Realizing the Best Returns on Discretionary Expenditures

There comes a point where most successful investors decide to spend some of their stash.  As my mother-in-law was wont to say, "Shrouds don't have pockets."

The question a few people might ask is, Where can I get the best return on my spend?

Several academic studies have addressed this issue.  Most of the literature reaches the following finding:

To live in the developed world is to live in a consumerist society. Although the broader forces that created this society have led to unprecedented material abundance, scholars have maintained that these benefits have come at a significant psychological cost. An important question, then, is how these psychological costs can be minimized. With that in mind, we review research showing that people derive more satisfaction from experiential purchases than material purchases. We then summarize the findings of an extensive program of research on the psychological mechanisms that underlie this difference. This research indicates that experiential purchases provide greater satisfaction and

happiness because: (1) Experiential purchases enhance social relations more readily and effectively than material goods; (2) Experiential purchases form a bigger part of a person’s identity; and (3) Experiential purchases are evaluated more on their own terms and evoke fewer social comparisons than material purchases. We conclude by discussing how social policy might be altered to take advantage of the greater hedonic return offered by

experiential investments, thus advancing societal well-being.

A wonderful life: experiential consumption and the pursuit of happiness by 

Thomas Gilovich, Amit Kumar, and Lily Jampol

The above-noted article is worth reading in its entirety.  

Some Potential Strategies to Achieve Best Returns

1. Reduce discretionary expenditures on "stuff" by simplifying one's life (there is a bountiful literature on this topic which is readily accessible) 
2. Look for alternative ways to enjoy the benefits provided by "stuff" without having to own it e.g. use Uber or short-term rentals instead of purchasing a car, rent cottages, use lending libraries for tools, books etc. 
3. Spend more on experiential purchases, especially if it gives joy to others who are close to you

There is another dimension of "spending" and that is "giving".   Here is an insightful article. on the topic.   One of the propositions advanced is that it is more a question of "how" than "how much".

Giving—and thoughtful, generous giving at that—may be more rewarding than receiving on numerous levels, from the neural, to the personal, to the social. And would a more generous, so to speak, gift be even more rewarding than a less generous one?

The Psychology Behind Gift-Giving and Generosity

Of course, there is yet another dimension to giving - the business of extracting donations on the part of charitable organizations.  The following article provides what might be to some, a rather cynical perspective on a multi-billion $ business sector. 

Getting Into a Benefactor’s Head 

To end this post on a more positive note, I would recommend the following book: 

Good Things Happen to Good People: The Exciting New Research that Proves the Link Between Doing Good and Living a Longer, Healthier, Happier Life by Stephen G.Post.

I came across this book while reading one of Prem Watsa's missives.