How do you buy things?

I’m struggling to get my head around spending money.

As a bit of background:

Me and my fiancé are both 25 we bought our first house last year, we’ve both received 2 promotions in the last YTD. We’re working really hard to enjoy whatever the future brings.

My income / Outgoings
All Bills (Mortgage, Credit Cards, Energy, Council Tax, Gym etc.) - 38.17% (£896.41)
Spending - 17.56% (£400)
Saving / Investments - 44.27% (£981.58)

We are in the most comfortable position we’ve ever been in. We live a life we’re very happy with and treat ourselves to a lot. I no longer look at my bank account before doing a food shop or filling up my car, I know I’m safe.

However the idea of spending money terrifies me. I’ve got two big purchases coming up, a new phone and a new car.

My phone is on it’s last legs and has been for a long time. The battery lasts a few hours, the speaker doesn’t work so I have to take calls awkwardly and it’s super slow, but (I think) it works. I can still listen to music in the car and I’m never far from somewhere to charge it.

I’ve got an old Kia that’s clocking up to 100k miles, it’s still got life in it but it’s far from a joy to drive. I’ve been eyeing up a new A class due to it being the cheapest way into a level 2 autonomous car which would be a huge QOL improvement.

However with both it seems like such a huge waste of money that could be better put into some sort of saving / investment account. Everyone around me tells me to just spend my money “Why would you want to pay your mortgage early, it’s supposed to be there for years”. So I’m reaching out to others investors to get an idea how you justify spending money.

I know “justify” isn’t the correct word in that sentence, but that’s how it feels.

Cheers!

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Sounds like these two things are things which you need to improve your life, they’re not frivolous items you’re wasting money on.

Perhaps buying decent second hand car and refurbished phone might soften the blow of spending?

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I see buying an expensive phone as an investment :rofl: I think from todays premium phones you can get so much worth out of them that it enables you to cut back on other things.
Also, if you look to have it for 5 years, its an acceptable amount to pay each month

Hey Ben/Flatking,

Congratulations on your place in life, it sounds like you’ve worked hard to achieve what you have. I think you’ve brought up some fascinating yet rarely-talked-about aspects of finance, namely frugality.

Buying a car is one of the most expensive purchases we will make in our lifetimes. But for the sake of commuting, school run, etc - I think it’s fair to say it can be a necessary purchase. In terms of making a rationalised car purchase - I would only like to bring up the wealth of evidence on the poor cost effectiveness of buying a brand new car, if you’re this is something you’re considering. A car typically loses 40% of it’s value in its first year (or first few thousand miles) of being driven, despite having lost little of its utility, making it a more attractive purchase in year two (if you take no pride in having a shiny new car). The price of a new car is inflated by the tendency of others to consume inconspicously. This is a key concept in what I consider a seminal book on frugality - “The millionaire next door (1996)” :ok_hand: I love that you assessed the car’s impact on your quality of life (autonomy, etc) - I personally think that’s a great mindest to have. Going electric and helping to save the planet is a possible plus, if you’re so inclined :earth_africa:

image

NB: A car, no matter how fancy, isn’t inherently bought to show off - one might just need or love cars that much

The book asks: why do people get a brand new car? Why get personalised plates? - Often, but not always, to show off. This can encourage negative mental traits that have a negative impact on oneself. What is less talked about is how money is better spent on things that improve our quality of life. I feel the categories of goods we can consume that have a positive impact on our lives are nicely summarised in Maslow’s pyramid of needs, a frequently referenced concept in the financial world (image courtesy of monevator) - I would only squeeze “(mental and physical) health” somewhere in there too:


I would consider a retirement pot to be a form of financial security, which according to the pyramid is a relatively high priority. i would argue most people invest to be financially independent/secure in time:

Should I pay my mortgage early? Interest rates are at a historically insane low, so the cost of borrowing is the cheapest it has been for a long time.

I’ll finsih this point in the morning, too tired rn sorry :sleeping:

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Life is short, so do what makes you happy. If that’s buying a car so be it as long as you can afford it.

I am over paying my mortgage now but am 20 years older than you, at 25 I was living and not thinking about that. Not to say it’s a bad idea just different strokes for different folks.

Life is about experience in my personal opinion, do I wish I had started investing in my 20’s, probably yes but would I change anything. Nope.

Disclaimer: I am not qualified to give financial advice :joy:

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You don’t say what type of phone you are considering getting. There are, however, several phones <£500/600 which will last years. There is very little benefit to spending more.

As has been said for cars, you will pay a premium for a new car and it will depreciate quickly. This will be even greater if you buy a Level 2 car - while it’s new technology atm - there will many more models soon.

While it’s always good to save money, especially at a younger age, as you will be more secure/comfortable later in life - you need to strike a balance between that and enjoying your life ATM so you can still enjoy life. The aim should be to save so you can spend it sensibly when you need/want to which improve the quality of your lives/fulfill an ambition and not on ‘wasteful’ spending you get no real benefit from as so many do.

It sounds as if the phone definitely needs replacing - the car less so and perhaps a 2nd hand model will do when the time comes.

If spending so ‘much’ is a concern perhaps go out for one for two fewer meals for a little while and think of the money saved as paying for your phone.

For phones, you can get an ok new smartphone for under £200. I bought some of these Samsung J3s for work and they seem fine. I think smartphones are at a point where the noticeable difference between a £1000 phone and £200 phone will be slightly faster processing, they will all have the same apps and you’re browsing the same internet…: https://www.argos.co.uk/product/7477083

My personal phone is a samsung galaxy s5, which is now 5 years old and works fine. I bought a second battery for it and a battery charger ~£30 total, I just swap the batteries over, I never really have to plug my phone in to charge.

For cars, as others have said it doesn’t make much sense to buy a new car. You could also look at leasing a car, not sure how cost effective this is over time, but leases can include the maintenance package and servicing etc. When you factor in the cost of your time, it may be attractive. It also allows you to try out different cars, one of my colleagues leases a electric Nissan Leaf for about £200 per month.

Really appreciate everyones replies!

I’d be looking for a new iPhone, which I think is the biggest issue when justifying the price, but everything in my work and home life is apple and it does sync up really well to each other. The one plus 7 pro is an example of a cheaper better phone but without the apple premium slapped on.

I certainly don’t need a brand new car, the idea of being the single owner and know exactly what’s happened to the car throughout its life is very appealing. I’ve only ever owned second hand cars so it wouldn’t be a stretch to get another it’s just a fear of the unknown.

I’ve just had a quick look on autotrader, found the exact car I’m looking at with 6k miles on the clock ex demo for 8k less than brand new - I think second hand will be the way to go!

Thank you for the help everyone!

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In my opinion you have to optimise in order to save time.
If the new phone will save you an 1 hour a day thats gold
If a new car will save you another hour that even better.
At the end of the month you have total of extra hours to spend with the loved ones.

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Sadly a new car won’t save me any time. I live 30 minutes away from my work and on average I spend 2 hours a day in my car. Stop and go traffic is a massive pain, that’s why I was eying up level 2 autonomous driving as it would literally drive the car in stop and go traffic. So technically it wouldn’t save me any time, but I would certainly be less worn out by the time I got home!

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In which case opt for a iPhone 7 or 8 - which are perfectly good phones and will be supported for years - but which have a smaller premium than the latest models

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Battery life on the 7 is terrible, a little better on the 8 and the plus models. Personally I think the XR is a big upgrade over the 8 and you can get some superb contract deals on the latest models. I went for a deal with Mobilephonesdirect back in November on a 2 year contract, 80GB a month data with Vodafone entertainment pack for a little over £600, well under the RRP.

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If you will ever consider Android I’m a fan of Motorola for the following reasons.
Good price quantity ratio and price tag around 200£ for the Moto G
Good performance for what I need to do that is freetrade, call, internet and mail.
Dual SIM on some models
Almost completely vanilla Android
Mine is over 2 years old and the battery is still holding good enough, get to the afternoon.
The only thing I regret a little is not getting the 32gb version back then because 16gb feel small now.

For transparency I’m not sponsored by them.

There are plenty of used cars with active cruise control/stop n go traffic. I would personally get a top spec used prius or hyundai ioniq. But if you still want to go for a new A class, I would really recommend you test drive one for a few days first. I had the new one as a courtesy car and the quality just doesn’t feel like it deserves to have the Merc badge.

Also driven a new bmw 5 series for a few days with the stop and go function and it’s pretty much no different to an automatic car… Because if it stops for more than a few seconds you will have to reengage it by pressing a button or tapping the accelerator.

As the previous poster suggested, the best cost to value ratio is to buy a top spec car that’s 3 years or older, as it would have lost most of its depreciation by then.

Hey Ben, I completely get the phone situation… I bought an iPhone X and returned it the next day. Couldn’t justify £999 for a phone. Happy to stick with my 6s for the moment.

As for the car, I personally (not advice) made a decision to never buy a car, but lease them. Between the depreciation, the upfront lump sum, and the cost of running its not worth the expense. Finding good leasing deals for brand new cars has been more cost effective for me, more so than TFL.

Only thing I would recommend, is keep doing what you’re doing, it’s obviously working, keep saving/investing, and treat yourself as life is short. Maintain a balance between finances and fulfilment.

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Try downgrading on some functionality to reduce the price. I really needed a phone recently but didnt want to spent £800 for a S10, so i got the S10e(ssential) for £500. The same is possible for the Iphone.

The other option is to buy an executive saloon or estate at dirt cheap second-hand prices. I went for a Mercedes C-Class with 110,000 on the clock about 5 years ago for around £1,500. Up to 195,000 now and the only cost has been the regular service and MOT, they don’t call them Stuttgart Taxis for nothing. It’s a 2006 model but the paintwork and interior still look like new and has all the high-end mod cons. Luxury motoring for £25 a month. :+1:

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I got a Motorola from Argos for £70, it’s a bit slow for fancy apps but it’s fine for stuff like Freetrade. Cars on the other hand I’ll happily spend thousands on a 50 year old truck :smiley:

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I paid just over £50 for my Nokia 1 for Freetrade :smile:

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The XR for example is £750 new (discounts if you have an iphone to trade in), and very good from what ive been hearing (I have the XS). The phone will get at least 4-5 years of support compared to Androids 2-3, so your looking at £150 a year assuming you keep it for 5 years.

Unlike android phones, you can easily get a genuine battery replacement for the phone a few years down the line if it has degraded to the point that you notice it (£65, £0 with apple care). Some android phones also have some battery replacement options but they honestly don’t come close to the transparency in pricing and ease of actually finding out how to do it.

The higher end phones can look expensive, but only if they are not supported by the manufacturer and only if you don’t keep them.

Not to mention the ease of use of the phone in your day to day life does have a non-zero value to it, especially when you have other devices that Just Work™ with your iPhone.

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