The recent launch of the iPhone XS and XS max is giving Apple users the feel of an early Christmas! It’s no surprise that the latest iPhone XS will burn a hole in your pocket as usual! No wait actually it might just incinerate your pocket completely! Apple has come out with its latest versions and the iPhone Xs with 512 GB storage capacity is the costliest one to be launched till date. Oh, wait were you hoping these would be a cheaper version of the already existing one! Time to wake up!
But who’s to blame. Apple charges for quality and technology innovation. It comes with some amazing features and also let’s not forget the spasmodic virality of the Memojis taking the internet by a storm! However, you’ll only be able to make your own memoji if you have an iPhone X, or beyond. A convincing bait to get current users to upgrade!
In India, iPhones are a status symbol and as a nation possessed by the grandstand of all things branded, the iPhone XS becomes the ultimate status symbol for anyone!
So how can you buy the new iPhone XS/ Max without crippling yourself under the burden of paying the EMI’s of the costliest iPhone ever? Which frankly if you didn’t buy you could easily afford a Tata Nano! But who are we to judge!
With the influx of young adults in the investing domain, the investment horizon has shifted to slightly shorter term goals like buying a car, travelling or in this case buying a phone. Investing is a powerful tool and can be used very smartly used for short-term goals as well.
To make it seem more affordable look at it as a big one-time purchase and break it down into monthly instalments. So if you have to shell out a lakh today, how about breaking it down to 6 monthly targets, where you invest each month in order to get the money that is needed for the purchase.
SAY NO TO EMI
For a lot of young adults, today the phone becomes the focal point of their existence and their medium of connectivity to the real and virtual world. But it’s so expensive to afford a good phone and if you are an Apple fan, the struggle is real! Buying an iPhone might seem like an insurmountable task given the hefty pricing and EMI might seem like the most lucrative option. But we suggest you don’t go down that road because –
- EMI’s tend to be a costlier proposition for short-term goals like buying a phone.
- When you’re paying EMI’s you are actually paying more than the cost of the phone because of the extra interest you have to pay. When you are investing, you are spending less than the actual cost as you earn a return from your investments.
- Here’s a small calculation
EMI Cost of Phone (Loan amount) 1,00,000 Tenure (yearly) 0.5 Years No. Of Payments 6 ROI 15% 0.0125 (monthly) Monthly EMI ₹ 17,403.38
Cost of phone: INR 1,00,00 | Rate of interest 15%. So you spend INR 17,400 (approx) every month on EMI for the next 6 months in order to pay off the loan. Isn’t it better to figure out how much to invest each month, so you reach the purchase price after 6 months?
WAIT IT OUT
- If you are okay with postponing your purchase by 6 months, the price of the phone might reduce marginally. Also, the brands usually roll out discounts and cash backs once a few months have passed. Assuming there is a 5k discount on the phone, the price of the phone would be INR 95,000.
- Now here’s the calculation for your SIP
SIP Cost of phone (SIP target) 95,000 Tenure (yearly) 0.5 Years No. of payments 6 Rate of returns 8% 0.006666667 (per month) Monthly SIP ₹16,204.82
Price of the phone – 95000 | Rate of return – 8% on MF (debt funds) | So you invest only 16,200 (approx) per month, which is lesser than the EMI instalments and you get returns on the invested amount. Not to mention the possibility of cashback offers after 6 months.
We believe investing rather than taking loans to buy consumption goods is always a better idea!
Some points to remember:
- Start a safe investment today in liquid/debt funds for short-term goals as they are less risky.
- Always try to be debt-free.
- If you have an ongoing SIP, withdraw the amount you need and let the rest of the SIP stay as is. If you have an ongoing SIP of say 10000, you only need to put in an extra 5k-6k in SIP so you save the 16,000 you need to buy an iPhone. Plus you can continue the SIP post your purchase.
- Only take EMI for critical goals like buying a house etc.
If you want to know more about selecting an appropriate fund for your goals read this!