Thirty euros a month sounds very different from seven hundred and twenty euros. With 24 equal instalments, however, they are the same amount, even before any additional costs. The first questions are therefore how much you will pay in total and what you are committing to over the coming months.
Add up the entire purchase
Check the initial payment, number of
instalments and final instalment. Add compulsory insurance, arrangement fees
and any other services required by the offer. If the phone requires a more
expensive mobile plan, compare the extra plan cost over the full contract
period as well.
In an invented example, a phone costs 24
instalments of €30, an initial payment of €40 and a compulsory service costing
another €5 a month. The total is €880. If the same phone without those extras
costs €750 and your existing plan is sufficient, the difference is €130. This
illustrates the calculation; it is not an actual offer.
For consumer credit, check the annual
percentage rate of charge, or APR. It brings the interest and included credit
charges into an annual percentage to help compare offers. Also read the total
amount repayable, the payment schedule and any costs outside that figure. [10]
Future instalments reduce future choices
You may be able to afford the instalment
easily today, but your expenses could change in six months. You might move,
reduce your student working hours or need to repair a computer. A commitment
you have already made remains part of your monthly plan.
Before deciding, add up every instalment
you already pay. An individual €20 or €30 may seem small, but several
commitments can approach the amount you need for an emergency fund or another
goal. Check especially what happens if you pay late and whether you can end the
agreement early.
Judge instalments by the terms
Paying in instalments can be reasonable if
the total cost is no higher, you can reliably cover the payments and it
preserves a necessary reserve. Sometimes a phone is an essential work tool.
Assess the particular offer and its purpose instead of treating all instalment
arrangements alike.
If you mainly want to upgrade a working
device, try an exercise. Set aside the proposed instalment in a separate
account for three months. This shows how the payment affects daily life while
building part of the purchase price. You may discover that your old phone still
works well enough or that a cheaper model suits you.
Give the money you keep a clear purpose
If choosing a more suitable device leaves
you with €200, assign it a purpose immediately. It could cover repairs,
contribute to an emergency fund or help build assets for the future. Without a
purpose, the difference can quietly disappear into other purchases.
For a distant goal, you could also compare
gold or silver. This turns part of your earnings into a physical asset instead
of creating another regular payment. This decision also needs a calculation:
account for the difference between purchase and sale prices and the cost of
storage. Precious metal prices can fluctuate. [20]
The question
before buying is therefore broader than whether you can afford today's
instalment. Check whether the entire arrangement helps you use your earnings in
the way you want.
First step: Calculate the
total cost of one phone offer and compare it with buying the device and mobile
plan separately.
Sources
[10] European
Commission (n.d.). Consumer credit.
[20] Commodity
Futures Trading Commission (2020). Beware of Gold and Silver Schemes Designed to Drain
Your Retirement Savings.
