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Let’s talk about buying an iPhone for $1,000. Apple’s CEO Tim Cook once compared that dazzling price tag buying a cup of coffee a day for a year. Doesn’t matter, does it?

But financial advisors see it differently. By some estimates, a $1,000 investment in a retirement account today will skyrocket to nearly $17,000 in 30 years.

In other words, $700 to $1,000, the price range of modern smartphones, is a great buy. less than half According to the Pew Research Center, American adults have enough savings to cover three months of emergency expenses. Yet one in five people surveyed by the financial website WalletHub I thought a new phone was worth going into debt with.

Tech companies rightly claim that our smartphones are our most powerful tools for work and play, and therefore worth every penny. But they also play numbers games to underestimate the cost of a new phone. Samsung, for example, said the new Galaxy phone costs $200 – but that’s only if you trade a one-year-old phone for credit for a new one. The actual price is $800.

That’s why it’s worth looking at phone upgrades from a different angle to weigh their financial implications. This can help us make well thought-out decisions so that the movement is not automatic.

The irony in Mr. Cook’s coffee analogy is not lost on financial advisor Suze Orman, who once associated people’s coffee habits with “Coffee habits.”wasted $1 million“The seemingly small amount of money people mindlessly spend on java – and now phone upgrades – could be a path to poverty, he said.

“Do you need a new one every year?” the host asked Mrs. Orman. “Women and Money” digital audio file. “Absolutely not. It’s just a ridiculous waste of money.”

Apple and Samsung did not immediately respond to requests for comment.

So what is the real cost of a phone upgrade? Let’s look at the math.

Flipsy, a company that buys and sells used phones, released an analysis this year. it’s smart to get a new iPhone every year. Here is its distribution:

• The iPhone 12 cost $799 last year. If you trade it in to cover the cost of a new phone, it’s now worth $460. The latest iPhones, the iPhone 13, also cost $799. So if you traded your iPhone 12, the iPhone 13 will cost $339. At this rate, if you bought an iPhone every year for four years, including the original $799, the net total would be $1,816.

• If you waited three years for the iPhone 15, your iPhone 12’s trade-in value would drop to about $200. Swap it in and the iPhone 13 will cost $599. Add the original $799 and your net cost over four years will be $1,398.

In a nutshell, Flipsy said that a three-year annual upgrade costs $418, or roughly $12 a month, compared to an every three-year upgrade.

Framed this way, getting a new phone every year instead of every few years can seem like a bargain. But adding these numbers to a financial calculator tells a different story.

If you put $12 per month into a retirement account, such as a Roth IRA with an average annual rate of return of 10 percent, that amount would translate to $25,161 over 30 years. Miss Orman’s savings calculator.

Mrs Orman compared the trade-off dilemma to buying a car. Car manufacturers may argue that the declining trade-in value of your car should force you to buy a new one on a regular basis – but don’t be fooled.

“I love my car and I don’t care if it goes down in value,” he said. “Imagine 11 years of saving money without my car payment or spending more money to buy another car.”

What about those coffee cups? On average, we pay $3 per cup, so $1,000 can get you roughly 333 cups. But naturally making your own coffee is much cheaper.

I put together some numbers coffee calculator It was designed by Bone Fide Wealth, a financial planning service. A $16 bag of beans from Peet’s Coffee at Costco can produce about 41 cups of coffee for 39 cents each. So a $1,000 iPhone is worth about 2,500 cups of coffee. It’s not compelling.

Doug Boneparth, president of Bone Fide Wealth, made a counterpoint. For people who have plenty of cash and are aware of the implications of their spending, splurge on new phones may be negligible in terms of overall savings goals compared to larger spending like housing – and if phones make them happy, go for it. He said that he spends money every year to buy a new iPhone as a kind of hobby.

“Personal finance is very personal,” said Mr. Boneparth.

However, he acknowledged that even his hobby is starting to reap diminishing returns as new phones don’t get better technologically every year. “The 13 is the first model I said ‘This literally has a better camera’,” he said of the latest iPhone.

Ms Orman warned that for most people who don’t have that much money in the bank, especially those who have debt, the effects of phone upgrades could become avalanche. A $1,000 phone withdrawn from a credit card could turn into $3,000 with interest when paid off, he said. More debt can also affect your credit score, making it harder to buy or rent a home.

“If you think a phone is worth going into debt, then, oh my God, now you’ve always prepared yourself to be in debt,” he said. “The truth of the matter is, there is nothing more than a medical expense worth going into debt with.”