Apple’s recent announcement of the new iPhone 13 is one of several new tech items that have been announced or introduced recently. The Google Pixel 6 and the Samsung Galaxy S22 are two other phones that you might have your eye on. In addition to new phones, there are plenty of laptops, TVs, wearable items and other tech that are sure to make many Christmas shopping lists. If you or someone you love is a techie, here are some things to think about as you budget for new tech.
Most technology items are depreciating assets
The first thing to remember is that most technology items are depreciating assets. What that means is that it loses value over time. Like buying a new car, most tech items will never be worth more than it is at the time of its initial sale. Just like you might lose a third of your new car’s value as soon as you drive it off the car lot, your new phone might lose a third of its value as soon as you walk out of the Verizon or Apple store.
A new phone
Technological advances in cell phone technology have been nearly exponential since the original iPhone was introduced in June 2007. Every year, phone manufacturers seem to come up with additional features. Larger and more vibrant screens, bigger and more precise cameras and faster processors are just a sampling of the changes that are announced each year.
While there’s no doubt that a new cell phone today is significantly better than the original iPhone from 2007, those innovations come at a price. The new iPhone 13 comes with a suggested retail price of $699 to $1399, depending on the model. And that’s assuming you can actually buy an iPhone for its retail price, given the global chip shortages that are affecting supply chains.
Other new gadgets
Cell phones are not the only new gadgets that many people get interested in. New laptops, tablets, TVs and wearable technology are other things that have the highest value they’ll ever have when they first come out. If you want to be on the bleeding edge and always have the latest technology, you’ll definitely pay a premium.
Budgeting for new tech
So does the fact that most new tech gadgets are depreciating mean that you should never buy them? As with most personal finance decisions, the answer is that it depends on your specific situation. Remember that the whole point of a budget is to not spend money on things that are not important to you, so that you still have money to spend on the things that ARE important to you.
If new gadgets truly bring joy to your life, by all means, get every latest gadget the moment it comes out. Just make sure to include it in your budget so it doesn’t wreck the rest of your financial picture. A sinking fund can be a great way to do this, especially for items that are announced well in advance of the date they’ll be available for purchase. If you want to budget $1000 towards a new phone every year, set up your sinking fund to save $83 each month. Then when you’re ready for your new phone, you’ll have the $1000 that you need.
Alternatives to always buying the latest tech
If you’ve decided to hold off on buying the latest version of a particular gadget, here are a few alternatives. The easiest thing to do is take a look at the previous year’s model. Everyone that wants the one that just came out will be looking to sell their previous year’s version. That will drive down the resale price and you may be able to pick up a relative bargain.
Another alternative is to wait it out for a few months. Companies like Apple, Google and Samsung know there is a large market that wants the latest model of products. They also know that those people are willing to pay whatever it takes to get them as soon a possible. After a few months, it’s common for the price to drop anywhere from 25-50%
The Bottom Line
New technology and gadgets will continue to arrive every year at a remarkable pace. But just because a new version comes out doesn’t mean you have to be the first to buy it. Remember that most technology gadgets (including cell phones) are depreciating assets — they lose value over time. But if having the newest technology is important to you, make sure to plan for it in your budget. A sinking fund or other high-yield savings account is a good place to save up your money.
Dan Miller is a freelance writer and founder of PointsWithACrew.com, a site that helps families to travel for free / cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 kids.
New Tech is Coming! Here’s What’s Worth Budgeting For is written by Dan Miller for mint.intuit.com