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With interest rates continuing to rise, inflation at a 40-year high and student debt exploding, there’s plenty of reason to feel nervous about your finances. But here’s some information that might make it easier to cut back on your spending: People actually get less happiness from purchases they make when feeling financial stress, according to recent research from Duke University’s Fuqua School of Business.
Why? “That feeling of financial constraint leads people to revisit their purchase and think about what else they could have done with that money, also known as ‘opportunity cost,'” Gavan Fitzsimons, Fuqua marketing professor who co-authored the findings, tells the Journal of Consumer Research. So, “every time they think about that purchase, they are going to be less happy with what they did end up buying.”
And that held true whether people bought things or experiences, at whatever the cost, according to the “Spending and Happiness” research performed by Fitzsimons and his team.
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People experiencing financial stress are “more likely to buy things to [try and] improve their happiness,” Rodrigo Dias, Fuqua Ph.D. candidate and one of the research paper’s co-author, tells Fuqua, “but our research shows what happens is precisely the opposite.”
The disconnect is that, “as a society, we have fallen into this trap where we believe that material goods are going to make us feel better,” Fitzsimons tells Select. But the truth is, the excitement of buying new things fades as we get used to a purchase – “we don’t fully realize how fast we adjust,” says Fitzsimons.
Fitzsimons adds that over the last 50 years, American consumers haven’t gotten any happier. In fact, consumer unhappiness is on the rise — regardless of the level of income. And with the results of Duke’s new research, he’s not sure that will change anytime soon: “Everyone feels [financially] constrained,” he says. “I’m not sure this is temporary.”
Luckily, there is a way to maximize the emotional value you get from buying something while financially stressed, according to the Duke researchers: Plan the purchase.
Since opportunity cost is a reason for dampened “purchase happiness” among the financially stressed, it helps when buyers are “already thinking through the possible alternatives for how they could have spent that money,” Fitzsimons says.
One good way to plan is to shop around for the best deal. If you’re looking to buy a new TV, for example, start searching online through local retailer websites as well as other shopping sites like Amazon. If you have access to wholesale stores such as Costco, BJ’s or Sam’s Club, consider shopping there for additional savings. It’s also worth mentioning looking through Facebook Marketplace to find a used unit in your local area.
Once you’ve determined exactly where you’re going to buy an item, how you pay for it can make a difference as well.
You may, for example, want to consider buying that new TV with a cash-back credit card such as the Chase Freedom Unlimited® to reap further rewards and utilize additional benefits, including extended warranty and purchase protection.
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Foreign transaction fee
Information about Rakuten has been collected independently by Select and has not been reviewed or provided by the company prior to publication.
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Or maybe you just decide against the purchase. Instead of buying a new iPhone as soon as it comes out, try diverting that money instead toward your emergency fund or a tax-advantaged Roth IRA retirement account.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.