This is part 4 in our series on the recently published book, Happy Money: The Science of Smarter Spending, by behavioral scientists Elizabeth Dunn and Michael Norton. Their tagline is:
“If you think money can’t buy happiness, you’re not spending it right.”
According to their research, there are five basic ways in which money can be spent that increase happiness for the average person.
And we’re hitting these main points one-by-one. Feel free to start at the beginning (links above) or hop right into this week’s.
Part 4 – Pay Now, Consume Later
That’s right. Read it again. This is the exact opposite of what every credit card company, and in-store financing plan wants us to believe makes us happy. That is, “Buy Now Pay Later”. Rather than getting enjoyment out of the immediate gratification that’s becoming more and more available (instant downloads, anyone?), what humans really seem to enjoy is the build up.
“Why does yet-t0-be consumed sangria taste so sweet? Because the future hasn’t happened yet. It’s inherently ambiguous inviting our minds to fill in the details as we would like them to be…. A product we don’t yet own is like a distant image coming into focus. It captures our attention because we don’t know exactly how it will turn out.”
In this chapter, Norton and Dunn use as one of their primary examples a company called Birchbox, which allows people to sign up to have random makeup samples sent to them once per month. People can’t choose what’s in the box, and it’s a mystery until the boxes are sent out. But therein lies the tension. While people want to reduce their uncertainty by finding out what is inside the box by searching the internet before it arrives at their doorstep, “taking away the uncertainty can also take away the fun.”
The Pain Of Paying Now
As it turns out, the pain of paying is more than a metaphor. Brain scans taken while research participants went “shopping” inside the machines showed visible signs of activity in an area of the brain that responds to impending pain when faced with high prices. The conclusion, therefore, according to Norton and Dunn is that “because the pleasure of consumption is purest without the experience of paying for it, anything we can do to separate payment form consumption can enhance the pleasure of the purchase.”
However, prepayment can have its own kick in the pants when it leaves you open to disappointment if your purchase is not fulfilled later.
I dunno about this one; but I suppose it’s a variation on delayed gratification. In both cases, you could spend a lot of time thinking about how much you’re going to enjoy doing X, before you actually get to the event itself. Oddly, when I actually practice delayed gratification, I usually get bored with the idea of actually doing X before I pay for it. Unfortunately, if I paid first, then waited before doing it, even if I was bored with the idea I would still be out the amount I paid, and unhappy with what I purchased…
This is perhaps the only area that I think that Norton and Dunn’s advice is perhaps a little off base. In pre-paying, I think we have a tendency in our culture to over consume. N&D even noted that when vacationers paid for their all-inclusive vacation ahead of time, they were far more likely to enjoy their “free” booze, but as Norton and Dunn themselves pointed out, they were over consuming precisely because it felt “free”.
Buying desserts in bulk might be cheaper and feel like we’re just “pre-paying” for dessert for the next 3 months, but it’s not cheaper (and it’s much worse for our health) if we over consume and eat it all in a few weeks – which is really the basis of my skinny cow dilemma.
We don’t always have a very good intuition of what it will take for us to feel satisfied in the moment when trying to plan things far in advance, so we are likely to have a tendency to over consume because of it. Planning a vacation and want to pre-pay for it? You might stuff an activity in each morning and afternoon/evening in the hopes of getting the most out of every experience, when in reality when the time comes you might be much happier sleeping in or enjoying leisurely activities. I think the danger is that we don’t always have a good grasp on Quality over Quantity when we are trying to plan things that are far in the future.
So while I think this is an interesting concept, I’m more apt to err on the side of NOT over consuming right now.
What are you paying for now to consume later? Do you think it made you happier?