Most people are in pursuit of happiness. We know money can make you happier, though after your basic needs are met, it doesn't make you that much happier. But one of the biggest questions is how to allocate our money, which is (for most of us) a limited resource.

There's an assumption that most people make when spending their money: that because a physical object will last longer, it will make us happier for a longer time than a one-off experience like a concert or vacation. According to recent research, it turns out that assumption is completely wrong.

"One of the enemies of happiness is adaptation," says Dr. Thomas Gilovich, a psychology professor at Cornell University who has been studying the question of money and happiness for over two decades. "We buy things to make us happy, and we succeed. But only for a while. New things are exciting to us at first, but then we adapt to them."

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So rather than buying the latest iPhone or a new BMW, Gilovich suggests you'll get more happiness spending money on experiences like going to art exhibits, doing outdoor activities, learning a new skill, or traveling.

Gilovich's findings are the synthesis of psychological studies conducted by him and others into the Easterlin paradox, which found that money buys happiness, but only up to a point. How adaptation affects happiness, for instance, was measured in a study that asked people to self-report their happiness with major material and experiential purchases. Initially, their happiness with those purchases was ranked about the same. But over time, people's satisfaction with the things they bought went down, whereas their satisfaction with experiences they spent money on went up.

It's counterintuitive that something like a physical object that you can keep for a long time doesn't keep you as happy as long as a once-and-done experience does. Ironically, the fact that a material thing is ever present works against it, making it easier to adapt to. It fades into the background and becomes part of the new normal. But while the happiness from material purchases diminishes over time, experiences become an ingrained part of our identity.

"Our experiences are a bigger part of ourselves than our material goods," says Gilovich. "Your experiences really are part of you. We are the sum total of our experiences."

Even when an experience has negatively impacted our happiness, once we have the chance to talk about it, our assessment of that experience goes up. Gilovich attributes this to the fact that something that might have been stressful or scary in the past can become a funny story to tell at a party.

Another reason is that shared experiences connect us more to other people than shared consumption. You're much more likely to feel connected to someone you took a vacation with in Bogotá than someone who also happens to have bought a 4K TV.

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"We consume experiences directly with other people," says Gilovich. "And after they're gone, they're part of the stories that we tell to one another."

You're also much less prone to negatively compare your own experiences to someone else's than you would with material purchases. It's easier to feature-compare material goods (how many carats is your ring? how fast is your laptop's CPU?) than experiences. And since it's easier to compare, people do so.