You Can’t Afford an iPhone 7

Most Americans can’t comfortably afford the new iPhone 7…and that probably means you. Starting at $649, the iPhone 7 is arguably the best smartphone on the market and millions of Americans want to buy one before even laying their hands on it. Unfortunately, getting an iPhone 7 is a poor financial decision for most people.

If you bring in a healthy salary, have plenty of money in the bank, have a solid retirement plan, zero credit card debt, and don’t stress about money on a daily basis, then by all means go ahead and order up a shiny new iPhone every year. However, most Americans struggle in at least one of those areas. There’s no question that many of the people that bought one of the 1 billion iPhones Apple’s sold to date had no business buying an iPhone.

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Those that know me, may be surprised that I think most people should avoid buying the iPhone 7 considering I’m going to order a pair of them and already gadgets than I need. I’m very fortunate to be able to comfortably afford these devices, but it took years of hard work to get to that point. Unfortunately, too many people prioritize shiny new iPhones over their financial health.

If you want the new iPhone 7, here are a few things to consider before plunking down your hard-earned cash for Apple’s latest device.

1. The iPhone 7 Costs More Than $649

A lot of people end up buying more than they plan when making big purchases and the iPhone 7 is no exception. Yes, the base iPhone 7 starts at an advertised rate of $649, but it only has 32GB. Apple is adept at encouraging its customers to climb up its pricing ladder, which extends all the way up to $969 for the 256GB iPhone 7 Plus.

Screenshot 2016-09-07 19.56.40Of course there’s a lot more to a phone purchase than just a phone.  In Apple’s hometown of Cupertino, the sales tax rate is 8.75%, bringing the total cost of a base iPhone 7 to $705.78 and pushing a 256GB iPhone 7 Plus all the way up to $1,053.79. AppleCare+, Apple’s optional extended warranty and protection, adds $129 to the total. Upgrade and activation fees can cost up to $45, depending on your wireless contract. Add in a case and your shiny new iPhone 7 Plus can cost more than $1,200.

And then there’s the fact that Apple’s done away with the headphone jack on the iPhone  7. A lot of people will be tempted to buy expensive wireless headsets to replace their older wired headsets, even though an adapter is included in the iPhone 7’s box. Once Apple gets you in its store, its staff are very adept at up-selling accessories and every time I walk into an Apple store I end up walking out with more than I planned.

2. Those Payment Plans Don’t Actually Save You Money

Apple and its wireless partners offer payment plans to help ease the iPhone 7 sticker shock. Since most people simply don’t have the means to plunk down iPhone 7 money at a moment’s notice and wireless carriers have done away with phone subsidies, consumers must bear the full cost of new iPhones.

iPhone 7 upgrade Plan

Above is the current Apple iPhone Upgrade Program, which allows people to buy on monthly installments and upgrade each time a Apple launches a new iPhone model.  All of the above prices seem reasonable at first glance, but you need to be careful. It’s a lot easier to justify $45.75 per month to yourself than $969 for the most expensive iPhone 7 Plus model. But after 12 months you will spend $549. After two years of payments, that’s $129 more than just paying for the phone outright. Where does that extra $64.50 go? To AppleCare+, a mandatory damage-protection and warranty policy add-on for those making monthly payments. Whether or not AppleCare+ is worth its cost is up for debate, but by deferring payments you don’t get a choice in the matter.

One of the problems with the iPhone Upgrade Program and similar payment plans is that someone that can’t afford $649 in one go may have serious issues coming up with extra cash when they damage or lose their iPhones. There is a $99 deductible to repair damaged iPhones covered by AppleCare+. If you damage your phone more than twice during your payment plan, Apple will charge either $299 or $329 for an out-of-warranty repair.  If you lose your iPhone 7 or someone steals it, you’ll have to pay off the entire balance since AppleCare+ does not cover missing iPhones.

Another thing to consider is that you may not even qualify for any of the payment plans if you have poor credit or a thin credit profile. Some carriers will ask for a hefty downpayment, negating the benefits of a payment plan.

3. You Don’t Have Enough Money to Pay for an iPhone 7


Most people in America don’t have enough savings to comfortably pay for the new iPhone 7 in cash. According to a recent survey, almost two-thirds  of Americans don’t have $1,000 in savings. In other words, you could drain the bank accounts of most Americans and they still wouldn’t be able to pay for the most expensive iPhone 7 model in cash.

It’s stressful to not have any money in the bank due to any number of reasons, but it’s plain stupid to spend your last several hundred dollars on an iPhone. There are plenty of cheaper alternatives, including older iPhone models and Android-powered smartphones.

4. You Probably Don’t Make Enough Money to Afford an iPhone 7

American households earn $53,657 per year on average (median). That means half earn more and half earn less than that amount, according the United States Bureau of Labor and Statistics. That’s before taxes, rent, car payments, health insurance and all those other pesky bills.


No matter what you earn, you shouldn’t spend $649 or more for an iPhone 7 if you don’t have your financial house of cards in order. Drowning in debt? Skip the iPhone 7.  Only paying the minimum due on your credit card every month? Your old phone is fine for now. Haven’t gotten around to contributing to your 401k or establishing an IRA? Well, you get the idea…

Sometimes people work really hard to justify major purchases that they know are financially irresponsible. You’ve probably heard phrases like these when people are getting ready to fork over big cash for a shiny new gadget:

“I make $50,000, so an iPhone 7 is only about 1% of that…I can totally afford one.”

“All of my friends are getting one, and I earn more than them…so I can afford a new one.”

“My old iPhone’s screen is broken. I’d rather buy the new iPhone 7 for like $30 per month than waste $100 repairing my iPhone 6’s display.”

I have bad news for you: If you have to justify the purchase of an iPhone 7, then you can’t afford one.

Average Income

The person earning $50,000 per year isn’t considering that the cost of an iPhone 7 is far higher than 1% of their discretionary income, which is the amount of money that people get to actually spend or save AFTER accounting for mandatory bills and expenses. If you want to depress yourself a bit, figure out just how little discretionary income you bring in each year by deducting taxes, rent/mortgage, insurance, food expenses and transportation.

If you’re buying the iPhone 7 just because there’s a new model available and everyone you know seems to be buying one, they you’re making the age-old mistake of keeping up with the Jonses. Major purchases should be reasonable and planned out, not because of peer pressure or simply to have the latest and greatest a company has to offer.

5. Just Because It’s the Best, Doesn’t Mean You Can Have It

The iPhone 7 and iPhone 7 Plus are two of the best smartphones available. They have better cameras, battery life and overall performance than previous iPhones. They trounce most of the Android offerings from competitors. No question about it, the iPhone 7 is awesome.

Ferrari Califonria

But just because it’s awesome doesn’t mean you should get it. I’ve always wanted a Ferrari, but it’s a couple hundred thousand dollars above my budget and its backseats probably aren’t the best choice for carpooling to my kid’s school.

Most people can’t afford a Ferrari and relegate it to fantasy land by the time they’re old enough to not have posters of Ferraris on their bedroom walls. They instinctively know that Ferraris are just too darn expensive for the average person to afford.

So why is it that so many people seem to think of the iPhone 7 as a normal purchase? Sure, it’s a fraction of the cost of a Ferrari California like the one pictured above, but people don’t do whatever they have to do to get behind the wheel of a Ferrari. The reason so many people that can’t afford iPhones buy new ones each year is because Apple, its partners, and easy credit make it so easy. If Ferrari were to offer a lease that started out at $40 per month, then ballooned into $2,000 per month after a year, I’m sure countless broke people would line up for new supercars, ignoring their impending financial doom.

6. There are Cheaper iPhones Available

The iPhone 7 is a beautiful device, but there are plenty of cheaper iPhones available to buy. Apple still sells the iPhone 6s, which was released last year. It also sells the smaller iPhone SE for $399.

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Reputable companies sell refurbished iPhones for even less. For example, Gazelle sells iPhones for as low as $179.  Sure, the iPhone 5, iPhone 5c and iPhone 5s aren’t nearly the phone that the iPhone 7 is, but having an emergency fund just might be more important than having the latest iPhone.

7.  The iPhone 7 Won’t Change Your Life

The only thing Apple does better than building phones is marketing them. The reason why the world is buzzing about the iPhone 7 is that it has some of the best marketers in the world. For decades, Apple’s produced some of the most innovative advertisements and marketing videos. Its retail stores earn more per square foot than any other retailer in the world, including Tiffany & Co., which sells engagement rings that cost more than most Americans earn in a year.

“It makes all the things you do each day SO much better,“ Tim Cook said at the iPhone 7 launch event.

Yes, it will take better photos than most smartphones. It will repel water. The battery will last longer than older phones and its screen looks even better than previous iPhones’ displays. But no, it will not make everything you do each do so much better. As much as I love the iPhone 7…it is just a phone. If you can’t afford it, which most Americans can’t, don’t buy it.