I truly believe though that the journey towards financial security is not just a numbers game or an exercise in self will - it’s also about gaining a deeper understanding of how our minds work. When it comes to the relationship between money and happiness, we may find that our hard earned dollars were misplaced in the first place. So often we run on autopilot with our daily routines that we can’t even recount where our money is actually going. I know firsthand what it’s like to run on that treadmill. For many years, I used my career as a crutch to blindly cover my expenses. As long as my spend was below my income, I figured I could buy whatever I needed or wanted without question. As my salary grew over the course of my career, I equated more spending with a better quality of life. If I was working my way up the corporate ladder, I deserved to enjoy a little extra luxury too! While some of these expenses were nice vacations or experiential outings, many purchases were also material things - clothes, home goods, and goodness knows how many Amazon packages I cannot even recount. Every January though, I get the urge to purge my home of all unnecessary items in an effort to bring back some sense of order after the holidays. Nothing drives me up a wall like having a room (or a house) full of cluttered items and this past month was no different. It’s my yearly reminder of how many of the mindless purchases I made end up causing me more stress to deal with in the long run. Thanks to Netflix shows like Tidying Up With Marie Kondo, The Home Edit, and The Minimalists, we’ve gotten an inside look at how much “stuff” Americans at large build up in their homes. According to The Minimalists site, American households contain more than 300,000 possessions. On top of that, the annual employee engagement survey that Gallup conducts each year shows that roughly two-thirds of Americans are also not actively engaged in their jobs. 
If you fall into the bucket of dreading the daily grind, think about the time and effort you spend at work to afford the items that eventually get thrown away, forgotten, or shoved in the back of a closet. Not only is a large part of the workforce not actively engaged in their profession, but their spending habits are likely contributing to even greater dissatisfaction. It’s a vicious cycle! So how do we leverage our greatest assets, time and money, to meet our deepest needs instead and improve our overall sense of wellbeing? Even the most sophisticated financial tools haven’t cracked this problem, but behavioral science has uncovered a few clues. Hedonic Adaptation: The Achilles Heel of the Mind
Despite research showing that happiness and wellbeing plateaus once our incomes cover our basic costs of living, it’s natural to continue working towards that next pay raise or bonus. Societal expectations, prestige, and appearances are all reasons we seek additional income and inflate our lifestyles.
There is, however, another reason that we are subconsciously driven to buy more things and upgrade our cost of living. That inner temptation that convinces us to purchase the next skincare product, a nicer car, or a bigger home is called hedonic adaptation. Hedonic adaptation has long been researched by psychologists and refers to our tendency to return to a baseline level of happiness, despite the ups and downs of daily living. Think about the gifts, for example, that you received during the holidays or over this past year. Are you as excited about them today as you were when you were when you first unwrapped them? Whether it’s a positive or negative event such as receiving a new Amazon package in the mail or even a job rejection, our brains are wired to eventually get used to things over time. Once the novelty has worn off, our emotional responses eventually get dampered and we return to our base level of happiness. Therefore, even if you have convinced yourself that a new phone or sleek pair of yoga pants will absolutely make you feel happier than you are today, the actual euphoric effect is only temporary. Hedonic adaptation applies to many other scenarios as well such as life milestones and salary expectations. Take a look at this research study by Di Tella et al. in 2010 which looked at real income over time across 7,812 Germans from 1985-2000. Despite the average salary increases, their overall happiness levels stayed relatively the same. 
Another popular study from 1978 looked at lottery winners, and showed no improvement in long-term happiness despite a once in a lifetime windfall. For those of you who are cursing the winners of the Gamestop trading frenzy or the bitcoin bonanza, rest assured that their long-term happiness from these events may end up no better than yours. Practicing Intentional Spending
In the digital world we live in today, we’re constantly bombarded with material products and consumer lifestyles that promise increased happiness. When we cave into these purchases though to satisfy our intrinsic need for something new, it can cost us in a big way.
By understanding hedonic adaptation, we can spend our time and money instead in more effective ways that have longer lasting effects on our overall well being. Here are a few ways that we can overcome hedonic adaptation and maximize the value of our dollars: 1. Invest in experiences
Investing in experiences instead of material goods is one of the best ways to harness our need for novelty. When we take a vacation, try a new restaurant, or attend a concert, we get the emotional high that lasts just long enough before it loses its X factor. No extra baggage (besides those unpacked suitcases) to deal with later.
A study by Van Boven and Gilovich in 2003 demonstrates the benefits of experiences over material purchases as well. They asked participants across various income levels in their study to think about an experiential and material purchase that cost >$100 and to rate various aspects of happiness. 
Overall, participants reported higher levels of happiness on their experiential purchases in comparison to their material ones. Those with higher income levels reported even grater levels of happiness with experiential purchases in comparison to material goods.
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