I Can Afford The New iPhone And You Can Too

The new iPhone just came out and folks are lining up to get their hands on it.  While everyone else rejoices about the new phone, it seems like we in the personal finance community collectively shake our heads.  I recently read a few articles about the financial evils of buying a new phone and found this puzzling.  I’ve never thought of a new phone as a financial sinkhole.  And when you do the math, it’s not very expensive if you plan it out in advance.  So why are people saying not to upgrade the single most important piece of technology most of us own?

Of course, we’re all a pretty frugal bunch.  There’s definitely no shortage of things that personal finance folks will tell you not to buy.  You’ll never catch us buying a coffee from Starbucks, watching NFL football with our cable TV subscription, or buying a sandwich at our local deli during the work day.  These are about the biggest personal finance sins one can commit, and a surefire way to make it so you’ll never be able to retire!  Or so we’re told.

From what I’ve been reading, it seems like we can add another unforgivable sin to the personal finance world: upgrading your phone.  I guess we can call it the new latte factor.

I’m not going to buy the new iPhone right away, but I will buy it as soon as I have the money set aside in my budget.  I currently have a pretty good iPhone 6, so why am I committing the unforgivable sin of buying a new, snazzy iPhone 7?  I’ll tell you why.  It’s because I value a new phone a lot and it doesn’t cost that much.  I can afford the new iPhone and I bet you can too. 

How Much Will The iPhone 7 Cost You?

According to the prices I found online, here’s the cost of the iPhone 7 and the iPhone 7 Plus.

• iPhone 7: $649 (32 gb); $749 (128 gb); $840 (256 gb)
• iPhone 7 Plus: $769 (32 gb); $869 (128 gb); $969 (256 gb)

To make things simple, we’re looking at an average cost of probably around $800 depending on which model you want.  If you’re buying a new phone every two years, that’s a grand total of $400 per year or about $33 or $34 per month.

That $33 per month is not the reason you won’t be financially independent!  I don’t care what anyone tells you.  Saving $33 per month is not going to get you to the finish line.

But What About Compound Interest?

I can already see what the phone naysayers are saying.  $33 per month is about $400 per year.  If you put away $400 per year for 30 years at an average return of 7%, you get (cue drum roll here)….$40,429.22!  Oh my goodness!  That phone you’ve been buying every 2 years cost you over $40,000!  (As an FYI, you would have put away $12,000 of your own money if you had saved that $400 every year for 30 years).

Here’s my problem with this type of thinking.  You can do this type of calculation with anything you want.

Do you drive to work?  According to one study, 70% of people commute more than 6 miles to work.  If we assume the low end of 6 miles each way at the IRS rate of 54 cents per mile, that’s $6.48 per day driving to work.  Do that five days per week and that’s around $32 per week you spend to drive to work, not including the cost of gas.  That’s way more than the cost of a new phone!

Oh my goodness!  You better start walking to work or hop on the bus, because if you don’t, you’ll never retire!  Better get used to working for 50 years.

Really, you can do this type of thinking with anything.  Are you sure you couldn’t cut your grocery bill down $33 per month.  Do you spend $33 per month hanging out with friends?  Buying anything for anybody?  Traveling?  Camping?  That’s my problem with this type of formulation.  I can point to any particular thing you buy and make a compound interest calculation over 30 years and tell you how much money you are wasting.

It’s Not An Either-Or Proposition.

The point is, we all make choices about what we value and what we want to buy.  If you value a new phone and can afford it, by all means, go buy it!  If you value something else, by all means, go buy that!

It’s not a choice between financial independence and toiling forever at work.  You can strive for financial independence, but still buy things you care about.  There’s a concept called the “false dilemma”, in which something is presented as an either-or choice, when in reality, there are multiple choices.  (You can read a summary on Wikipedia here).

I think the same is true here.  Like the famous latte factor, we personal finance people like to pick one thing, say how dumb it is to buy it, and then point to that as a reason why people can’t reach their financial goals.  But it’s not an either-or proposition.  You can buy a latte every single day, or buy the latest phone every two years, yet still also save money and reach your financial goals.

This is true even if you’re making a normal amount of money.  Let’s say you’re making around $40,000 per year, which I’d argue is pretty low for a regular, college educated person.  That $400 per year for a new phone represents just 1% of your income.  Most people who are college educated and advancing in their careers are going to be making more than that, so more than likely, that $400 per year is going to be even less than 1% of your income.

Can you really not spare 1% of your income to buy that phone, if you really want it and find value in it?  You don’t have $33 to spare per month?  If you plan it out in advance, I guarantee you that you can afford it, if that’s something you really want.

If You Can’t Find The Money, Then Make More Money.

Okay, lets say you really don’t have a single cent to spare in your budget.  In that case, don’t buy the phone if you really can’t afford it.  Instead, use the money in ways that bring you more value.

But if you really want to buy the new iPhone, you have another solution.  Make more money!  Can you make a mere $33 per month?  I can name three ways that take up very little time:

1. Rent out a room on Airbnb for 1 night per month.  Actually, you’d probably only need to rent out a room 1 night every other month or so in order to have enough to buy a new iPhone every 2 years.  Can you let someone stay in your house 8 days per year?  As an added benefit, you’ll have an incentive to keep your house clean for at least 8 days per year.
2. Dog sit a dog 2 days per month.  I’ve already detailed how I make money by pet sitting other people’s dogs a few times per month.  Can you take one weekend per month and watch someone’s dog for them?  Bonus: you get to play with a dog for a weekend.
3. Make food deliveries 2 or 3 hours per month.  This is coming in a future post, but you can easily make $33 per month by just hopping on your bike and making food deliveries on Postmates.  Plus, you’ll get some exercise biking around town.  If you aren’t exercising 2 or 3 hours per month…well, I think I’d recommend hopping on your bike and getting some exercise because it’ll cost you much more than $33 per month in the future if you aren’t staying healthy.

There’s plenty of other options too.  You can probably flip some trash that you find in the street and make $33 per month.  I know I’ve been able to do that.

The point is, $33 per month is not a large amount.  If you really don’t want to spend $33 per month on a phone, then that’s perfectly fine.  But don’t tell me you couldn’t find a way to make yourself $33 per month on the side and buy your phone with that money, if you really wanted.

Make Active Choices About What You Value

The point of this post isn’t to say you need to buy the new iPhone.  My mom isn’t buying the new iPhone.  She only uses her phone to text and call people and occasionally go on Facebook.  You think a new iPhone matters to her?  She’ll stick with her hand me down iPhone 5s until the battery just doesn’t work anymore.

But me, I use my phone almost every minute of every day.  I’m constantly on it.  (Whether that’s good for me or not is another story).  I download every new app I see.  I have 5 gb worth of podcasts sitting on my phone that I’m trying to catch up on.  It’s a central part of my life.

It’s not about it being cool.  I don’t really care if having my new iPhone makes me look cooler.  Heck, my phone goes in a case right away, so no one can even tell what type of phone I have.  What I care about is having the fastest and best phone out there because I use this piece of property more than anything else in my life and I value it a lot.

And yes, your phone does get slower.  The operating system gets updated for a new phone.  New apps get introduced that are optimized for the new operating system.  Your phone will get noticeably slower if you are an iPhone power user like myself.

Conclusion

So if you want something, figure out how you can afford it and go buy it.  Go buy the new iPhone if you want it.  Go buy yourself a latte every day if that’s what you value.

The point is, choose the things you value and don’t let anyone else tell you what you should or should not buy.  It’s not an either-or decision.  You can still save while spending on the things you find important, as long as you plan it in advance.

I’ve planned ahead.  I set aside money each month so that I can buy the latest and greatest phone when it comes out.  The new iPhone is not going to make it so that I can’t reach my financial goals, and my guess is, it won’t make it so you can’t reach your goals either.