Computers don’t last forever technologically. When was the last time you fired up your Apple IIe to do anything relevant? Nostalgia aside, technology constantly moves forward and sometimes its difficult financially to keep up.
While computers today are much less expensive than ever before, $1500 or so for a new one is still a lot of money. However, there is a way to prepare for your impending upgrade so that you always stay on top of the latest technology without it causing a financial headache.
Payment Plans, Don’t Do It.
Apple (and other computer manufacturers) offer a monthly payment system where you pay a small amount of $25 to $50 a month for a few years. This always results in you paying, over time, way more than the original price of your computer.
Unfortunately, Apple’s payment plan right now is a credit card application so I can’t dissect their payment plan and show you how much you’d pay but we can talk about their Barclay’s Instant Financing. It sounds like a fabulous offer – buy something for over $900 and get 12 months of 0% financing. But once those 12 months are up, if you haven’t paid you will be charged about 21%-23% in interest, beginning on your purchase date.
So, you’re socked with approximately $230-$250 extra for the low-end $999 MacBook after one year. It gets worse as you purchase a more expensive Mac. A $1,500 Mac will run you $347 to $383 more if you don’t pay up before a year. Only pay the minimum after that and pretty soon you could’ve bought two MacBooks instead of one. Yes, you can play the arbitrage game but its risky. Why not take advantage of interest before your Mac purchase rather than after?
Create Your Own Payment Plan:
Instead of paying Apple or anyone else’s payment plan, create your own and have interest pay you instead of them.
First, sign up for a high-interest savings account. I recommend ING because I’ve had one for years but FNBO, HSBC, and Everbank are also recommended options. Granted, you’re not going to see 21%-23% returns, and currently the rates suck (Thanks, Ben!). But its better to have around 1.5% being paid to you rather than 23% paid to someone else.
Second, decide on what Mac fits your needs. I would budget for $1,500 because you may want extras like RAM (don’t buy it through Apple), a bigger external drive, updated software, etc. Get your total figure calculated.
Third, divide that number by 36. That’s how many months there are in three years. Why three? Three years is the recommended lifespan for a Mac (and a PC too). Technology races ahead and a three year upgrade plan will keep you current. You can stretch to four if you’re fine with being a little behind or bought a top-end machine. Divide by 48 if you’re going to wait four years.
The number you come up with is the amount you need to stick in your high interest savings account every month. ING can be set to automatically deposit this for you to make it effortless. So, for a $1,500 Mac every three years – deposit $42 a month. $32 if you want to go four years.
Keep doing this and you’ll never have to worry about where you’re going to get the money to replace the broken dinosaur of a computer you’ve been using for the past five years.
Skip the AppleCare Extended Warranty:
Lastly, skip the AppleCare. It doesn’t cover damage and only matters for Year 2 and 3. Stick the $250 in your account and start your saving plan. By the end of Year 1, when AppleCare would’ve kicked in, you’ll have about $750 saved already. That’s enough to cover logic board or display damage, or around 75% of a replacement $999 MacBook.