Ever spent a lot of money on something - say a new pair of shoes or an expensive dinner - only to regret your purchase the next day?
Dr. Ryan Howell (pictured) and Dr. Ravi Iyer know the feeling. In fact, they've made it their business to study and understand our relationship with money and the things we use it on.
Ryan, an associate professor of psychology at San Francisco State University and Ravi, a data scientist at Ranker.com, founded Beyond the Purchase, a website that offers surveys and quizzes to consumers to help them better understand how our financial decisions help our well being.
The most surprising thing they've discovered in their research?
"In our recent papers, we learned that, despite knowing that buying life experiences will make people happier, many of us spend a lot of money on material items because we mistakenly believe that material items provide us better value," the pair told us recently.
However, after making the purchase, we actually think that life experiences make us both happier and are the better use of money.
Here, Ryan and Ravi tell us more about their site and share some of the insight they've gained from studying our peculiar relationship with money.
Tell us about Beyond the Purchase; what is it and who is it for?
Have you ever spent money on something that didn't make you as happy as you thought it would?
Have you been thinking about if your next big purchase will make you as happy as you expect?
If so, then you should take some of our fun quizzes on Beyond the Purchase. The quizzes and surveys we offer are primarily designed to help people become happier through better use of their money, as well as to advance the scientific understanding of how and why consumers make the financial decisions they do. After each quiz, we will provide you with personalized feedback and happiness tips.
What interests you about studying the relationship between spending and happiness? Why are you so passionate about this area of research?
Honestly? Researching happiness is fascinating. People make predictions every day about what will make them happy - including how they should spend their money. Sometimes we make some pretty bad predictions. Helping people to understand how they can truly buy happiness is something that keeps me up at night (and makes for some really good cocktail party conversations).
How is your research being applied in the real world?
While there is no shortage of data available to marketers today, there is a glaring deficit in how that data is interpreted into meaningful, actionable insights. That is why we recently partnered with Zenzi Communications to discover not just how consumers behave, but why they behave in the ways they do.
What have you learned about how our spending affects how we feel (and conversely, about how what we feel affects our spending)?
There is no doubt that sometimes people engage in a little retail therapy to make them feel better when they are down. However, often the very next day, people regret making purchases when they were feeling sad or blue.
What red flags or warnings can we start recognizing in ourselves to avoid overspending or avoid making impulse purchases that we might regret later?
There is one fundamental question you can ask yourself to decrease potential buyer's remorse. Ask yourself why you are spending your money. If it isn't because of some core value or if it isn't going to satisfy a basic or psychological need, it isn't likely to increase your happiness (and that goes for life experiences as well).
In your research, what types of spending tend to make people feel
happier or at least satisfied longer?
The best way to spend your money is in some way that will bring you closer to your friends and family. We call this satisfying the need for relatedness. When you spend your money in this way, you will feel happier than if you spent it in any other way.
What types of spending offers only a short-term high followed by regret?
This is the classic description of retail therapy - going to buy something, instead of doing something, when you are in a bad mood. People say they feel a lot better after the purchase, but regret settles in rather quickly.
What types of personalities tend to be tied the most with overspending or reckless spending? What about personalities that are more conservative with their money?
Ironically, people who are fairly materialistic, even though having and spending money is important to their identity, are typically the least effective at managing their money. That is why we include quizzes on our website to help people learn about their happiness, values, spending habits and money management skills.