iMistake?
October 03, 2014I read this article about Apple selling 10 Million iPhone 6’s on the first week of sales and it made me think about the number of people I see in coaching sessions who have the newest version of cool technology. Having the latest iPhone or Galaxy or iPad or whatever the technology might be is seen as being on the leading edge. There’s a bit of a “cool factor” involved.
At least that’s what I hear…I’m usually 3-4 versions behind the latest. It wasn’t until my daughter forced me to (so that I could download apps that help us stay in touch while she’s away at college) that I finally upgraded from my 5-6 year old iPhone 3 not very long ago. The new technology, though, can have a big impact on your financial life.
How? These phones and devices can sell for $400 – $700, not to mention the monthly cost of data plans and cases and accessories. And, many of the people I end up coaching have significant amounts of credit card debt, which was added to with the purchase of the new phone or case or Bluetooth speakers or Beats headphones, etc. Not only is the tangible cost the issue, the need to have the latest technology almost becomes a lifestyle decision and people will sacrifice things like fixing a car, going out with friends, and fiscal restraint for a new gadget. And, with the “planned obsolescence” of each generation of technology, it can become a never ending flow of dollars required to feed a technology habit.
If the new phone plus the case plus the data plan and minutes plus accessories (car charger, extra chargers, cables, docking stations for music, etc.) cost $1,000 over the course of a year and you have outstanding credit card debt at 19.99% (a relatively common interest rate I see during individual sessions), that $1,000 used to pay off debt would actually reduce the debt by $1,000 AND the interest by $199.90 over the course of a year. That’s about a $1,200 overall debt reduction. If that happens every 2 years when a newer, better, shinier model comes out, that’s a $6,000 swing in your financial life over 10 years!
When I have presented the numbers this way to people who, when talking about their budget, have listed cell phone bills as a material part of their monthly budget, I have seen a number of them reconsider purchasing the latest and greatest technology. If they stay a few models behind the curve, the costs drop significantly. Debt can be paid down and progress can be made.
As a goal, I have worked with people to tackle their consumer debt by being aggressive with expense reductions while the debt is still floating out there. And, as a reward, they can splurge on a significant technology upgrade once the debt is paid off. That is, if the urge to splurge still exists, which I’ve found goes away after 2 or 3 new models get introduced and life hasn’t been negatively impacted by the failure to upgrade.
I will admit to having a curiosity factor regarding the new iPhone and I’ve gone out to look at them. But, I’ll stick with my current model until it no longer works or it fails to allow me to stay in touch with my kids. I have other things that I value more and other financial goals I’m trying to reach. How about you? What price, considering all the factors, are you willing to pay for your technology?