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[No Gyan] – Buying the new iPhone X vs Investing

Buy iphone vs invest money

I don’t want to take any moral high ground here by telling whether it makes sense to buy the new iPhone vs invest the money instead.

But just thought that I would share some bits of a conversation that I had with a friend yesterday.

This friend of mine is a gadget freak. And as of now, he has decided that he ‘should’ buy the recently announced iPhone X whenever it becomes available in India.

Unfortunately, he doesn’t have the financial solidity or high income to make the cash purchase. So he is thinking of taking the EMI route.

As far as I know, this new model is expected to cost around Rs 80,000 to Rs 1 lac. To be honest, till just a few years back I would not have thought that mobile phones would cost that much. 😉 But that’s how inflation and more particularly, lifestyle inflation is.

Coming back… I did try to reason out with my friend about the purchase.

I already know that he invests just Rs 5000 per month in mutual fund SIPs. And that is not because of lack of intent to invest more but because more often than not, his expenses end up being more than his income… almost every month. 🙂 Had it not been for me, he wouldn’t have begun even that smallish SIP.

I may sound odd but at the face of it, this purchase of a mobile phone for Rs 1 lac doesn’t make sense to me. Atleast not in my friend’s case. He might have his reasons to purchase it (remember he is a gadget lover)… but still, I didn’t feel it right.

So I told him so and he blasted back telling that he knew I would say so as I was always looking to for opportunities to give some financial advice. 🙂

I understood that his defenses were too strong for me to break down and he will do what he wants.

Nevertheless, I still tried. I compared his expected EMI of Rs 9000-10,000 with a SIP of Rs 10,000 every month in mutual funds.

Now the EMI payment for the iPhone would only last for 12-15 months. But just to sort of arm-twist him into believing in the power of investing, I showed him what a SIP of Rs 10,000 (which he could do if he didn’t buy the phone) could deliver in 5, 10, 15 and 20 years.

I have already done such calculations in this detailed post on mutual fund SIP sometime back. So using that, here is what I told him:

  • 5 year SIP of Rs 10000 monthly = Rs 8.5 lakh
  • 10 year SIP of Rs 10000 monthly = Rs 23 lakh
  • 15 year SIP of Rs 10000 monthly = Rs 50 lakh
  • 20 year SIP of Rs 10000 monthly = Rs 96 lakh

Note – Assuming 12% average returns with annual compounding.

He did see the merit in this “what if I invest” logic.

But then his heart took over again and he brought in the we-live-just-once logic. 🙂 He asked me what will he do with all the money when he becomes old. He also questioned me that I should not be telling him anything about spending when I myself spend money on travelling.

At that moment, I knew I had lost the debate. 🙂 🙂

I am pretty sure that he will proceed with the purchase. And I don’t blame him here. It’s simply about priorities. I cannot be the judge about how people spend money. I can only tell what I think is a better approach. I cannot force anyone. I guess many aspects of personal finance cannot be explained to people when their desires and incentives are strong enough. 😉

I don’t know what else to say to him or here…

Ideally, aspirations (desires and wants) should match our abilities to bear the costs comfortably and sensibly.

But then, it’s easier to say so.

If your wife asks you for a diamond ring which you cannot afford easily, I am sure you will do everything in your ability to make that purchase possible (irrespective of whether it’s sensible or not). 🙂

But just because you cannot afford something doesn’t mean you shouldn’t aspire for it. That’s like giving up. Work towards increasing your income if that is what must be done. And then just use your money sensibly. Don’t become a saving machine. Spend too. But don’t throw away your money. If you save money now, money will save you…if not immediately, then eventually.

Happy buying!

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12 comments

  1. I think i read this on moneymoustache, when he says that the one skill he wanted to teach his kid was how much more beneficial it is to delay immediate gratification. This is a textbook case of ‘i want to feel good owning the latest gadget NOW’ rather than ‘let me forego this gratification today, but instead have the ability to buy many more latest gadgets 5 years later’

    The way he does that is offer his kids a financial reward for delaying any impulse led gratification they are seeking, say get Rs. 50 for your piggybank if you decide not to buy this new toy now

  2. I know few friends who are ultra rich and can afford to retire in any part of the world are happy to continue with their old phones. I tease them to get the new one and their logic is, it is serving all their purpose (talk, data, cam, whatsapp, videos, mails) and they don’t see the merit in going for new one. Their old phone was the top end when they bought it. Use it till damage seem to be the motto. But then urge to buy fancy new phones seem to be from young guys than middle aged or retired.
    I see this trend. People who can not afford would go crazy to buy any new stuff and those who can afford wait patiently be it gadgets or stocks.

  3. I truly agree that you cannot turn around people’s mindset to investing/handling their finances….I have genuinely made my case with documented examples to friends/families, though they get the point at that instant, they are not able to follow through…may be lack of intent or Lack of goals or not ‘really’ understanding the uncertainty of future may be the reasons. They get back to their happy ‘ignorance’ or ‘will look into it next year’ approach. As far as buying anything outside your means best to simply avoid it, gadget freak or not. Debt/EMIs avoided at any cost would be the most prudent and wise move. People who are excitable but are patient will get way more returns…Stocks/MFs/Life!

    1. Yes Viswa. We cannot convince everyone. And that’s fine. Some will understand and make necessary course corrections. Others won’t. That’s how it is.

  4. Simple, crisp and yet so profound..

    Your posts are so easy to get it as you always write from the point of view of a common man and not a seasoned investor, that’s the best part.
    Good luck.

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