Get my 5-day email funnel that generated $400,000 from a single launch

Want an email sales funnel that's already proven to work? Get the entire word-for-word email funnel that generated $400,000 from a single launch and apply it to your own business.

Yes! Send me the funnel now
Start Here: “The Ultimate Guide to Making Money”

How much an iPhone will really cost you

54 Comments- Get free updates of new posts here

7 0

Look at this fascinating quote from this week’s Time Magazine: “…as of last week, the income segment with the highest percentage of visitors to the iPhone site was 18 to 24 years of age, earning less than $30,000 per year.”

For decades, personal-finance “experts” have told young people not to buy lattes, fancy electronics, and expensive clothes. To which I always reply: How has that been working, grandpa?

I try to take a different approach. Instead of lecturing young people who will simply press ctrl-w and go back to Facebook, how about showing how everyday decisions impact us?

Let’s take buying a relatively large purchase, like an iPhone or a Balenciaga handbag. If you’re going to buy something big, that’s fine — but consciously know how much it’s actually costing you. Not just how much money it costs today, but the total cost of ownership. One eye-opening way to consider a large purchase is the % of your income.

What percentage of income would an iPhone cost you?
Income — After taxes — % of income
$30,000 — $24,905 — 1.6%

$40,000 — $31,044 — 1.3%

$50,000 — $37,439 — 1.1%

$60,000 — $43,774 — 0.9%

$70,000 — $50,109 — 0.8%

I want everyone to pay close attention because, in the above table, something magical happened: I created the most ghetto HTML table ever constructed. Thank you, thank you.

(Jeff Kuo pulled those numbers here using the following assumptions: single, no children, standard deduction, no adjustments, 7.65% FICA, average state income tax roughly 4%.)

If you’re making $30,000/year, then, a $399 iPhone is roughly 1.6% of your salary. Also consider the opportunity cost of investing $399, and remember that the impact of large purchases is mitigated by holding onto something for a long period of time. For example, you save vast amounts of money if you drive your car for 15 years.

Bottom line: Look behind the numbers when you make a large purchase. It’s not just $399. And while this might seem to complicate things, ignorance really isn’t bliss. Just go to a mall and watch the people shopping. Can they afford their purchases? The sad thing is, most people don’t know if they can or not. But you can.

7 0

Related Articles

Best travel credit cards from a man who’s traveled to 193 countries

Are you finally ready to book your dream vacation BUT… you want to make sure you get all the rewards ...

Read More

The psychology of breakfast

I got a few emails from people who said, “Dude Ramit, I signed up to learn about business. Can you ...

Read More


7 0
  1. BUT!!! And iPhone is NOT just $399! You have to pay AT&T for service on it and I read that full service on an iPhone will run you about $170 a month. That’s the part of the iPhone rush that floors me. We make well, well more than $30,000 per year and there is no way that we’d pay $170/month for phone service.

    But then again I’m clearly not in the iPhone demographic 😉

  2. @ Nicole.

    iPhone plans are $60 a month. Obviously, if you’re using a boatload of minutes, the iPhone plan is going to cost more, but the plan prices are very very comparable, and often cheaper than comparable rate plans from other carriers. Think before you post.


    I commend you for actually looking at the actual cost of the phone, and not playing the sensationalist “It’ll cost you over a thousand over two years!” card. Presumably everyone has a cellphone, so the cost of the rate plan is just replacing a cost you already had.

  3. Nicole, thanks. Dave, no need to be a bully to Nicole — but your point is also great. Thanks to both of you.

  4. Ramit, good analysis. It is amazing how people buy things they can’t afford. It reinforces my idea that people decide what they can afford largely based on their friends.

    One of my friends wastes money all the time, and his excuse is that his other friends spend even worse. I remind him that his other friends also have lots of credit card debt and he should instead compare himself to good role models.

    This discussion reminds me of a recent study that correlated obesity with fat friends. When did it become acceptable to use bad role models?

  5. To add to what Dave said, *do* look at the actual cost of the phone compared with what you pay now. If I decided to purchase the iphone right now, the only cost I would realize is the cost of the phone – I already pay the same amount per month for a plan.

    Also consider the fact that the iphone can replace similarly priced phones that have been around for a while (e.g., treo, blackberry, sidekick). Furthermore, if you need mobile internet access, the iphone’s practically a steal.

  6. I also like to think in terms of the monthly cost.

    If I am like most people and replace my cell phone every 2 years (and let’s be realistic; how good do even top-end cell phones from 2 or 3 years ago look know?) then I am paying about $17 a month for the phone ($399/24 months) — probably more like $17.75 if you add in the sales tax — in addition to the $60/month service plan (and again, being realistic, after adding in taxes, fees, etc., this is probably more like $70/month). So an iPhone costs about $90/month — a whopping 4.3% of the take-home pay of someone earning $30k!

  7. Dave: point taken, it is only $60 per month

    No, not everyone does have a cell phone, although cell phone companies would like you to believe that they do so you’ll buy their often over-priced product and increase their bottom line. Our culture is so caught up in the “must haves” that we forget that cell phones, cable and internet are choices. If you have the money and make those choices, more power to you. But we are not victims of the modern era who must buy these things. We can make other choices and save our money/let our money work for us.

    Even if you HAD to have a cell phone there are much cheaper options. If you have the money to spend – more power to you. But the point of the demographics is to say that it is the people with the least amount of free cash spending it on iPhones. It is indeed interesting. It does speak to me of both a lack of financial education and a sense of entitlement. Go America 😉

  8. I like cmadler’s response, as it factors in the phone and the monthly cost. Now how does that compare to having a land-line? I honestly don’t know, having never had a land-line to pay for, but I think if someone uses the cellphone as their primary and have no land line it may be more stomach-able.

  9. I would say that if you want an iphone, then go get it…but cut down on something. I do this to balance what I like to love, can have with must have. Eventually you get into the right spending habits. Sometimes experience teaches us more than reading or being told.

  10. Before we go on another iPhone-hating discussion, this is just as applicable (if not more so) about the iPod. They are ubiquitous, especially in the under-25 crowd, regardless of income level, and they are basically in the same price range (and as some other commenters said, the monthly service agreement isn’t really applicable because it’s in line with the price most people pay already for their monthly cell phone bills).