Yes, being rich and wealthy does not necessarily reflect on what you cary around with you, what you are wearing, what you are using. Yes, everyone does agree, including me, if you see someone driving a Lamborghini, cary around with him a diamond crusted phone and designer bag, plus wearing the best looking suites, he/she must be rich and wealthy. Yes, he/she is looking rich and wealthy, but he/she may not be actually rich and wealthy. Why? Because it could be in order for this person to drive Lamborghini, cary around diamond crusted phone and designer bag plus wearing the best looking suites, he borrowed huge amount of money from the bank. While on the surface this person looks damn rich, but his bank accounts and debts, telling that he is damn broke.
Note the difference and let me explain you more with simple sample and illustration that everyones these days owned and always craving for – a phone.
A simple sample: Phone
Biggest and leading smartphone manufacturers have shown (or at least teased) their latest and greatest. Apple with its iPhone X and iPhone 8, Samsung with its Galaxy Note 8, HTC with its squeezable U11, LG with its G6 and V30, Xiaomi with its Mi6, Mi Max 2, Mi A1, Google soon will announce their Pixel 2 phones, and many more.
Those latest and greatest piece of technology sure nice to have and hold on hand but is it really a necessity for you to buy them or you just buy it simply as a status symbol, showing and (even worse) pretending that you are rich since you can afford such gadget?
The Set Back(s) to Become Rich and Wealthy: Spending on fast depreciating items
While carrying iPhone X sure will give you the impression of rich and cool, but what happen is, buying iPhone X will set you back at least US$999.
While the same amount of money, if invested sure will give you better results – well, depends on what kind of investment you make.
I’m not here trying to make you not to buy the latest iPhone because I hate it. No. In fact I’m one of the Steve Jobs and Jony Ive follower. Just not the hardcore one. I was an iPhone user since iPhone 3G and I did buy and own their previous latest and greatest: the iPhone 7 Plus.
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Don’t buy the latest iPhone just because its new look and cool-ness factor but do buy it if you need it. If the features able to help you on your life. Before committing to buy a new phone, do list what you need from a phone. And have a comparison on what are things you are looking on a new phone that your current phone doesn’t have it. After comparing and get the result yourself, is your current phone has all of what you have just listed? If yes, then certainly you don’t need a new phone. It’s just an impulse generated by the hype. Park your money somewhere else that can give you better results and benefits.
Item Depreciation and Lifecycle
Do you know a phone lifecycle is just between 3-5 years? Great if a phone nowadays can last more than 5 years.
From 3-5 years of its life cycle, phone lose half of its price within a year from the date it’s being introduced and put on sale. Yes. Half the price. Another year, another half price cut. So if you buy iPhone X today as much as US$999, next year around same time, it will just worth US$499 since Apple will happily introduce iPhone X successor to the market.
To Spend vs To Invest – Illustration
Now considering you and your best friend both have US$999 on each pockets. While you decided to upgrade your considered decent phone to iPhone X simply because of its cool-ness factor, your best friend decided to keep using his decent phone and instead use the US$999 cash he has to invest in some financial instrument – say Fixed Deposit.
Assuming he get only 1% interest a year from his investment, by next year, his US$999 will be increased to US$1009. Yes, it’s just US$10 more from his first initial capital of US$999. But if you compare yourself with him, the same US$999 last year, now his worth become US$1009 while yours become US$499 (thanks to the phone depreciation) and that is 202% difference.
Fast forward to next 2 year from today. assuming today is 2 years since you bought your iPhone X), you still use your iPhone X while he still use the same phone, his US$999 which last year became US$1009, after 2 years become US$1019 ($20 more from his initial capital of US$999), while yours (using the calculation method I mentioned above – another year another half price cut for a phone) now worth only US$249. And that’s 409% differences between you and your best friend. He is, by 2 years from now, is 409% more rich and wealthy compare to you.
What you can learn from the illustration and the relation with Rich and Wealthy
Illustration above is just a very simple way of calculating how a person can get richer and wealthier simply by not buying the latest and greatest phone each time they are released, of course there are a lot of other factors to be put in as well, but hopefully you get my point: Being rich and wealthy does not reflect on what you carry around with you – in this case the phone, because there’s no point to look rich in front but broke behind.
So, what do you think? Do leave your comments and thoughts below on comment section.
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