To maximize happiness, what should you spend money on?

in the bank. Today we save nothing and instead spend everything we make, usually on stuff nice apartments or houses, nice cars, nice furniture, nice clothes, nice electronics, nice restaurants, and so on. My daughter, Arena and I are having an ongoing discussion about this over the iPhone four. She has an iPod Touch, but she wants an iPhone so she can do cool stuff like make movies, make video calls, and do whatever else you can do with the iPhone.

For I've been trying to help her understand that over the course of two years, the iPhone four costs two thousand plus dollars, and as much as I love her, she's not getting one. I'm not getting one, and for the exact same reason, two thousand bucks is a lot of money. After you own an iPod for two years and spend your two thousand dollars, what have you got? Nothing? Absolutely nothing. If you want to make movies, you can buy a flip for a hundred dollars. Does anyone need

video calling? If so? Irena has access to a laptop that came with a free camera, and Skype is free to But the iPhone looks cool, she says, sort of smoking to some, and it costs even more after a year of smoking. What have you got? Lung cancer? Most of the stuff we buy is like this. You buy it, use it, and then throw it away. At the end, you have no thing. Really. The New York Times is proposing a different path in an article entitled but will

it make you happy? You can find this On the bright side, the practices that consumers have adopted in response to the economic crisis ultimately could, as a raft of new research suggests, make them happier. New studies of consumption and happiness show, for instance, that people are happier when they spend money on experiences instead of material objects, when they relish what they plan to buy long before they buy it, and when they stop trying to outdo the Joneses.

It's a long and fascinating article well worth reading, but the article largely neglects a third option for spending money, and that option is assets. Let's say you have two thousand dollars that you might spend on an iPhone. You could buy a nice experience with it instead, like a trip, But the third option is to either put it in the bank or buy an asset it With two thousand dollars, you could buy stock in a company you admire, or you could buy gold, coins or whatever. These kinds of

things tend to retain their value. Not always. Stocks can go down and gold can fall in value, but they have that tendency to retain value two years from now. Unlike an iPhone, you can sell them and get your money back out of them. Money in the bank you can always access, and it tends to keep its value throughout time. After you buy some assets or put money in the bank, several times, you would accumulate enough money for a down payment on, say a small rental house.

The advantage of stocks and rental houses is that you can cash flow them and make money every month from them. With the money you make, you can buy more assets, and pretty soon you first have a lot more experience collecting assets, so you get better at it, and second you have enough assets to be a lot more financially secure. Let's say that you save up a hundred thousand dollars in assets. If you were to then lose your job, you would feel a lot better about it. You would

be happier than you might otherwise. So there are three options to consider, the normal path of buying stuff, the New York Times path of spending less on stuff and buying experiences and trips instead, and then finally, the asset buying path. Consider all three the next time you have spare cash. For more illness and thousands of other topics, visit how stuff works dot com and don't forget to check out the brain stuff blog on the house stuff

works dot com home page. You can also follow brain stuff on Facebook or Twitter at brain stuff hs W.