Posts Tagged ‘saving’

How the iPhone cost as much as a trip to Greece!

I love to travel and enjoy fashion, but electronics are not a big deal to me. I normally buy new gadgets when I need them and rarely because they’re new or sexy—except for the iPhone.
 

I succumbed to pressure from my new team at work and bought the iPhone. One guy, Brian, should’ve worked for Apple’s marketing team.  He was constantly thinking up new iPhone commercials.  For months, I heard teammates say—“There’s an app for that . . . . Check out this flashlight app . . . . The iPhone does this faster . . . . Google maps is much better on an iPhone,” and many more comments.  It felt like working in an infomercial! When Brian showed me how to hack into the iPhone to get internet access on my laptop for no additional charge, I was sold.  I bought the iPhone a few weeks later, justifying the purchase with the free internet.

1st Problem: Justifying Long-Term Costs with Short-Term Benefits

I justified an ongoing, long-term cost—monthly plan and maintenance to the iPhone— with a temporary benefit.  Apple would eventually block the hack, which they did a few months later. Once I couldn’t use my iPhone to get internet on my laptop, I lost my main benefit and was stuck with the ongoing costs. Long-term costs should only be justified with long-term benefits; otherwise, when the short-term benefits are over, you end up stuck with all costs and none of the value.

2nd Problem: Maintenance Costs were too High

I dropped things, and often. The iPhone was the most delicate phone on the market, due to the large glass screen.  After having the iPhone for 8 months, I accidentally dropped and broke it, despite using a heavy duty case. Apple charged $295 for a replacement iPhone and wouldn’t lower the cost by allowing me to downgrade to older version or one with smaller memory.

Final Solution: Change phones & providers!

I had 2 options—sink another $300 into the iPhone, for a total of $1,725 annually, or move on to another phone. The chart below explains why the iPhone was so dang expensive!


How the iPhone cost as much as a trip to Greece!
First iPhone * $350
Yearly Costs for Cell Phone Plan: $90/ month for 350 minutes, texts,and iPhone data plan $1,080
Yearly cost before breaking phone $1,430
Replacement iPhone $295
Total 1-Year Cost for iPhone $1,725 !!!!

For someone that’s not into technology and would rather spend that money traveling, it didn’t make sense to throw more money at Apple or AT&T.

I changed to Sprint, where I got more minutes and unlimited texts for $20 less per month and got a HTC Hero with Android apps and a touch screen for $179 after the rebate.  Get this—paying the early termination fee and buying a new phone was only $14 more expensive than getting a replacement iPhone.


How cheap it was to switch to Sprint
AT&T Early termination fee $130
Cost of HTC Hero after rebate $179
Total cost of switching to Sprint (just $14 more than replacement iPhone) $309

The Sprint plan offers more minutes, unlimited texts, and costs $240 per year less than AT&T—just enough for a plane ticket to visit my best friend in Seattle!

The iPhone was the best phone on the market.  But did I need the best phone? Nope! Just one that fit my lifestyle.


If I had bought the replacement iPhone, I would have spent over $1,700 on my cell phone!


$700 saved on cell phone pays for roundtrip international flight!
iPhone HTC Hero Difference
Phone $350 $ 179* HTC Hero was over $170 cheaper
Monthly Plan $90 $   70 Sprint $30 cheaper monthly and fewer dropped calls
Yearly costbefore breakingphone $1,430 $1,029 HTC Hero/ Sprint was $400 cheaper
ReplacementPhone $295 $0 HTC Hero was not as delicate and was unlikely to break
Total 1-YearCost $1,725 $1,029 Saved about $700! Cost of international flight!

For some people, almost two grand was worth it. If you prefer electronics and can afford the iPhone after savings and bills are paid—then go for it!

As I said in the beginning of the post, I’m not into electronics. If I had two grand to spend, I’d rather travel or shop.  Spending according to my values meant changing from the iPhone to a cheaper phone and having more travel money!

———

What new item did you purchase because your friends, family, or coworkers influenced your decisions?  Did the new purchase match your values?

Try adding up the total yearly cost. With the yearly cost in front of you, ask yourself if the item is worth that much?  Would you rather spend that cash on something else?

* Although I bought cases for both phones, the cost of 2 iPhone cases and 1 HTC case was not included in the calculations.

 

How I Almost Threw my Bonus Down the Drain

 A few months ago, I got promoted at work! I called my dad to share the news.  After we discussed the new level and responsibilities, I get excited about the larger salary. “I have more cash now!  I can travel more, buy a new suit, move to New York City . . .”

As I continued listing items, my dad jumped in, “Don’t start spending more just because your salary increased. Buy one special item to celebrate and don’t change your spending habits.”

In responce, I was annoyed.  I thought, “I’m the personal finance guru in the family. Why are you lecturing me?

The next day, I thought more about my dad’s comments—still confident he shouldn’t be lecturing me, the expert,—and decided I’d do one better. “I won’t buy anything to celebrate.  The summer was so fabulous that I don’t need anything extra.”  I went to South Africa for 2.5 weeks and went to the beach in Cartagena, Colombia for a week.  I also went to NYC a lot.

However, deep-down inside, I still wanted to buy something to celebrate the promotion.  Over the next few weeks, I found myself frequently thinking, “I just got promoted, and I am not buying anything big to celebrate.   I can splurge a little. It’s only an extra $3-$10.”   

“What does it matter if I buy lunch at Whole Foods instead of eating at home?”

“I’ll just take a cab this one time. I’m too tired to walk.”

After 2 weeks of spending a little more here and there, I noticed I was running out of cash.  I have a $60 per week cash allowance ($240 monthly) that I spend however I want without tracking.  I had almost finished the month’s cash during the week #2!  Then I checked my credit card balance and found an extra $150 on here! WTF! By splurging on $3-$10 here and there, I’d spent about $360 in 2 weeks without noticing.

Right then and there, I decided to buy a bike to celebrate. I admired how people in Cartagena, Colombia completed their daily errands on foot.  I wanted to buy a bicycle and start riding to work, to the grocery store, and for other errands, so I could incorporate more exercise into my daily life.

My New Bike - Schwinn Women's Searcher

Once I choose a concrete gift, I stopped creating little ways to treat myselfI was content. I got a $420 bike on sale for $350 ($70 savings) and spent $150 on accessories (helmet, light, etc).  Every time I rode or saw the bike, it reminded me of my travels and commitment to living a healthy, fabulous life.

If I had bought the bike initially, I would have spent only $570, instead of spending a total of $930, with $360 wasted on crap.

I hated to say it, but my dad was right.  The experience reminded me that psychological factors affect my buying habits.  When I tried to sweep the feelings under the rug, they trickled out, and I spent on little extras.  I had to admit my feelings to myself before I could stop hemorrhaging cash.

Sometimes the best answer is to go ahead and spend the cash—like in this case where I had the money.  Other times, the best solution is to understand why you want to spend money and find a cheaper or free alternative that provides a similar feeling.

Being Financially Fab means being aware of why you spend money. When you understand your motivations, you have a hell of a lot more control over your cash. 😉

When was the last time you were in a similar situation?  What did you do? Do you know how feelings and psychology affect your financial decisions?