Here’s an interesting article I read in French, translated in English by Safari.
Written by Nicolas Bérubé
Every week, I talk about finance here using words like “millionaire”, and I give examples of investments that may seem light years away from the reality of many people who are just trying to pay their credit card balance on time.
Sometimes, I put myself in the place of a young or old reader, who says to himself: "OK, but what does that mean to me? How does that speak to me? "
The answer is that it doesn’t speak to him at all, to this reader. Reading about money when you start from zero, or near zero, is a bit like looking into binoculars through the big end: what you can distinguish 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. It seems to be 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 more than $200,000.
How do I get to this amount?
Let’s imagine that a young 20-year-old adult decides this week that he needs an iPhone 16 Pro Max (does it seem that I like to write iPhone 16 Pro Max?).
This young adult, let’s call him Yves, works hard. He doesn’t have much luxury in his life. So having a good phone seems to be the thing to do.
On Bell’s website, Yves will see that the iPhone 16 Pro Max, bought to be replaced every two years, with the cheapest package, costs $127 per month plus taxes, but let’s ignore the taxes in this example.
“I earn a lot more than $127 a month, even while I’m in school,” he said. It’s an expense I can afford. "
Yves decides to get started. Every two years, he changes his phone to have a new one.
How much does all this cost him? Probably a thousand and a few dollars a year, says Yves. In fact, he doesn’t really know. It’s just a phone.
Now imagine a 20-year-old young adult a little more curious, let’s say Nina. Nina understood that her silver inputs are valuable.
By digging a little, she realizes that she can buy a refurbished iPhone 13 on eBay or Marketplace for $400.
She also finds a plan at Public mobile at $23 per month for 6 gigabytes, with unlimited texting 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 not contribute very positively or negatively to their satisfaction with life.
Studies on the subject are clear: our possessions do not give us happiness in a lasting way because we get used to them and they stop fascinating us. Researchers have a term for this: hedonic adaptation.
In short, the difference is that Nina will have $100 per month in her pockets that Yves will no longer have.
Nina knows that the best way to invest is to put it on autopilot. It therefore schedules a transfer every 1st of the month from its bank account to its TELI account in an investment platform such as Wealthsimple, for example. His $100 is automatically invested in a “growth” fund with a modest management fee, such as BMO’s ZGRO funds, BlackRock’s XGRO, or Vanguard’s VGRO.
One hundred dollars per month invested from the age of 20 to 65 years gives more than $200,000 in investments if we assume a 5% annual return – not at all assured, but the stock markets have experienced an annualized growth of more than 7% for several generations. And it takes inflation into account, because prices will increase, but the savings gap between Yves and Nina for the phone will also increase.
But this is just the beginning.
As the majority of people will live together, and combine their finances, we can double the amounts in this example.
So a couple could have more than $400,000 in non-taxable investments in their TFSALs on the eve of retirement. All this for having found a better price for his phone, and having learned the simple basics of investment.
The idea is not to make anyone feel guilty, but to understand. Understand where our money goes. Understand how money makes money. Understand that you don’t get rich by renting your hours. Even at a high price. Even when you are a lawyer or 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, friends, university professors, our employer or the kind employee of the Apple store will not eliminate him for us.
My example is a simple phone. I’m not talking about the hundreds of other decisions and habits, such as choosing a vehicle, the size of the house, living near or far from work, favoring the bike, solo or public transport, going to a restaurant three times a month or three times a week, spending Saturday at the mall, 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 this?
