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Paying For Your Phone WIth A Plan
talessi@ariesfoundation.org
EVEN A LITTLE DEBT ADDS UP QUICKLY...
BUYING YOUR PHONE ON A PAYMENT PLAN
When you buy your phone on a paymnet plan you are putting yourself in debt. Let's say you buy a $1,000 phone and you paid the tax upfront, you now owe $1,000, even if that's split up over 24 months. And for fun, let's say last year you bought the new iPhone 11 Pro for $1000 on a plan and it's only 42 dollars a month. Now the newe iPhone 12 is here and your provider has a trade-in program where you could trade in your newest phone and get the latest and greatest phone and keep the same payment plan. And you've been doing this year, over year, over year, and you know what happens? You never end up owning any of these phones. You're just borrowing them or renting them, and every single time you literally get no value out of the phone. so you pay for twelve months you put half the phones value and then you trade it in and you get the next phone or you trade it in you get a credit towards the next phone but you never own the phone at no point have you paid the phone off and this is inherently the problem
See whenever you are buying things using credit cards or payment plans the mindset is usually, I'll pay it off eventually. But you are not thinking about it in the best way. If you thought about things in terms of the way that businesses do, then anything that does not appreciate in value is considered a loss of income, or bad debt. So when you buy a phone for $1000 and the next year it is now only worth $400 or $500, then you've paid all this money and you actually lost money. When you invest in depreciating assets like a phone, or a tablet, or a computer you invest your money in something that's depreciating. Now I know we all use mobile phones and computers to make money, but we don't need the newest gadget to do that. An iphone 10 does the job the same as an iphone 12.
If you had just kept your phone instead and had no payment, you would just have your monthly bill to pay for using the cellphone service. Which woul also mean that you did not have the extra $42 a month payment for your new phone. Wouldn't that be wonderful! Imagine what you could do or pay off wiht that extra money each month. This starts the trend for us. If we can nip it here, then we can move on and tackle other types of debts that we accrue. See while we think we are gaining more stuff in our lives, what we are actually doing is putting ourselves deeper in debt. In our opinion the right way to grow your wealth is being patient and buying things with cash. Don't put down the bare minimum and carry a large debt balance...So you have to drive an older model car, or not have the newest and shiniest cell phone, or move into a smaller home until you can afford a larger one. The best way to do any of this buying is to save up and be able to either A) Pay Cash or B) Put down a large deposit (more than 50%) it will go a long way to helping you lead a less stressful (at least from a financial point of view) life. Maybe even declutter your life a little. Think about it. How much money you owe other people, how many times you've bought stuff on credit, or went into debt over a materialstic thing?
And maybe, just maybe, you may find that haveing less stuff isn't such a bad thing. That maybe it can be a positive thing. Because if we really look at our lives and how we are living, sometimes we are trying to compensate or make up for things just by buying stuff...But are you really happy? you need to answer that question for yourself, but I say is don't use debt, or set aside funds in your budget so that you can afford it. There is a very simple rule to follow: if you don't have the money today, and you have to use a credit card to afford it, then don't buy it. Have patience and wait. Build us some savings or a down payment and then buy it, even if it is last year's iphone.
Got Questions? Ask Us. We Can Help WIth That!
ARIES FOundation for FInancial Education, Inc is a nonprofit dedicated to the mission to help everyone have a better relationship with their money.
Vist our site www.ariesfoundation.org
to learn more about what we do.
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