My partner and I make a reasonable income, and we’ve been able to save some money over the years. We can afford to move to a more expensive neighborhood, but we aren’t sure if this is the right way to spend our money. What do you say?
I’d be cautious about moving to a pricier area. We tend to compare ourselves with our surroundings, and our happiness stems directly from those comparisons. If the people around us drive Hondas, we feel good in a Honda; if those around us drive Audis, our old Honda will make us cringe.
Moreover, we quickly become accustomed to the fancy new car and derive less excitement and fun from it. This phenomenon is called the “hedonic treadmill”: We continuously chase prestige, thinking it will make us lastingly happy, but we rather quickly revert to our pre-purchase level of happiness.
So you should be careful when trying to figure out the benefits of moving. Right now, you’re probably overestimating the value of a move; six months afterward, its value is likely to seem lower. As a practical shortcut for all this, you could assume that the value of moving is only half of what it seems right now—and ask if you’d still move. If the answer is still yes, go for it; if it is no, stay put, and look for other ways to spend your money.