The Economics of Spending for Happiness

A friend of mine once asked me how one should deal with spending for leisure. For this person, it is hard to say no to eat outs, night outs, parties, and out of town trips.

Frugality is the efficient management of wealth, spending primarily on NEEDS; so this begs the question: is spending on wants an inefficient way of spending? Not necessarily. This is where knowing how to budget and control spending becomes very important.

Before we even talk about budgeting, let us start with this: Happiness is Subjective. Your happiness is different from someone else's happiness. When we buy something or travel somewhere because we saw how happy people were who have bought that same thing or have gone to that same place, what we actually want is to be happy as those people and not the thing that they purchased or to go to the place that they went to. When you emulate the things that your friends do that make them happy, you are forgetting that what makes them happy will not necessarily make you happy.

There are people who will buy a gadget simply because their friend has one, and that person looks happy. Others will go to a beach destination right after seeing photos of their friends in that place simply because their friends looked happy in their photo. This is precisely the trick that TV commercials play on us. When they show your favorite actor or actress endorsing a product or when they show a group of friends enjoying a soda, this tells your brain that you have to buy the product that your favorite actor or actress is endorsing in order for you to be like him or her or that you have to buy soda in order for you to have a good time with your friends.

So the next time that you log on to Facebook and find yourself wanting to go to Europe simply because you saw some travel photos of your friends and they looked so happy in Europe; ask yourself if going there will indeed make you happy or if there is some other thing that will bring you happiness. Only you know the things that will make you happy. Other people's happiness should not and will not dictate yours.

Now let's go to budgeting. Only after allocating an amount to be spent on NEEDS should you set an amount to be spent on entertainment or vacations. Remember that the key here is not to eradicate all spending on leisure but simply to control it. If you find yourself going to the movies once a week, cut it down to just once a month. Instead of going out to eat on weekends, try cutting it down to just one weekend a month.

I remember a time where a fast food meal tasted really good to me. This was a few years ago when I would eat in fast food restaurants only on some weekends and special occasions. Fast forward to this day, I don't anymore think that fast food meals taste good. Why? Because I now eat in fast food restaurants almost every day and they have become ordinary to me. The point of this story is that when you do something frequently, it becomes ordinary. It then takes more for you to become happy. You will also find yourself appreciating something more if you experience it only once in a while. So if you currently find that a McDonald's Cheeseburger meal is special to you, watch that you don't enjoy it too often lest it becomes your ordinary fare.

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