October 4th, 2011

Calculating the ROI of Happiness on an iPhone 4S

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Apple

Money can totally buy happiness. Just ask anyone (like myself) ogling the new iPhone 4S that Apple just launched.

In fact, most purchases we make are investments in our own happiness. However, how often do we stop to keep track of whether or not those purchases actually made us happy? Even worse, we keep on investing blindly in the same things without a second thought as to the return on investment we might be getting.

Don’t worry, though. I created a (deeply flawed) system for calculating an ROI for my happiness.

Calculating the ROI of Happiness

  1. What did you buy and for how much?
  2. How long did you enjoy it for?
  3. How much happier did it make you?
  4. Purchase Price/(Happiness Gained x Hours of Use) = Price per happy point/hour.

Now let’s put that formula to work.

Of iPods and Grills

Here are two purchases I can say made my life substantially better, for which I’ve calculated the ROI of my happiness to be under $0.50 per happy point per hour.

  1. A five-year-old iPod that I still use and love – $349
  2. A George foreman grill I bought at a garage sale – $5

I’ve used my iPod an average of 30 minutes every day for the last 5 years. Let’s say I gain one happy point whenever I listen to it. So that’s 912.5 happies that I gained from an initial investment of $349. In other words, the iPod generates a happiness point at $0.38 per hour.

My George Foreman Grill is an even better deal. It was $5 at a garage sale and I’ve made at least 100 sandwiches on it. I get 1.5 happiness points from it for 15 minutes per sandwich. So it generates a happiness point at only $0.13 per hour. Man, I love that grill.

I can’t stress enough how terrible the math is here, but it’s a real attempt to quantify happiness in terms of money. Plus we see some patterns:

Quick Tips

  1. Buying used keeps the price of happies/hour down. A new George Foreman would’ve halved my ROI.
  2. Long-term use helps too. Rack up the hours of happiness to get the most from your purchase.
  3. Fancier items won’t increase your ROI. Five years ago, I agonized over the 30 gig and 80 gig iPods. But very little of my enjoyment for the past five years was based around those extra 50 gigabytes of storage. The higher-end model just increased my price of happies/hour by 40%.

Buying an iPhone 4S

It’s the same thing with the new iPhone 4S I’m currently drooling over. Most of the happies come from iPhone 4S vs. no iPhone 4S, instead of 16 gig iPhone ($199) vs. 64 gig iPhone ($399).

What’s my coveted iPhone 4S’s price per happy? Over the next two years, it’ll cost me $919 total (after a $30 monthly data package). If I use it for 3 hours a day, assuming 1.25 happy points per hour, my cost will be $0.34 per happy point, which is pretty reasonable.

Let’s try an example of the ROI of happiness on something I didn’t have to pay for. Over the weekend I joined 600,000 other thrifty music-lovers and attended Hardly Strictly Bluegrass, an annual concert in San Francisco that’s entirely free thanks to rich guy, Warren Hellman. He described a concert featuring the music he loves as, “The closest I’ll ever get to heaven.”

How does Hellman’s ROI compare to my new iPhone?

Using a rough estimate, the concert was $300,000 and created two happy points per hour for the 600,000 folks that were there. If they were there for two hours each, that’s 2.4 million happies/hour generated, and an average price of 12.5 cents per hour. Turns out, happiness is cheaper if you buy in bulk.

One last takeaway from this ludicrous analysis is that cheaper buys end up making you happier per dollar than their more expensive equivalents. There’s a big jump from something to nothing, and every dollar you invest in happiness after that offers a diminishing ROI.

So go ahead and buy a little happiness; just be sure to get your money’s worth.

Once again, a conservative sandwich-heavy portfolio pays off,

Ezra Fox, Credit Karma Contributor

6 Comments

  1. I was pretty skeptical about buying my first Iphone a few years ago. I didn’t want to commit to the monthly rate and was getting by with a “free phone” from Sprint with no data. Once I got the Iphone and used it for awhile, I absolutely had no regrets. It has really been a game changer. The reality is that if you are coming from a “voice only” plan, you would even be happy with the 3GS. That would lower your overall costs and improve the ROI significantly. I look at a smart phone almost the way I look at high speed Internet in my house. It’s really become a necessity. Cable TV? Not so much (which is why I don’t have cable)
    Hazzard

    Hazzard at 4:30 pm on October 4, 2011
  2. If you can afford the new iPhone, then I recommend just buying it. I know it increases your monthly budget but its definitely worth. Just make sure it can fit into your monthly budget. If you do not have a budget, then you should think about writing down your monthly spending and income.

    UltimateSmartMoney at 3:43 pm on October 6, 2011

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