Spending money
Jan
30
We have lots of discussions about how to get people to save more, which is clearly important.
But today I want to ask a question about spending money: Assume you had $20,000 to spend (and that you could not save it), what would be the ideal way to spend it? In other words, what would be the way to spend this sum if your goal was to get the most joy and happiness out of this amount?
I am not asking because I have an answer, or even an idea of how to do research on this — I am asking because I really don’t know.
So — any input will be welcomed…
Irrationally yours
Dan
My latest book, The Upside of Irrationality, explores some positive and some negative ways that irrationality plays out in our lives.
wouldn’t your previous research suggest that the most happiness would come from spending the money on your friends and family…or for that matter on a complete stranger…perhaps someone in need?
i will pay up my educational loan for my current masters program in which i am enrolled. If i have still some amount left then maybe, dunno i am wrong person to ask this question i guess.
I would a third use a third of it for a downpayment on a house and save the rest for a rainy day.
Holiday in the sun, whores and drugs.
i’m not the kind of person who finds happiness in material things, so i would use that money to explore the world that i live in.
It’s a very simple question.
If there is no time limitation/frame to spend this money, than i’d go for a 2-3 years trip around the world.
I’d buy the expiriences.
Pay my friends (who usually say no time/no money) to go travel with me.
I recall recent studies have shown that, in terms of maximizing your own happiness, the best thing to spend money on would be experiences, rather than buying material goods or even donating it to charity. So, rent a small island for a week and fly out with some friends and family, charter a sailboat, take a safari or have some other sort of adventure…
When I read this question it makes me think about the stimulus money we received last year. Was that money spent on goods and services as the government planned? Or did people use it to pay off loans and credit cards? Was it invested or donated?
$20,000 is a lot to think about spending. I could pay off some debt, buy something for myself or family and contribute to a favorite cause. A smaller amount (like the stimulus) might only go to one thing.
I’m sure I would do something irrational with it.
pay off equity line debt for house (with $1000 left over)
Use $1000 left for:
get us both teeth cleaning
get him new glasses
nice orthopedic dog bed
join NPR & Public television again
pay to fly foster cat to a friend
buy my mom an iPod
if anything left, go shopping at Goodwill!
Build a statue of myself.
A combination of a few ways. Part of it would go to paying debts, because those are always a source of stress.
Then, another good part would go to removing tedium and obstacles to doing thing that I either enjoy or have advantages in doing. For example:
*I would buy stuff for the kitchen that speeds up cooking so that “it takes too long to prepare” becomes less of an excuse to cooking an healthy meal.
*I would buy a new computer, because the poor hardware gets in the way of my favorite hobby (video games); often, hardware limitations takes away from my gaming experience.
*I might buy good training gear so that “I don’t want to go to the gym” is not a good excuse to avoid working out.
Finally, I might spend some money to see friends that live far away. Being near them is more valuable than any money in the world.
If there is anything left, I’d give it to a friend who I feel could use the most of that money.
fix up house
get some cool gadgets
splurge on good meal
buy the needy gifts
travel
Does buying a house, getting more education, or setting or college bonds for your future kids count as saving it? If so I’d probably move somewhere fun and not work for a year.
I’m assuming that all this money would need to be spent immediately or discarded, yes?
Well, my first thought would be to find a way to make that $20K last, but that’s explicitly disallowed by the rules. Or, at least, not without being sneaky.
I would probably spend it on things I could get a lot of mileage out of… one time purchases that either provide a lot of use, or enable me to increase my income. For instance, as a game developer I might be inclined to spend it on a new computer (were my current one not already new) or on new hardware that might enable me to work faster or more productively. I might similarily spend it on trying to make my workspace more organized or productive… perhaps a new desk, maybe a new chair. After that, I might consider other things… like a game I was looking at buying, new sparring gear for Taekwondo, etc.
Obviously, if there was a pressing need of some sort or another (for instance, a friend just had their car vandalized and couldn’t afford repairs, etc) that would change things. Likewise, if the money could be held on a long time I’d probably avoid most big ticket items and just use it as a buffer to avoid having to worry about my finances for a little while.
I would spend the money on living expenses so I could conduct my own research and write – in other words, design my own work experience – for as long as I could.
I would do something I have wanted to do – and take the Bikram Yoga teacher training which is about 15,000 and 9 weeks of intense training. It would enrich mylife and in turn I would teacher others how to heal as well.
I’d buy a few important items, that I need, like a replacement pair of glasses or clothes. Some of my clothes have worn out.
For the most part, I’d be interested in buying a holiday in a mild-warm climate, and just enjoy myself. The idea is to buy something consumable, so that I won’t be burdened with a bunch of stuff.
For the last little bit, I’d just give it away as a tip, because it would be hard to buy stuff for a few dollars.
If I could help somebody get his business idea started, then that would be great.
Pay for friends mission trips.
According to what you said I cannot ‘save’ it but would investing it in something count as saving it?
If thats what I could do I would otherwise this:
-Pay off some of my college loans ($2500)
-Give $4700 to my mom
-Give $3000 to my sister and brother-in-law (they could use a vacation together).
-Several weekend vacations up North($800)
-Some personal things:
–new cellphone (less than $100)
–personal/school laptop (Mac-$1500)
–I-pod and music ($500)
–1 year Krav Maga lessons (maybe $1000?)
–Tutoring for Math (maybe $800?)
–2 year-long subscription to Popular Science and Popular Mechanics, and Psychology
Today($100?)
–Dance lessons ($1000)
–Book shopping ($1000)
–Car repair (new windshield, front and back breaks, rotors etc, any other issues-$2000)
–Use some of it to help me get a job (maybe $1000?)
Now lets do the math: 2500+3000+3000+800+100+1500+500+1000+800+100+1000+1000+2000+1000= 18300? Um, put the rest to the other college loan. No scratch that, I’ll give it to my mom. Now 18300+1700=20000!
I hope this helps you in you.
Sincerely (albeit irrationally),
Maximilian
take my wife and 4kids to a topflight mexican resort (pacific side) for as long as it lasts
If I wanted to get the most joy out of it as I could, I would use it to visit as many as my old friends as I could (and do something fun with them while visiting their particular area of the country). I think the moments I have the most fun and laugh the most these days are when I’m reconnecting with old friends (but not for too long… the novelty wears off rather quickly).
Finding a way to turn it into 40 bucks, then into 80, then into 160 and so on. Gilbert says winning the lottery will not make me happy, for once I get used to it, I will just take being rich as “normal” and be just as happy as a paraplegic man is after a year of becoming discapacitated. But if I get twice as rich everyday, there will be never time to establish what “normal” is, and I will be happy for eternity, or so I think… Unless I get used to winning all the time, for which it would help to lose some very little amount of money now and then. By that logic, a casino where the player always win at the end should be then what heaven is really about.
is there a limited time period in which i have to dispose of it?
if i had to do away with it immediately, id put it on my house. its almost paid for, and this would get me almost all the way there… which would make me very happy. but i suppose one might consider that a different form of savings so maybe thats no good…
if i couldnt put it towards the house… well, ive got house repairs to take care of, i could easily put $20k in to home improvements. that would provide me a certain peace of mind, which is a flavor of happiness (one of the better ones, to my thinking) but if it had to be just FUN fun, frivolous fun… hmm… id prolly throw one hell of a party for all my friends. lots of beer, bbq, music, and fun for all. although… thats a whole lot of beer and bbq i guess
Pay off debt: that would be a relief.
Visit family and friends, that would be relaxing and productive.
- about half of it to help my homeless, jobless son reestablish himself
– the rest of it to a street kids organization in Jakarta, Indonesia – where I live.
gold
I would use most of the money to help people in need (probably some that I know personally) but then also buy a (small) gift for myself.
I would give $2000 to my favoured charities (animal rescue). The rest, if can be extended to some time, spend on a trip in many places I wanted to visit and if not – do a flight license and go to a trip with the rest.
Hi
Here’s a link which summarises some recent research on the subject (http://ow.ly/12fYy )
It seems that experiences win over things.
Pay off a mortgage debt that causes me stress.
First, I would pay off my credit card debt (about $10,000). I will spend the rest on cosmetic surgery!
I would buy $20,000 free Amazon gift certificate to use in the next few years
A used minivan. Our oldest car (an excellent running sedan) would be sold for a dollar to someone who needed it. We got the car for $1 after our (old but reliable) truck got destroyed in a tornado.
Kind of a silly hypothetical. If you have debt of any kind, then paying down the debt is essentially the same thing as saving it since borrowing is the opposite of saving. Even if you stipulate “no paying off debt” money and expenses are fungible enough that spending on one thing can free up money for saving or debt reduction elsewhere.
Pay of my husband’s student loans (~$17,500) so that he can stop worrying about having to work all the time to pay them off, take a little time off, and use some of leftover money to spend time together and travel.
NPR keeps asking me to “invest” in them, so at any rate they can’t have any of this money, nor can I “invest in the community.” Maybe I’ll “spend” it on art or antiques… or gold bars or stocks.
It’s funny to see how many readers of this blog (who I assume should attract readers with higher-than-average levels of economic literacy) speak of “paying off debt” as a way to “spend” the money… when it should be obvious that paying off debt is a key form of saving. That makes about as much sense as me saying that I’d “spend” it on stocks and bonds…;-). Not fair!
That sum would buy an excellent 2-months vacation for two people… but I can’t just take 2 months off my life and neither can my sweetie. So maybe I’d split it — a new motorcycle, a 2-_weeks_ vacation, some new jewelry for my love, and substantial donations to my favorite charities (second harvest, humane society, wildlife rescue).
But seriously this mental exercise has worked for me in a “count your blessings” kind of way… thinking how little (although undoubtedly positive) difference such a large sum of money would make to my happiness if I had to spend it immediately (as opposed to paying debts or other forms of savings), means that my modest lifestyle fits me pretty well.
“Income sixpence, expenditure five-pence, happiness. Income sixpence, expenditure sevenpence, misery”…!-)
Buy back retirement time!
I’d give $2500 to my church – I’m not one for tithing, but I think of free money like a sourdough mother. Pass a chunk along.
The other $17,500 I’d split between some items I am interested in,but not enough to spend now (Xbox, iPad); some home-improvement projects that I have been putting off; architecture fees for a house I plan to build soon; and a making a trip I have planned in March more spectacular than it already is.
Essentially, I would use that money to accelerate things I am already thinking about/doing.
Tithe first. The rest? Pay down our credit card debt. It is a sword hanging over my head. I’m the “saver” and my husband is the “spender” in our family. Two years after losing his job he finally sees that “credit card” does not = “free money” (same with “school loans”). Funny, we have less cash flow than ever, yet we’re still able to peck away at our debts most months.
As a person that only recently started debt, i mean, real life, I would put everything on my house mortgage. Only then I would think what to do with the extra money saved per month.
This is my first answer, without thinking too much. Could change my mind if really thinking hard about it.
One could think about several different dimensions on which answers to this question might vary:
– Material things vs. experiences
– Lots of small things vs. one large thing
– Self-oriented vs. altruistic
And for all those who say paying back debt, since that is essentially the same as saving, I don’t think that fits the bounds on the question.
1. Pay my credit cards (25% of the money)
2. Traveling the world (50%)
3. Cash for occasional spending
Haiti. It would have been quite a different answer a month ago.
I’d definitely use it to reduce daily annoyance first. Like that check engine light on my car. The vacuum cleaner that only stir up dust. The leaking dishwasher. The ugly mirror door on my closet…
If I have money left, I’d travel with friends.
I’d spend it on my son’s college education
Pay off debt!
No debt? Invest in something material, house, business, etc.
Hard to answer, take whole family to visit some new place maybe. Spend some on maintenance things. I would try to invest the rest. but like my past life shows I might continue to do more mistakes.
Just an observation that those having debts would spend money on reducing the debt (reducing their pain), while some (probably those who don’t have debts) might spent money on pleasure things (happiness? perhaps it’s individual for everyone)
I would pay off my credit card and car debt, buy an engagement ring, then use the rest to travel.
LAND
10.000 for savings.
10.000 for a new car (I don’t have any).
I read your book (italian traslation), you’re great.
I’ll give all the money to the people from Haiti.. they really need it.
i will split it to:
- 30% short term joys (instant consumption)- e.g. books, new suits
- 30% mid term joys – trip in summer
- 30% long term joys (more than one year of continuous happines) – e.g. laptop/camera/car
split evenly for me and me fiance.
I would definitely buy something for my parents(5%) and sister (5%).
given your requirement of not being able to save, i might be tempted to spend on something with a lasting impact like a car or a home or something. its almost quasi savings i guess. something in which the payoff can be enjoyed for a long time.
I would use $5000 for my expenses back to hong kong to visit my grandpa who’s in the last stage of lung cancer. Gotta spend 3 whole months with him so the living expenses will be taken care of. Meanwhile, I would use 8000 to sponsor poor kids for education (Instead of donation which probably won’t get them out of the poverty cycle) As for the rest, I would pay for ted conferences
How about starting a project like ‘Planting a forest’ ?
That would include all the management efforts to find territory, people who will be willing to donate their time.
Eventually – you have a chance to contemplate the forest growth over the the course of your life, and beyond…
This could be anything else that serves the interests of many, not yourself.
I would start a business so the money would hopefully perpetually produce financial, experential, and social dividends to myself and maybe others. It could be viewed as a creative exercise-experiment in entrepenuerial art. Something out of the mainstream that would be a little risky.
10 or 20% donated to kiva.org would be great because you could keep loaning the money out perpetually or it would come back to you eventually to spend on yourself after having used it to microfinance someone in need
to get the most joy and happiness out of this amount? it certainly wouldn’t be paying off debt- where’s the fun in that?
i’d rent a villa in the tropics and take golf, photography, fishing, cooking and sailing lessons.
One of these
http://en.wikipedia.org/wiki/Mitsubishi_evo#Evolution_IX
I think, Dan’s question is the research it self. He is not just throwing some random question but (I suspect) he is interested what is the majority of people would say or he is looking for experiment idea…
My observation says most of the answers relate to debt & house. For debt I think it’s a bit paradoxical because I think the first time we put our self in debt is because we want to be happy (buy house, buy latest gadget, etc) and now we are in a debt, getting out seems to be the happiness that people are looking for.
If that’s true why have debt on the first place?
I think rational people should only get into debt if they know exactly how to pay it off, therefore the debt is not a burden but trade off between present & future value (which how finance people measure their return etc)
It seems that people are still choosing to spend on themselves whether it be for debt relief or educational expenses or material items like a house although some did mention the previous study that spending on others was the route to the most happiness. But spending on others as really a way to get the most happiness for yourself and that in itself is rather selfish.
I take the question and goal as not happiness as a temporary fix or an instant in the moment Christmas morning type thing but what I would do with the money that could sustain happiness or continue to produce across numbers and time. I don’t think there is a way to get around be somewhat selfish aspect but as an investment into happiness I would use the money to:
Build a barn – I need a warm place for animals and their supplies which would make them happy and I could get more animals which would make me and more animals happy.
Landscaping – I need to improve the enviroment and habitat which adds to peace and serenity while giving birds, butterflies, frogs, rabbits, deer, etc. a place to be thereby increasing their happiness and all those that see them. Total number of happiness there would be huge, constant and continually increasing.
Any left over money would go to help my son get a used car which would increase the happiness of him along with his father, sister and I who currently must transport him to school and work.
Mixed strategy seems appropriate:
1) Charity/Microloans/Haiti–$1000
2) Gifts to Friends and Family–$2000
3)Vacation/food—$2000
4)Personal improvement—$3000. Gym membership/trainer. Language courses. New clothes, etc.
5) Quality Material possessions–fine watch, Plasma TV, beautiful poster or painting, home improvement.
—$6000.
6) Debt reduction—$5000
7) Long-shot investment or gold coin.—$1000
It seems that age and station in life may be factors. Earlier in my life, I felt that “things” were important to my happiness. Having found that “things” don’t provide a lasting feeling, I now believe that experiences are the place to consume. Competing closely for those same dollars is charity where I feel connected. My best guess is to combine the two. An example might be to help fund and build a playground for disadvantaged children. Something like http://www.kidsaroundtheworld.com projects.
I would give half of it to a charity that I thought needed it the most and use the other half to facilitate my weight loss goals (buy a treadmill or enroll in a fat camp).
My answer, and I suggest everyone else’s will be as well, is dependent upon the circumstances of one life at a moment in time. Today, I’m married, or actually will be in 45 days so to me it’s the same thing, so with 20 grand I’d simple turn to Nancy and say- “how’d you want to spend it dear?” and she’d tell me and I’d do it. I suspect she’ll turn around and pay off our debt and that will be that. When she’s happy, I’m happy.
It took me over six decades to figure this out and it don’t get much simpler than that. We’re happy if we get to live in a warm place, have enough to eat and play with the grandkids occasionally.
Happiness comes from adjusting your “needs” to fit your income. Keep your standards (income requirements) low and joy will follow
Take my family on a road-trip through Central America. Study Spanish and indigenous languages in the countries we visited. Climb volcanoes, explore Mayan ruins. Swim in rivers, hot springs, lakes and oceans. Sleep in hammocks, tents, huts. Take pictures, leave footprints.
I’d pay off my Toyota. Then every day I’d enjoy climbing into my “free” car!
Dr. Ariely, I am not sure I understand the question but I will answer it as if it is understood to mean “What would I use 20,000.00 on right now that would make me most happy”
Well, I would buy a whole bunch of gifts for people off of Amazon.com since I am a Prime member and in a addition to free-shipping, the gifts arrive there rather fast. (Dr. Phil would say that people who like giving gifts are really just selfish and want the recognition, but I disagree) I would also buy a whole bunch of books for myself as there is nothing like acquiring more knowledge that you’ll never use i.e., dead passions…;) And lastly, ignoring the fact that I have racked up some debt that could certainly use being paid off, I would probably gamble (roulette or keno) what ever was not spent while drinking 22 oz. Miller Light drafts in the process.
If the goal is spending it to maximize joy/happiness, I’d spend it on something that:
1. Helps me grow, and
2. Excites me
Why? Because I don’t REALLY know what makes me happy (even though I think I do) and the research says that achieving ‘learning’ goals (rather than ‘product’ goals) provide the most happiness. Also, passion is fired by excitement.
Given these two, I’d probably travel, somewhere where I could learn another language, help understand people that are different from me, and bring back knew learnings that I can share with others…
Give it to my wife – it’d then get spent on bills and vacations
Huh! Even being readers of this blog, it seems every single respondent above me persists in thinking they’ll get the most happiness by making their own decisions about how to spend the money– as if they were able to act rationally when confronted with a huge pile money to spend!
Here’s a different idea: I’d spend the first hundred dollars to hire someone with more experience than myself in making rational decisions about money, and I’d ask them to advise me on how to spend the rest.
<3,
mungojelly
I will give half to my brother to provide him more time to decide what to do with his life.
Another half, I’ll pay to a friend of mine in exchange of his agreement to follow my suggestions about how to improve his life.
If the goal is to get the most happiness and enjoyment out of that money, I’d have to spend it taking the family (and maybe some friends) on a vacation. We could use that money for maintenance on our house, but I don’t think that would create as much enjoyment. It’s just about enough to build a sunroom on our house, but I’m not sure the continual use of such a room would contribute to lasting happiness as much as the memories of a great vacation.
Bet it on black.
I would travel the world, in a low key kind of way, so my money will go a lot further. First stop, India!
Half to my wife to spend as she pleases, my half to pay debt (and a little bit for gadgets).
I would buy 18 1oz. gold coins and put them in a sock in my desk drawer. The gold should retain its purchasing power over time in the face of inflation or deflation. It is also liquid, so if there is any problem or emergency, I can sell it to take care of my needs. It will serve as “insurance” so to speak. This will provide me with peace of mind over time, which is “joy and happiness”, just in a less intense and momentary form than giving a gift or taking a trip to the islands. I will have $200 left over which I will use to buy several bottles of Wild Turkey whiskey, which I might be able to use as currency in the case of inflation or other domestic problems. This also a truly liquid form of wealth and can bring joy and happiness as needed over time.
I’d deal with my school finances and then spend the rest on gaming materials and creatures comforts. Everything my friends and I need to kill time happily together and enough to get out of my current educational mess.
I read yr book and loved so much…
1st buy a cellphone with internet
2nd buy a car 2nd hand
3rd give about 1.000 $ realy needed person
4th travel wçth my daugter
and I think my 20.000.-$ will be finished:))
thanks and regards,
ilkay from Türkiye-Adana
I forgot feedback for yr book…
It provide to me to think think think ask ask ask and answered how to avoid firms traps.
And sometimes I laughed so much:) to myself(my behaviour according to your resaerc) and your stories.
Again thank you so much…
i would give it to my dog, i dont need crap like that.
im also wondering why they still havent made any 100dollarcoins.
Very interesting questions, and amazing consistency in replies. My impression (Can’t wait to hear what you make if these, Dan!):
1. If the person is experiencing “pain,” such as a loan or other obligation or issue that can be assuaged with the money, they will use the money for that first. Of course, people’s perceptions of what’s painful vary, so a debt or an imperfect house is a huge pain to some and inconsequential to others
2. After the pain is taken care of, people will pursue pleasure, and here its remarkable that that the pleasure seems to fall into 3 categories:
a. Physical or mental exploration (travel, learning, reading, etc.)
b. Charity / spending on others
c. Time with family friends.
(Very surprised that from my cursory overview, C is behind B!)
My own reply? No reason to expect that if I were handed $20,000, I’d spend it differently than the way I already spend money when its related to pleasure / happiness. So that would be family vacations and toys (clothes, gadgets, etc.) for me and friends and loved ones. If pain-reduction counts as happiness creation, then subscription to “concierge physician” for parents and personal trainer for me and my husband would be top of list. (Both being considered already, so again, not different from existing behavior.)
I would divide it up amoungst my neices and nephew to help them in their education and/or put towards getting their first home
I would buy a rich piece of land on which I could grow a large garden.
Finish the basement in my house. We purchased the house in July 2009. We plan to live there for at least the next 15 – 20 years. Finishing basements isn’t the best resale investment you can make in a house, but it does add some resale value. Also it would an investment in our enjoyment and pleasure of the our home, which we will benefit from for many years.
Pay off any outstanding debt. Pay off my sweet hearts student loans.
If you can’t save it, you could get the same effect by investing it in some form of appreciating captital. Others before me have suggested education…a fine way to invest in yourself. Or, you could purchase goods that will grown in value–homes (at least in a past life) or the like.
(I suppose my comment also assumes you don’t have any debt. That’s always a good place to start!)
Buy a house after getting a divorce.
I would like to say that I would spend the entire bunch on paying off my debts. However, having just finished “Predictably Irrational” I have to confess that a chunk of it would probably go to crap I don’t need. Like more books (which I have no room for) or a bigger apartment. Hopefully I would have the self-control to put a big chunk of it into the debt though. In answer to those who believe that paying off debt is cheating on the “must spend” rule, I would trade in my piece of junk Jeep and buy a car that actually gets some gas mileage and DOESN’T break down every 5k miles.
The question requires that I spend the money. I would budget out the money for a period of months and use it instead of other discretionary money.
Buy a couple of cases of expensive bordeaux or burgundy. A recent good vintage (i.e., 2005) that will only be ready to drink in not less than 10 years. That way, in ten years, you can decide to drink it or sell it. You may also have a chance to drink a couple of bottles (actually enjoying your wine) and selling the rest, probably for a profit.
I would spend the $20k as follows
$11k to buy a racing skiff – I am a passionate sailboat racer and this expediture would simultaneously put $$ in the pockets of the dealer who is a friend, as well as to give me thousands of hours of physical and visceral enjoyment
I would take $5k and pay my parents back for a loan they gave me to save my roof. This is part of being in integrity and partly working down my debt load
I would take $5k and go on a week long holiday with my girlfriend despite the fact that I have a high interest unsecured loan for part of the above reference roof work. Why? Because it is a new relationship and it is important to me to build loving joyous memories early on to build a foundation against the viscisitudes of life.
Now, an interesting way to ask the same question is, “You’ve got 20 grand and 1 minute to come up with a way to spend it. How do you spend it?”
Then, ask the same question and give the person some time to ponder, like say an hour or so.
I bet you get a different answer for each. Obviously, they can’t know the second question until they’ve answered the first.
Having superficially pondered this question in and out for about 24 hrs now, I still can’t find a concrete way to spend it.
I guess if it had to be “spent” right away, then I’d check with my close ring of friends to make sure they don’t have any urgent financial needs. If not, then I’d take the money (or the remainder) and throw a party for all of them and a guest of their choosing. Something unique, but not over gaudy.
You’ll have a lot of memories/experiences in that one night. Just think of the rapport you’ll build in that one night?
Easy.
I would invite a great speaker who talks about life and life philosophy (for example Esa Saarinen or some Buddhist teacher) and give a chance of many of my closest friends and not so close acquaintances to learn from the teacher.
Mikk
I believe that saving can bring one happiness, as it can reduce ones exposure to future, unknown financial distress and lost opportunity.
I also think that I would consider paying off debt first, but this could be viewed as a form of saving. Another alternative would be to invest the money, as an investment implies that risk is involved, hence we are given a return on investment. Alias, this also could be viewed as a form of savings.
Having said all of this, if the spirit of the question is intended to be about spending disposable income, then I would spread and spend the money over a longer period of time by purchasing small to medium ticket items (or activities). I think to improve my standard of living marginally over a long period of time would give me the most enjoyment in the end.
I believe that saving can bring one happiness, as it can reduce ones exposure to future, unknown financial distress and lost opportunity.
I also think that I would consider paying off debt first, but this could be viewed as a form of saving. Another alternative would be to invest the money, as an investment implies that risk is involved, hence we are given a return on investment. Alas, this also could be viewed as a form of savings.
Having said all of this, if the spirit of the question is intended to be about spending disposable income, then I would spread and spend the money over a longer period of time by purchasing small to medium ticket items (or activities). I think to improve my standard of living marginally over a long period of time would give me the most enjoyment in the end.
I’d use $1400 to make an extra mortgage payment, give $8600 to different educational and charitable organizations, and then give 100 people $100 each to use to help someone else (stealing this idea but I think it’s really interesting to trust someone else to use the money to make a good decision).
I used to think that if I ever had a million dollars to give to charity, how would I divide it up. But I’ve realized that for someone like Bill Gates to give a few million is equivalent to me giving $100 (obviously not exactly but same idea). This is the idea of relativity as it exists in Behavioral Economics. I think we lose sight of how little each of us needs to give to make a large impact, even if some philanthropist is giving millions more than you or I.
Excellent family vacation – exotic, such as Antarctica.
I’d give it to Conservation International.
I would pay off all my CC debt and still have enough left to take my family to Disneyworld for a couple weeks.
Take the chance/risk at the game tables in Vegas (or in the stock market but that might violate the can bit save rule). If I lose, I am no better financially but gain by having fun. If I win, you know how it goes.
Down payment on a house.
What I think is interesting about this question is that it only gets what people say they would do with $20k, given that no one has given or is actually going to give them $20k.
Unless you are giving out $20k apiece as research. In which case, I think you’re brilliant. (Call me!)
it’s kind of a problematic amount of money.
on one hand it is enough to be considered a lot of money and to be an almost graspable amount. i can picture 20K but it’s more than I’ve ever had for spending.
on the other hand it’s not enough to be a truly fantastic some of money. many things I can picture wanting to have cost more than 20K.
as kids we use to pretend what would we do with all the money should we have one the lottery (assuming 1,000,000 NIS – about 280,000 USD) we than indulge in wild fantasy of how we can spend the money.
the fantasy it self was half the fun.
what i found to be specially interesting with this question was two things
1. i think of the 20,000$ as a single block, mostly wanting to devote it to a single cause sometime enveloping more than one payment for service or goods (for example: taking a year of traveling around India will include buying a bag)
2. this medium size some presents much more of a problem than a smaller some let’s call it 2000$ or a much bigger 200,000$
so far written above are several repeating options:
1. spend money on your self
1.1. spend money on goods or services
1.1.1. several small items
1.1.3. one big 20K purchase
1.2. spend money on experience
1.2.1. several small items
1.2.1. one big purchase
2. giving the money to someone else
2.1. someone you know (family, friends)
2.1.1. several small presents
2.1.2. one big present
2.2. charity
2.2.1. several small donations
2.2.2. one big donation
Please not that I feel that buying a house with the money or paying debt is almost an other form of saving the money.
another thing i can distribute these activities is spending the money on ordinary life necessities such as pair of glasses or a visit to the dentist or spending the money on extra ordinary stuff such as holidays and luxury
what would be most interesting for me to see is if there will be a change between the distribution of results with different amounts of money and also would inserting a time limit on the answer will change the results
also i would be interesting to see how many people will attempt to save the money even tough it’s sort of against the rules in forms of buying stuff that they could later sell with profit such as wine crates, stocks, or any other form of investment.
my plain straight forward answer would be that i would take 8-12 months off work and go tour India.
Regards
Ilan
p.s
when i started wiring this replay i never expected it to be so long
First, let me say that I just finished reading your book. I don’t know how that may affect my answer. Also I am a lawyer, if that means anything.
My immediate reaction to the question was that I would spend the money to help a poor person. That is what I would do if my goal was to maximize my own joy and happiness.
My second reaction was that is not what I would do if you actually gave me $20,000. If you gave me $20,000, and I had to spend it, I would spend it to pay off debt and take a nice vacation.
I take from this that maximizing my own joy and happiness is not really a goal in my life, or if it is, I am not going about achieving it. I will have to think about this.
Like one of the earlier replies, I’d say $20,000 isn’t fantastic amount of money to fantasize about. Its all relative, meaning how often do you spend this amount. I’ve spent this amount on couple of occasions when buying a car – for cash. Well I don’t believe in buying on credit something that depreciates the moment I drive off the forecourt.
I’ve often fantasized about winning a large lottery, and the answer I often come back with surprises most people. This is to say that when you have so much money that you can afford anything you previously thought was unaffordable, and that you were prepared to toil for – which includes work at a job that you didn’t much care for or didn’t much care for your bosses, well just the knowing that I don’t have to do this is worth the joy and creates the happiness. In a nut shell, it just knowing that I can afford anything that was previously impossible is the source of satisfaction, leading me to stay in the same place as I do today. Sounds miserly, I know but I think its the head game of chasing the illusion of something more valuable then what I may have today, an illusion that if chased can never be appeased.
Anyways, coming back to spending $20,000 so that I derive joy and happiness. I’d setup 20 scholarships for $1,000 each and apart from the fact that the recipients will have to write an essay on a subject matter to be determined, they will be considered eligible if they and their parents were born in Africa. The university they plan to go to must also be in one of the African states. I will derive joy in assessing which candidates are selected. I will be happy if 51% matriculate college, as this will mean majority derived value from such funds.
Take a long snowboard trip with my girlfriend.
Give some money to social projects.
I would pay of debt. Car loan + Student Loan + Credit Card + Personal Loan = $19,300
I would put the remaining $700 toward a laptop for my girlfriend, probably kicking in an extra $150 of my own funds.
I would give all the money to my parents who’ve spent it on me for all these years and it wouldn’t matter to me what they did with it.
Pay off $20K in debt (the rational response) and then increase my discretionary enjoyment expenses (the irrational part) by the eliminated annual interest. Presume that there is $20K in credit card debt at 15% interest, paying off the debt frees at least $3K each year. The [economically] rational thing to do would be to invest the $3k, but that’s not as much fun as spending it on an indulgence! Of course, many Americans simply would simply re-incur the debt plus more…
I don’t want to sound smart, but the best way to use the money according to my own research is to spend it on knowledge. I would buy the best courses, seminars, trainings and videos the world can offer about making myself realize how to get wealth financially, emotionally, mentally, spiritually, etc to make me a better person. In this way, I would be able to stretch out and maximize the happiness that I will be able to get in this lifetime by knowing so much. I’m thinking longterm success and happiness. And the only way I know that could make this money worthwhile is to invest in the best asset we have, our brain, our thinking. When we’re set up, you can’t imagine how our minds are able to work and create the things that people have wished for. I hope this would help.
I would spend it on things that would give me a return (in social benefit, happiness etc or possibly monetary).
I would spend the $20,000 on three things:
1. $10,000 into a new small business in which I would cross my fingers would turn a profit
2. $4,000 contribution to children to school who can’t afford it
3. $1,000 a nice little adventure vacation for me.
Without a doubt, I would put most of it onto my loans. They knowledge that I did something to reduce my debt and either reduce the time to pay it or the amount per month would be a serious relief.
But I couldn’t have that much money and not take care of some immediate desires. Basically, I would catch up on the things that I have been putting off in my own life. Car repairs, new clothes, replacing a few broken appliances, and the like. Come to think of it, I could probably spend the entire $20k on just that, but I wouldn’t because I would feel terrible that I didn’t put some into my debt.
It would like be about $2k into personal things and the rest into my debts.
> what would be the ideal way to spend it?
> what would be the way to spend this sum if your goal was to get the most joy and happiness out of this amount?
I think these two questions are not the same. Nor is either one the same as the most obvious phrasing, “How would you spend it?” Similarly, the answers aren’t the same either.
First… the ideal way to spend it… for me would be about 10 years in the future. I would use the money to take my family on a “vacation” to another country – somewhere “poor”, where we would get to spend some time (a month?) immersed in their culture… so my kids would develop a broader perspective from which to consider their own decisions going forward. This would have to be in the future because my son is only 2, and wouldn’t get much benefit from such a trip at this time. That’s *my* “ideal”… it strikes a balance between something I’d enjoy, something I’d value, and what I consider my most important responsibilities.
How would I spend it to maximize “joy”… I’d need to get input from my wife to answer this question. What might selfishly give me immediate pleasure wouldn’t necessarily make me happiest over a longer time frame. I wouldn’t be able to decide what I’d enjoy most without knowing it’s effect on those I care about.
“What would I spend it on”… My family has a big 6 months ahead of it. We are planning to sell our house and buy a new one close to where we work (it’s a 50 minute drive each way, 4 times per week). Once we’re moved, we plan to adopt a second child. I don’t doubt that if $20k showed up tomorrow my wife and I would put the money toward moving and adoption expenses. This is neither my ideal, nor what would likely give me the greatest short or long term pleasure. But, like splitting a dinner check evenly, it is the simplest compromise and most likely use for a $20k windfall.
So, how I would “ideally” like to spend it, what I think would give me the most pleasure, and what I’d likely end up doing are not the same.
Land!
I would take the first third and use it to go to a developing country where I would be i) not surrounded by materialism; ii) be enlisted in physical labour for the benefit of my fellow human beings (like building a school, drinking fountain, etc. I would stay there for as long as the money allowed after travel and any food costs etc.
I would take the second third to go to an ashram (never been) to find my inner voice through rigorous asana practice and meditation for as long as they money allowed after travel and accommodations.
I would take the last third and spend time with family and friends sharing with them what I learned. I would donate any residual amount left over to a random stranger that looked down and out.
Pay down mortgage and credit card debt!
If I had debt, I would pay it all off first (not sure if you consider this equivalent to saving it, economically it is).
If either I had less than $20k of debt or I couldn’t pay it down with this money, well, since money is fungible, I would use it to pay my ordinary everyday expenses while saving the money I would have spent on those same expenses.
At least, that is the rational thing to do. Perhaps I am too rational (I am a PhD economist).
If I absolutely must spend it on items I would not ordinarily purchase, I would put the money towards my next large purchase, such as a new car or house, in order to move up the date on which I can afford that item.
I would tithe $2000, then find some type of asset that would cost around $18000 that would produce cash flow into the future. Like a house down payment, and rent it out so there is a positive cash flow. That would generate some recurring money over a specific period ($100 monthly for example). That would generate an extra $120/year in tithe, $1080/year to produce another asset. Once I’ve built assets that produce $5000 a month income, start putting another 10% toward a foundation that I will be setting up, that will allow kids to play sports. (Wouldn’t put any restrictions like parents combined income is over X amount.) Getting kids into sports is very important for many reasons, and when parents have too much debt or whatever they don’t pay for their kids to play.
Given I’ve planned my finances rather well and I don’t have any debts (student loans are halted because I’m back to being a student), I would donate the entire amount to the highest rated charity on http://www.givewell.net/
I’d get the most happiness out of doing this because this money will do so much more good in the world (surely save lives – perhaps hundreds of them).
I would set some charity organisation, all i know is that i would have difficulties to keep the money for myself.
(by the way Dan I am on a one woman mission to get people to read your book, i am summarising some chapters and sharing it with others i hope this does not call for a lawsuit. in my summaries i am stating that some of the material used is yours and that people should read the book)
We have a list, in order of priority, of all the home improvements we want to make to our house and yard. We also have a similar list of all the ‘fun stuff’ we’d like to own at some point. If it had to be spent within the year, we would put most of it towards our ‘final plan’ for our house and yard with a small percentage going to ‘fun stuff’ and 10% going to quietly help friends currently having economic difficulties.
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