Retirement planning is about much more than just investment, it's about helping you to make the most of your money. One way of doing that is to prioritise spending on life-changing experiences over material things.
Despite what marketing messages tell us, drawing fulfilment from money is much more about aligning spending with your personal values rather than simply accruing new possessions.
In this video, Robin Powell asked financial adviser and author CARL RICHARDS about how spending on experiences enriched his own money journey.
Robin Powell: A good financial planner doesn’t just show you how to invest. They can also help you to spend your money wisely. Instinctively, we like to buy things – stuff, if you like. But there’s plenty of evidence to show that spending on experiences – especially with loved ones – actually makes us happier. Author Carl Richards, who is himself a financial planner, says the most valuable purchase that he and his wife have ever made was a family rafting holiday in New Zealand.
Carl Richards: So we did this big loop, it was a five-day loop in New Zealand in Fiordland, with just me, my wife, and our four kids. At one point, we were four and a half days from the nearest road: we were out there, on pack rafts. I have, even talking about it now, I just have flashcards of scenes that I could tell you about that are unbelievably – I get emotional talking about it now – unbelievably valuable. There’s nothing else we could have done, and our kids will remember that for ever.
RP: Why, then, are we so tempted to spend money on stuff over experiences? Well, it’s largely down to clever and seductive marketing.
CR: I don’t know if addicted is the right word. It’s not the right word, but we’re somehow sort of “lured” into this promise that stuff will bring happiness. If I just get… that. And the academic word for that is the “hedonic treadmill”. Everybody knows this: a week after the new car, and sometimes on the way home in the new car, you’re thinking, “Wow, this is amazing. Won’t it be cool when the next model comes out?” The iPhone is a great example, just because it’s on such a cycle. Everybody knows: when’s it going to come out? In the Fall? And then as soon as you get the new one, you’re thinking about the next one.
RP: So how do you prioritise spending on experiences rather than stuff?Carl admits it isn’t easy, but the starting point is to recognise the trade-offs involved.
CR: You can’t go anywhere without being bombarded with the message that “if you just get this, then…” “if this, then that.” and it’s usually “if I buy this, I will be happy.” But we know that’s not true, so we just systematically have to be aware of our decisions and opt out of that system. Just recognise you’re making that trade-off and then, as soon as you recognise the trade-offs you’re making, it becomes much more clear. Like, “Seriously, I’m going to buy the phone over taking my family on holiday?” It becomes much easier.
RP: Ultimately, what you spend your money on should reflect your personal values. So if you haven’t already, work out what is really important to you. That way, whenever you’re tempted by an expensive car or gadget, you’re more likely to make the right decision.