? Do what we want there. So, the amount is the issue. But, I shouldn't speak for the OP.

To show what side of the fence I'm on though, who or what is this Hamilton that keeps getting mentioned? I'm serious, I don't know, so that would be $800 wasted for me. I also wouldn't buy and I-pad, so... :happy

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by lotusflower » Mon Nov 27, 2017 2:19 pm

chevca wrote:
Mon Nov 27, 2017 2:15 pm
To show what side of the fence I'm on though, who or what is this Hamilton that keeps getting mentioned? I'm serious, I don't know, so that would be $800 wasted for me. I also wouldn't buy and I-pad, so... :happy
http://lmgtfy.com/?q=hamilton

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by MidwestMike » Mon Nov 27, 2017 2:23 pm

chevca wrote:
Mon Nov 27, 2017 2:15 pm
To show what side of the fence I'm on though, who or what is this Hamilton that keeps getting mentioned? I'm serious, I don't know, so that would be $800 wasted for me. I also wouldn't buy and I-pad, so... :happy
Hamilton is a sung- and rapped-through musical about the life of American Founding Father Alexander Hamilton, with music, lyrics and book by Lin-Manuel Miranda.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by Da5id » Mon Nov 27, 2017 2:23 pm

chevca wrote:
Mon Nov 27, 2017 2:15 pm
Da5id wrote:
Mon Nov 27, 2017 1:16 pm
chevca wrote:
Mon Nov 27, 2017 1:09 pm
OP, I see your point... I'm one of the few, I think. :happy

OP isn't talking about going out to dinner or the movies as experiences, nor are they talking about a Lazy-Boy you're going to sit in until you wear it out. I believe OP is talking about dropping >$10k on a vacation/experience vs. dropping >$10k on a thing/toy/car. The MANY other smaller examples probably need not be talked about in this one.
I totally disagree with what you say. I think dropping $800 to see Hamilton vs buying an i-pad is a very similar evaluation myself. The amount of money isn't the issue, it changes the magnitude of the decision of stuff vs experiences, but not its fundamental nature.
It's fine to disagree with that, but I don't think the OP was talking about <$1000 experiences vs. items. Who cares about those little things? Do what we want there. So, the amount is the issue. But, I shouldn't speak for the OP.

To show what side of the fence I'm on though, who or what is this Hamilton that keeps getting mentioned? I'm serious, I don't know, so that would be $800 wasted for me. I also wouldn't buy and I-pad, so... :happy
Well, OK. But then you have to get into the "how much money is lots" question, and that is entirely relative to how much one has/how secure one feels. $10K is a fair bit to me mentally, but dropping that on an annual vacation will not actually change my life or prospects. And I've spent that much or more on a number of vacations.

As to Hamilton, I've not seen it either. But I have seen a number of plays in London/Broadway/Boston area, and while they are expensive I generally find the experience worth it despite having some sticker shock about the price.

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Car or a trip around-the-world?

Post by Taylor Larimore » Mon Nov 27, 2017 2:24 pm

Bogleheads:

When I graduated from the University of Miami in 1949, my parents offered to buy me a car or a trip around the world. My brother received the same offer.

I wanted the car. My brother wanted the round-the-world trip. We decided on the trip together. Looking back, my brother was right.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by chevca » Mon Nov 27, 2017 2:27 pm

lotusflower wrote:
Mon Nov 27, 2017 2:19 pm
chevca wrote:
Mon Nov 27, 2017 2:15 pm
To show what side of the fence I'm on though, who or what is this Hamilton that keeps getting mentioned? I'm serious, I don't know, so that would be $800 wasted for me. I also wouldn't buy and I-pad, so... :happy
http://lmgtfy.com/?q=hamilton
No need to insult anyone's intelligence.

Thanks, Mike for explaining it. And, $800 for a musical/play?? See to me... no way. But, then some might not enjoy a hockey or baseball game like I would.
Last edited by chevca on Mon Nov 27, 2017 2:29 pm, edited 1 time in total.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by lotusflower » Mon Nov 27, 2017 2:28 pm

So I'm still dying to hear which "hard assets" are objectively worth more than experiences. OP gave two examples, a luxury car, and a home theater. The justification was that when OP was done with them they would still have "tangible value". However the depreciation on those is totally huge.

What's the expected value of a $20k home theater system that's six years old? If it's not zero, it's close to zero, or maybe will be negative when you add the labor to haul it away.

There's no way that owning a luxury car and then selling it is price-competitive with a no-frills but safe new-model car. The premium price paid for the luxury has no "objective value" unless perhaps it's required to impress people you do business with (but the OP described it as "frivolous", so no).

For these examples, you are still buying an experience with the overwhelming majority of the money. So the real question as I see it is whether an experience that lasts years is worth more than an experience that lasts hours, days, or maybe weeks. Which memories have more value?
Last edited by lotusflower on Mon Nov 27, 2017 2:31 pm, edited 2 times in total.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by lotusflower » Mon Nov 27, 2017 2:28 pm

chevca wrote:
Mon Nov 27, 2017 2:27 pm
lotusflower wrote:
Mon Nov 27, 2017 2:19 pm
chevca wrote:
Mon Nov 27, 2017 2:15 pm
To show what side of the fence I'm on though, who or what is this Hamilton that keeps getting mentioned? I'm serious, I don't know, so that would be $800 wasted for me. I also wouldn't buy and I-pad, so... :happy
http://lmgtfy.com/?q=hamilton
No need to insult anyone's intelligence.
I apologize.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by chevca » Mon Nov 27, 2017 2:33 pm

lotusflower wrote:
Mon Nov 27, 2017 2:28 pm
So I'm still dying to hear which "hard assets" are objectively worth more than experiences. OP gave two examples, a luxury car, and a home theater. The justification was that when OP was done with them they would still have "tangible value". However the depreciation on those is totally huge.
"Totally huge" might be an exaggeration. But, I won't deny there is depreciation. Maybe, depends on the asset. But, how much can one sell for a done and over with vacation for? Pretty much all assets are going to be worth more $$ than and done and over experience. Even if it's $1, right?

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by randomguy » Mon Nov 27, 2017 2:34 pm

MrNewEngland wrote:
Mon Nov 27, 2017 1:18 pm
I would live in a hut if it was near a coral reef that I could freedive/scuba/spearfish all the time.
I doubt it:) Seriously there are some people that go life the surfing/ski bum lifestyle where they life as cheapily as possible to enjoy their passion. But very, very few people do it even among the ones that really enjoy the activites. It is more of a fantasy life than one that you actually would do. The idea of living on 10k/year so that you can live that life just doesn't appeal to most people when you actually have to do it.

Obviously I don't know and you could have very well made prior choices that prevent you from living that life.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by lotusflower » Mon Nov 27, 2017 2:41 pm

chevca wrote:
Mon Nov 27, 2017 2:33 pm
lotusflower wrote:
Mon Nov 27, 2017 2:28 pm
So I'm still dying to hear which "hard assets" are objectively worth more than experiences. OP gave two examples, a luxury car, and a home theater. The justification was that when OP was done with them they would still have "tangible value". However the depreciation on those is totally huge.
"Totally huge" might be an exaggeration. But, I won't deny there is depreciation. Maybe, depends on the asset. But, how much can one sell for a done and over with vacation for? Pretty much all assets are going to be worth more $$ than and done and over experience. Even if it's $1, right?
What is the difference between a $15k vacation and a luxury car that you owned for two years that cost $15k more than a Corolla over that period? The only difference I can see is the duration of time that you enjoyed it but once those are in the past, the difference collapses.

Also, if you got a deal on the vacation and it only cost $14,999, you'd still have your $1.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by an_asker » Mon Nov 27, 2017 2:43 pm

AntsOnTheMarch wrote:
Sat Nov 25, 2017 12:07 pm
eye.surgeon wrote:
Sat Nov 25, 2017 11:50 am
[...]Mind you, my wife has accused me of being the worst vacationer in the world as I get bored after about 3 days, and I actually enjoy my work.
Mathematiccally speaking, I can only disagree with you 100%. Objectivity is quite subjective in this case.
Had you worked for Wal-Mart, you would've figured out how to disagree 200% ;-)

To stay on topic: I think the sentence that I've quoted from OP is self-explanatory!

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by IMO » Mon Nov 27, 2017 2:57 pm

thangngo wrote:
Mon Nov 27, 2017 1:25 pm

This summer, we visited a small surfing town called Santa Catalina in Panama and met a couple who decided to get away from corporate world in New York and moved there to manage a resort. They make less than what the get from working in New York city but they do what they love everyday: surfing, diving, fishing, paddle-boarding. It really gave me a whole new perspective.
And that is also a bit of the irony, they seem to be now be just staying home making the most of the opportunities that are right in front of them. They apparently don't need to be traveling doing their activities they enjoy right at home. I have a much longer list of what I can do/enjoy from where I live than they do (all also outdoor activities), so it always brings in the question of do some people like to travel because where they live is so limited on what's available to them where they live?

There seems to be a bit of the "need to escape" in life. Some do it through drugs/alcohol, others via their sports/activities, some do it via material goods, some via travel, etc.

Anyway, the problem with the little paradise they found in Santa Catalina Panama is that when too many people go/move there the whole thing gets ruined . . . .

Edit: Moderator, shouldn't this thread be moved to Personal Consumer Issues?
Last edited by IMO on Mon Nov 27, 2017 3:10 pm, edited 2 times in total.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by hoops777 » Mon Nov 27, 2017 3:01 pm

eye.surgeon wrote:
Mon Nov 27, 2017 1:45 pm
I'm not sure you understand what "objective financial value" means . It's a literal monetary value. It ignores anything you cannot sell to another person. If you can't sell the happy memories from your hiking trip, it has no objective financial value.
How do authors and travel experts and various others make a living?Do their experiences not translate into monetary value?Avalpert sounds like he should write a book :D
K.I.S.S........so easy to say so difficult to do.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by avalpert » Mon Nov 27, 2017 3:10 pm

hoops777 wrote:
Mon Nov 27, 2017 3:01 pm
eye.surgeon wrote:
Mon Nov 27, 2017 1:45 pm
I'm not sure you understand what "objective financial value" means . It's a literal monetary value. It ignores anything you cannot sell to another person. If you can't sell the happy memories from your hiking trip, it has no objective financial value.
How do authors and travel experts and various others make a living?Do their experiences not translate into monetary value?
That is a very good point too - I have actually made direct money from my experiences through writing and serving as a travel consultant for others. I also have made money in harder to measure ways - for example, based on observing cars/peoples/pedicabs navigate a traffic circle in Kathmandu it sparked an idea to address a resource allocation problem I was working on that I leveraged into consulting engagements.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by afan » Mon Nov 27, 2017 3:12 pm

I would point out that my favorite purchases, VTI and VWITX, are not expected to depreciate over the long term. They can go down short term, VTI more likely than VWITX. But long after I have forgotten purchased experiences it is likely both will be worth more than I paid for them.

Although I can tell someone else about an experience and share in that sense, the value to them is likely to be far less than to me. The funds would be exactly as valuable to a recipient as to me.

But going back to the research-

There is a problem with studies that ask someone to rate their happiness or satisfaction and attempts to compare across subjects. It requires that the same level of happiness is rated the same by different people. Or at least that there are not aystematic differences in responses that bias the results. To the extent that some people more highly prize experience and others possessions, one has to assume they answer the happiness question the same way. If the same level of happiness, whatever that means, is rated a "7" by an experience person and a "5" by a things person then you have a problem.

If the things people tend to cluster their answers around 5 for just about everything while experience people range from 1 to 10, then comparing their responses gets very difficult. It is even harder if the experience people tend to answer with high levels of happiness on average while the things people do not, then the problem is worse. There are statistical methods for accounting for this sort of range effect, but my brief review of the most heavily cited papers does not see this attempted. Instead, in this small sample, the authors assume they can simply compare the means.

For the surveys I have seen, I would rate most things on a scale of 1 least happy to 5 "OK" and not use the 6-10 range to report very high levels of happiness. In this comparison I am a things person, to the extent that I am willing to spend money at all. Since I would rate just about no purchased experience above a 5 and most far below, comparing me to some experience people who qill say that they LOVE to travel, LOVE fancy restaurants, LOVE little out of the way neighborhood restaurants where the locals eat, LOVE Broadway shows, LOVE just about any other experience may capture more a difference in reporting than actual differencea in happiness.

As I indicated earlier, the experiences I value tend to be cheap or free, not require travlel, tickets or anything else expensive.

Unlike the other poster, I do know what Hamilton is but there is no way I am going to see it. If they make a movie and it is on TV for free and happens to be on while I am working out, maybe I would watch. Or maybe not. I have never seen a performance of anything that was worth $100 to me. The notion that a Broadway show is worth 8 times that much just does not make sense.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by hoops777 » Mon Nov 27, 2017 3:42 pm

afan wrote:
Mon Nov 27, 2017 3:12 pm
I would point out that my favorite purchases, VTI and VWITX, are not expected to depreciate over the long term. They can go down short term, VTI more likely than VWITX. But long after I have forgotten purchased experiences it is likely both will be worth more than I paid for them.

Although I can tell someone else about an experience and share in that sense, the value to them is likely to be far less than to me. The funds would be exactly as valuable to a recipient as to me.

But going back to the research-

There is a problem with studies that ask someone to rate their happiness or satisfaction and attempts to compare across subjects. It requires that the same level of happiness is rated the same by different people. Or at least that there are not aystematic differences in responses that bias the results. To the extent that some people more highly prize experience and others possessions, one has to assume they answer the happiness question the same way. If the same level of happiness, whatever that means, is rated a "7" by an experience person and a "5" by a things person then you have a problem.

If the things people tend to cluster their answers around 5 for just about everything while experience people range from 1 to 10, then comparing their responses gets very difficult. It is even harder if the experience people tend to answer with high levels of happiness on average while the things people do not, then the problem is worse. There are statistical methods for accounting for this sort of range effect, but my brief review of the most heavily cited papers does not see this attempted. Instead, in this small sample, the authors assume they can simply compare the means.

For the surveys I have seen, I would rate most things on a scale of 1 least happy to 5 "OK" and not use the 6-10 range to report very high levels of happiness. In this comparison I am a things person, to the extent that I am willing to spend money at all. Since I would rate just about no purchased experience above a 5 and most far below, comparing me to some experience people who qill say that they LOVE to travel, LOVE fancy restaurants, LOVE little out of the way neighborhood restaurants where the locals eat, LOVE Broadway shows, LOVE just about any other experience may capture more a difference in reporting than actual differencea in happiness.

As I indicated earlier, the experiences I value tend to be cheap or free, not require travlel, tickets or anything else expensive.

Unlike the other poster, I do know what Hamilton is but there is no way I am going to see it. If they make a movie and it is on TV for free and happens to be on while I am working out, maybe I would watch. Or maybe not. I have never seen a performance of anything that was worth $100 to me. The notion that a Broadway show is worth 8 times that much just does not make sense.
When you went into the happiness scale of 1 to 10 I immediately went back to my physical therapist and her level of pain scale from 1 to 10. :D
K.I.S.S........so easy to say so difficult to do.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by hoops777 » Mon Nov 27, 2017 3:43 pm

afan wrote:
Mon Nov 27, 2017 3:12 pm
I would point out that my favorite purchases, VTI and VWITX, are not expected to depreciate over the long term. They can go down short term, VTI more likely than VWITX. But long after I have forgotten purchased experiences it is likely both will be worth more than I paid for them.

Although I can tell someone else about an experience and share in that sense, the value to them is likely to be far less than to me. The funds would be exactly as valuable to a recipient as to me.

But going back to the research-

There is a problem with studies that ask someone to rate their happiness or satisfaction and attempts to compare across subjects. It requires that the same level of happiness is rated the same by different people. Or at least that there are not aystematic differences in responses that bias the results. To the extent that some people more highly prize experience and others possessions, one has to assume they answer the happiness question the same way. If the same level of happiness, whatever that means, is rated a "7" by an experience person and a "5" by a things person then you have a problem.

If the things people tend to cluster their answers around 5 for just about everything while experience people range from 1 to 10, then comparing their responses gets very difficult. It is even harder if the experience people tend to answer with high levels of happiness on average while the things people do not, then the problem is worse. There are statistical methods for accounting for this sort of range effect, but my brief review of the most heavily cited papers does not see this attempted. Instead, in this small sample, the authors assume they can simply compare the means.

For the surveys I have seen, I would rate most things on a scale of 1 least happy to 5 "OK" and not use the 6-10 range to report very high levels of happiness. In this comparison I am a things person, to the extent that I am willing to spend money at all. Since I would rate just about no purchased experience above a 5 and most far below, comparing me to some experience people who qill say that they LOVE to travel, LOVE fancy restaurants, LOVE little out of the way neighborhood restaurants where the locals eat, LOVE Broadway shows, LOVE just about any other experience may capture more a difference in reporting than actual differencea in happiness.

As I indicated earlier, the experiences I value tend to be cheap or free, not require travlel, tickets or anything else expensive.

Unlike the other poster, I do know what Hamilton is but there is no way I am going to see it. If they make a movie and it is on TV for free and happens to be on while I am working out, maybe I would watch. Or maybe not. I have never seen a performance of anything that was worth $100 to me. The notion that a Broadway show is worth 8 times that much just does not make sense.
When you went into the happiness scale of 1 to 10 I immediately went back to memories of my physical therapist and her level of pain scale from 1 to 10. :D
K.I.S.S........so easy to say so difficult to do.

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Re: Car or a trip around-the-world?

Post by flyingaway » Mon Nov 27, 2017 3:46 pm

Taylor Larimore wrote:
Mon Nov 27, 2017 2:24 pm
Bogleheads:

When I graduated from the University of Miami in 1949, my parents offered to buy me a car or a trip around the world. My brother received the same offer.

I wanted the car. My brother wanted the round-the-world trip. We decided on the trip together. Looking back, my brother was right.

Best wishes.
Taylor
Did your brother actually do the around-the-world trip?

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by fposte » Mon Nov 27, 2017 3:50 pm

chevca wrote:
Mon Nov 27, 2017 2:33 pm

"Totally huge" might be an exaggeration. But, I won't deny there is depreciation. Maybe, depends on the asset. But, how much can one sell for a done and over with vacation for? Pretty much all assets are going to be worth more $$ than and done and over experience. Even if it's $1, right?
What about when it costs you money to get them taken away?

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by flyingaway » Mon Nov 27, 2017 3:51 pm

Always buy stuffs that matter to you, as someone said before.

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by afan » Mon Nov 27, 2017 4:02 pm

Physical objects can be anywhere along a spectrum of deep, immediate drop in value to long term growth.

Some things depreciate rapidly, like fresh fruit.

Some things last for very long times and their value may increase or decrease over time, like gold bars.

Some things one expects will increase in value over long times, even if their value varies substantially along the way- VTI. VWITX Although they are not physical objects.

Some physical objects remain useful for many years. Tools like screw drivers and hammers. Not expensive to begin with and hold their usefulness for a long time. But getting a hammer when needed is not the sort of "experience vs things" decision most people mean. I don't know what a hammer costs and unless one is a professional carpenter one is likely all you need. So it could be a once in a lifetime purchase. Asking how happy one was made by buying a hammer 20 years ago would be difficult to answer. "I am happy every time I need to drive a nail?"

But people don't come on here and wax rapturous about how using a particular expensive hammer is a life changing experience. They also don't imply some sort of moral superiority because they use a hammer, as many on this thread have done about pleasure travel.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Re: The fallacy of spending money on "experiences" vs hard assets

Post by SGM » Mon Nov 27, 2017 4:08 pm

I compare buying and paying off a beach house vs. going on multiple exotic vacations. Financially speaking the choices are not equal.

Once you have adequately saved for retirement the question to my mind should be what gives you more satisfaction and happiness not what is better financially.

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