Every week, I talk about finance here using words like “millionaire,” and I give examples of investments that may seem light years from the reality of many people who are just trying to pay off their credit card balance. on time.
Sometimes I put myself in the place of a young or old reader, who says: “OK, but what does this mean for me? How does that speak to me? »
The answer is that it doesn’t speak to this reader at all. Reading about money when you start from zero, or close to zero, is a bit like looking through binoculars from the big end: what you can see seems tiny and impossible to grasp.
That’s why this week, I would like to talk to you about the iPhone 16 Pro Max.
I have nothing against the iPhone 16 Pro Max. Seems like a great phone.
I just want to say how much it costs, because it’s not written on the label.
The iPhone 16 Pro Max costs over $200,000.
How do I arrive at this amount?
Let’s imagine that a 20-year-old young adult decides this week that he needs an iPhone 16 Pro Max (does it sound like I like writing iPhone 16 Pro Max?).
This young adult, let’s call him Yves, works hard. He doesn’t have many luxuries in his life. So having a good phone seems like the thing to do.
On the Bell website, Yves will see that the iPhone 16 Pro Max, purchased to be replaced every two years, with the cheapest plan, costs $127 per month plus taxes, but let’s ignore taxes in this example.
“I earn quite a bit more than $127 a month, even while studying,” he says to himself. This is an expense I can afford. »
Yves decides to get started. Every two years, he changes his phone to get a new one.
How much does all this cost him? Probably a thousand and a few dollars a year, Yves said to himself. In fact, he doesn’t really know. It’s just a phone.
Now let’s imagine a young adult of 20 who is a little more curious, say Nina. Nina understands that her money coming in is valuable.
With a little digging, she realizes she can buy a refurbished iPhone 13 on eBay or Marketplace for $400.
She also found a plan with Public mobile at $23 per month for 6 gigabytes, with unlimited texts and calls.
By changing her phone every four years, Nina realizes that it costs her a total of $376 per year, or $31 per month.
So $127 per month for Yves, and $31 per month for Nina. Let’s round the difference between Yves and Nina to $100 per month.
We are talking here about two adults who could be colleagues, friends. Their level of happiness will vary. But their phone will neither contribute very positively nor very negatively to their life satisfaction.
Studies on the subject are clear: our possessions do not give us lasting happiness because we get used to them and they cease to fascinate us. Researchers have a term for this: hedonic adaptation.
In short, the difference is that Nina will have $100 per month in her pocket that Yves will no longer have.
Nina knows the best way to invest is to put it on autopilot. She therefore schedules a transfer every 1er of the month from his bank account to his TFSA account in an investment platform like Wealthsimple, for example. His $100 is automatically invested in a “growth” fund with low management fees, such as the ZGRO funds from BMO, XGRO from BlackRock, or VGRO from Vanguard.
One hundred dollars per month invested from the age of 20 to 65 yields more than $200,000 in investments if we assume an annual return of 5% – by no means assured, but the stock markets have experienced a annualized growth of more than 7% for several generations. And that takes into account inflation, because prices will increase, but the savings gap between Yves and Nina for the telephone will also increase.
But this is only the beginning.
As the majority of people will live as a couple, and combine their finances, we can double the amounts in this example.
So a couple could have more than $400,000 in tax-free investments in their TFSAs as they approach retirement. All this because you found a better price for your phone, and learned the simple basics of investing.
The idea is not to make anyone feel guilty, but to understand. Understand where our money is going. Understand how money makes money. Understand that you don’t get rich by renting out your hours. Even at a high price. Even when you are a lawyer or a doctor.
We get rich by investing.
As actor Frederick Matthias Alexander once said, “People don’t decide their future. They decide their habits, and their habits decide their future. »
We are all born financially illiterate. Our task is to eliminate this condition. Our parents, our friends, our university professors, our employer or the nice employee at the Apple store will not eliminate it for us.
My example concerns a simple telephone. I’m not talking about the hundreds of other decisions and habits, such as the choice of a vehicle, the size of the house, living near or far from work, favoring cycling, driving alone or transportation. in common, to go to a restaurant three times a month or three times a week, to spend your Saturday at the shopping center, the park or the library…
And so I ask you the question: if we found $200,000 in the phone, how much would we find in all that?