The Best Investment You Make May Not Be in Your Portfolio
When we talk about investing, we usually think about stocks, bonds, real estate, and retirement accounts. We put money to work today with the expectation that it will provide something of greater value in the future.
But what if we applied that same thinking to how we spend our money?
A new car provides value. So does a new phone, a nicer house, or a new pair of shoes. There is nothing wrong with buying things that make our lives more comfortable or enjoyable. But most possessions have something in common: eventually, the new wears off.
The new car becomes your car. The new phone becomes the phone you're thinking about replacing. The house you couldn't wait to move into eventually becomes simply where you live.
Experiences can work differently. Research has found that spending money on experiences often produces more lasting happiness than spending it on material possessions. One reason is that experiences can continue providing value long after the money has been spent.
They create what we like to call memory dividends.
And those dividends can continue paying for the rest of our lives.
The Three Stages of a Rewarding Experience
Behavioral researchers use the term "hedonic adaptation" to describe our tendency to become accustomed to improvements in our circumstances. Something new can make us happy, but we adapt to it surprisingly quickly.
Experiences have an advantage because their value isn't limited to the experience itself.
Think about planning a family vacation. Months before you leave, you start researching destinations. You talk about where you'll stay and what everyone wants to do. Reservations are made. The trip goes on the calendar. Part of the enjoyment comes from simply looking forward to it.
Then comes the trip itself. You're somewhere new, away from your normal routine, spending time together and having experiences that don't happen during an ordinary week at home.
The third stage begins after you return. You look at pictures. Someone tells a story about what happened on the second day. Years later, you're sitting around a table and someone says, "Remember when we..."
That's the memory dividend.
The vacation ended years ago. The money is long gone. But you're still receiving something from it.
Some Investments Appreciate in Ways We Can't Measure
We spend a great deal of time in financial planning measuring returns. That's important. Investment returns affect when you can retire, how much you can spend, what you can leave to your family, and whether your financial plan will succeed.
But not every worthwhile return appears on a financial statement.
What was the return on taking your children to Yellowstone when they were young?
What was the return on the trip you took with your parents while they were still healthy enough to travel?
What was the return on renting a house and getting your children and grandchildren together for a week?
You can't calculate those returns in a spreadsheet. That doesn't mean they weren't significant.
Twenty years later, you may remember that week with your family far more vividly than you remember what the S&P 500 returned that year.
Not everything valuable appreciates financially. Some things appreciate in our memories.
Don't Always Wait Until Later
Families often postpone experiences for perfectly good reasons. Travel can be expensive. Work schedules are difficult. Children have school and activities. There is always something else competing for our time and money.
Sometimes waiting is the right decision. But it's also easy to assume there will be a better time later.
We'll take that trip when the kids are older. We'll travel when work slows down. We'll spend more time with the grandchildren after we retire.
The problem is that life doesn't always cooperate. Children grow up. Parents age. Health changes. Families become more geographically dispersed.
The experience that is possible today may not be possible in quite the same way ten years from now.
Time is an asset, too.
That doesn't mean spending irresponsibly in the name of making memories. It means recognizing that postponing an experience has a cost, even if that cost never appears on a financial statement.
Start Investing in Memories Early
Parents sometimes wait to take children on meaningful trips because they worry the kids are too young to remember them.
Maybe they won't remember every detail. That doesn't mean the experience has no value.
Travel can teach children to become comfortable outside their routines. It can expose them to different people, cultures, foods, geography, and ways of life. It can build confidence and curiosity.
It also teaches them something about money.
Children learn what we value partly by watching how we use our resources. A family that makes room for shared experiences is showing children that money isn't simply about acquiring more things. It can be used to create opportunities, spend time together, and experience more of the world.
And the earlier we begin creating those experiences, the longer we have to enjoy the memories they produce.
That's where the comparison to investing becomes especially interesting. We understand that starting to invest early gives compound growth more time to work. Memory dividends can compound, too. One experience becomes a story, the story becomes part of a family's history, and often it inspires the next experience.
Retirement Changes the Equation
The idea of memory dividends becomes especially relevant as people approach retirement.
Most successful retirees have spent decades doing exactly what they were supposed to do. They worked, saved, invested, delayed gratification, and accumulated.
Then retirement arrives and they are asked to do something that can feel completely foreign: start spending the money they've spent 30 or 40 years accumulating.
That transition can be surprisingly difficult.
Someone with more than enough money to support retirement may still hesitate to spend $20,000 taking the family on a trip because it feels extravagant. And from a purely financial perspective, there's an obvious argument for leaving the money invested.
But that's not the only return worth considering.
What is the value of having your children and grandchildren together for a week? What if your grandchildren are still talking about that trip 20 years from now? What if it becomes one of the experiences your family remembers most?
A spreadsheet can't answer those questions.
This is where financial planning can be particularly valuable. Once we've established that you're going to be OK, we can start asking a different question:
What does your money allow you to do?
Memory Dividends Don't Have to Be Expensive
A meaningful experience doesn't have to involve first-class airfare or a trip to Europe.
It might be an annual fishing trip. Taking your granddaughter to a baseball game. A weekend with old friends. Renting a house where the entire family can gather. Sunday dinners that become a family tradition.
For another family, it might be the trip to Africa they've talked about for 20 years, taking the entire family to Europe, or celebrating a 50th anniversary by bringing everyone together.
The amount spent isn't what determines the return. What matters is whether the experience is meaningful to you and the people you care about.
Over time, those experiences become part of a family's shared history. And unlike most things we buy, their value doesn't necessarily diminish as they get older.
Sometimes it increases.
What Are You Saving For?
Financial planning necessarily involves making sacrifices today for benefits we hope to receive in the future. That's the foundation of saving for retirement, and it matters.
But accumulating money isn't the end goal.
At some point, the money needs a purpose.
A good financial plan should help you understand how much needs to remain invested for your future and how much you can comfortably use along the way. If you've spent decades building financial security, success shouldn't necessarily be measured by how much of it remains untouched.
There is a balance. You don't want to sacrifice tomorrow for today. But you also don't want to spend your entire life sacrificing today for a tomorrow that isn't guaranteed.
That's why we like the concept of memory dividends. The money you spend on a meaningful experience leaves your account, but the value doesn't necessarily leave with it.
You enjoy looking forward to it. You enjoy the experience itself. And, if you're fortunate, you continue enjoying the memories for years to come.
That's a pretty good return on investment.
The next time you're considering an experience and wondering whether you should spend the money, the financial question still matters. But it may not be the only question worth asking.
What could this experience be worth to us ten or twenty years from now?
The return won't appear on your investment statement. It may show up years later in a photograph, a family story, or a conversation that begins with, "Remember when we..."
If you'd like to talk about how the experiences you want from life fit into your financial plan, we'd be happy to help. Schedule a complimentary 15-minute call.
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This material was written in collaboration with artificial intelligence (ChatGPT) and derived from sources believed to be correct.
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