Hedonic Adaptation Spending: A $15,000 Raise Case Study in Why Upgrades Stop Feeling Good

A $15,000 raise sounds like it should change your life. Within a year or two, for most people, it quietly stops doing that. This post follows one illustrative household through exactly that pattern to show how hedonic adaptation spending works, what the research says about it, and the numbered steps that keep a raise from evaporating into upgrades you stop noticing.

The Case: A $15,000 Raise and Where It Went

Meet Dana (a composite character built for this walkthrough, not a real person). She earns $72,000 and gets promoted to $87,000. Her take-home pay rises by roughly $950 a month after taxes. She tells herself the extra money will go to savings. Here is what the next 18 months look like when nothing is planned:

Of the roughly $950 monthly raise, about $875 got absorbed, leaving $75 a month for savings. Every individual step felt reasonable: a nicer apartment, a safer car, dinners that save time. None of them felt like a decision. That is the signature of hedonic adaptation spending: the new baseline becomes invisible, so the next upgrade has to be bigger to register.

What Hedonic Adaptation Spending Actually Is

Hedonic adaptation is the tendency of emotional responses to fade as a change becomes normal. The classic paper is Brickman, Coates and Janoff-Bulman’s 1978 study, “Lottery Winners and Accident Victims: Is Happiness Relative?” in the Journal of Personality and Social Psychology (vol. 36, pp. 917–927). The authors reported that lottery winners were not significantly happier than a comparison group, and took less pleasure from ordinary everyday events. The sample was small and the study has been debated since, but the core idea has held up across many later studies: we adjust to good circumstances faster than we predict.

The part that matters for your budget is the prediction error. In their 2003 paper in the Journal of Personality and Social Psychology (85(6), 1193–1202), Van Boven and Gilovich proposed that material purchases lose their shine because people adapt to them. In their national survey of 1,263 people, 57% said their experiential purchase made them happier, compared with 34% who said the same about a material purchase.

I came across this research while trying to figure out why my own spending crept up after pay increases. As a software engineer, I tend to treat my finances like a system I can instrument, so I started tracking the gap between income and spending after each raise. The honest finding: the upgrades I barely remember cost me the most, and the ones I still enjoy were almost all experiences. I run my finances myself with index funds and tax-advantaged accounts and no advisor, so there was nobody to blame but my own defaults.

Hedonic Adaptation Spending in the Numbers

Spending creep is easiest to see in the largest categories, because that is where a small percentage change turns into real dollars. The Bureau of Labor Statistics reported that the average US household spent $78,535 in 2024. Here is how the biggest and smallest categories stacked up:

Housing and transportation together are half of household spending, and they are exactly the categories that people adapt to fastest and renegotiate least. A bigger apartment feels spacious for a few months, then it is just where you live. The payment, however, never adapts. It stays at its new level every month. If you want a closer look at how a raise gets absorbed this way, our piece on when lifestyle creep is actually the right call walks through how to decide which upgrades deserve to stay.

What Happy Spending Looks Like Instead

The research does not say money cannot buy happiness. In fact, a 2023 adversarial collaboration by Killingsworth, Kahneman and Mellers in PNAS found that higher income keeps boosting well-being for people who are already fairly happy, while for the unhappiest group the benefit flattens beyond a certain income (the original $75,000 figure from Kahneman and Deaton’s 2010 work, adjusted for inflation). So the goal is not to avoid spending. The goal is to spend where adaptation is slowest.

Based on the Van Boven and Gilovich findings, that tends to mean experiences, which people reshape in memory, over objects, which people simply get used to. A small but telling detail from the same paper: when participants were asked to choose from a distant time perspective, 64% (looking back) and 57% (looking ahead) leaned toward experiences, versus 50% when the choice was imminent. Near-term temptation tilts us toward the thing we will adapt to.

Why We Keep Underestimating Adaptation

Most people know, in the abstract, that new things get old. The trouble is forecasting. Researchers Shane Frederick and George Loewenstein surveyed the literature in their 1999 chapter “Hedonic Adaptation” in Well-Being: The Foundations of Hedonic Psychology, and a recurring theme is that people expect a change to feel good for much longer than it does. When Dana imagined the bigger apartment, she pictured waking up in it every day feeling pleased. What she got was a pleasant first month and a rent payment forever.

Three habits make this worse in everyday budgeting:

• Upgrades arrive one at a time. Each is small enough to approve without thinking, so the total never gets reviewed as a single decision.
• Payments are recurring, enjoyment is not. A lease, a loan or a subscription charges you every month long after the novelty has gone.
• Comparisons reset upward. Once the new apartment is normal, the reference point becomes the next, nicer one. This is the same pattern behind the Diderot effect, where one new purchase pulls in a chain of matching ones.

Seen this way, the fix is not discipline in the moment. It is structure before the money lands, because the moment is exactly when your forecast is least reliable.

How Dana Fixes It: 5 Numbered Steps

1. Decide the split before the first paycheck. Dana picks a rule for the $950: half to savings and investing, a quarter to one deliberate upgrade, a quarter to experiences. Writing the rule down before money arrives is the single biggest lever, the same logic behind commitment devices for saving money.
2. Automate the savings share. She sets a transfer to her retirement and brokerage accounts on payday so the money never sits in checking where adaptation can find it.
3. Pick one upgrade, not five. She chooses the apartment. Because the car, dining and subscriptions stay flat, she can actually notice and enjoy the one change.
4. Audit the invisible costs every quarter. A recurring check, like the one in our subscription audit with a cost-per-use formula, catches the small recurring upgrades that crept in without a decision.
5. Spend on experiences you can anticipate. She books one trip with friends each year. The anticipation is part of the return, and the memory tends to improve with time.

For a sense of how this feels in practice, our ranked list of frugal living tips by dollars saved shows which cuts matter and which are noise, so Dana is not squeezing the 2.5% of her budget that was never the problem.

The Outcome: Same Raise, Different Result

Run the same raise through the five steps and the picture changes. Instead of $75 a month in savings, Dana directs about $475 a month to savings and investing. Over 18 months, that is $8,550 saved versus $1,350 in the unplanned version, a gap of $7,200 before any investment growth. The raise was identical. The only difference is that the decision was made once, in advance, rather than hundreds of times in the moment. Her happiness did not drop, because the one upgrade she kept was the one she picked on purpose, and the trip is something she still talks about.

That is the practical lesson of hedonic adaptation spending. You cannot stop yourself from adapting. You can only choose, ahead of time, which changes you want to live with and which ones you would be indifferent to a year from now.

Key Takeaways

This article is for educational purposes and is not personalized financial advice.

Photo by Bence Balla-Schottner on
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Written by Chris Steve

Chris Steve is a software engineer with a deep interest in personal finance, behavioral economics, and AI. He started Money & Planet to share clear, research-backed money guides — the kind that explain the math instead of pushing products. His writing focuses on long-term wealth building, the psychology behind spending and investing decisions, and the practical tools regular people can use to make smarter financial choices.