If you’re thinking of getting the new iPad Pro, for example, you might be paying $1000 in one go with cash, OR you can use your Apple Card’s monthly installment feature and pay $83.25 for 12 months, with no interest.
Let’s just assume you’re not using your personal credit card, where you’d have to pay interest rates APR up to 24% (not smart, use Apple Card instead).
Here’s The Math
My current take-home pay is $500 a week or roughly $2000 a month.
Take-home pay is income that gets deposited to my bank account after taxes are taken out.
So in theory, my pre-tax income could be something like $700 a week, depending on different tax brackets, etc.
If I pay for the $1000 iPad Pro in one go, that would cost me about TWO WEEKS worth of pay, assuming I put away ALL of my weekly income toward a new iPad Pro.
Now, let’s look at it from the $83.25 a month for 12 months, interest-free installments from Apple Card.
$83.25 times 12 months equals the $1000 of that iPad Pro ($999 to be exact), so we can see Apple Card isn’t charging us interest on it, which is AWESOME!
$83.25 a month divided by the $2000 of my take-home pay is only 4.16% of my monthly income instead of 50% where I paid $1000 in one go.
So the math is you’re paying 4.16% of your monthly income little by little until the iPad Pro is paid off, versus paying out a larger sum all at once.
Here’s Where The Math Gets Even More Awesome
Let’s assume within the next 12 months, you are either going to get a promotion, a raise, a Christmas bonus, whatever, you name it.
So instead of paying $1000 in one go with today’s income, you enter into the installment plan and start paying 4.16% of your monthly income into the plan.
But let’s say a couple of months from you, you get a raise, or a bonus, or your parents give you money for your birthday, etc.
That 4.16% drops, which is better for you.
So let’s say I get a raise and instead of having $500 take-home weekly, I now get $550 take-home weekly.
That’s $2200 a month.
$83.25 a month divided by $2200 equals 3.78%.
So I’d be paying the future monthly installments with 3.78% of my monthly take-home income instead of 4.16%.
USING FUTURE HIGH INCOME TO PAY FOR PAST PURCHASES MAKES SUCH GOOD BUSINESS SENSE
And that, ladies and gentlemen, is why there’s a counter-argument in the non-mainstream section of owning a home that talks about taking out the longest mortgage you can with a fixed rate interest, because in the 30+ years of your mortgage, your income should have gone up 100% to 500% to make that mortgage seem minuscule with the future income you’re going to have.
My friend told me a story about how his mom didn’t go to medical school a couple of decades ago because the total cost of tuition would have been about $30,000.
My friend laughed while telling this story because he was going to medical school and total cost of tuition for him would have been $300,000 by today’s costs, but he got financial aid.
What Is The Moral Of This Story?
The moral of the story here is if you put the monthly installments in context of how much money you could hope to make in the near future, you’ll probably see that it makes good money-sense to get it for the longest installment possible that Apple is allowing you, so you’re using less percentages of your income to pay for the same expenses that you’ve locked in the price for.
But What If I lose My Job During Covid And I Can’t Make The Monthly Payment?
It’s $83.25. A MONTH.
Last time I checked, there are batches popping up everyday on Instacart, an app where you go grocery shopping for people and make money on your own time.
Each batch payload averages $13-25 for about an hour’s worth of work.
That means if you can do about 4-8 batches per month, if you lose your job, you can make the monthly installments for the iPad Pro.
I like it better than driving Uber because I don’t have to talk to anyone the whole time and I get to go at my own speed and be physically active versus sitting on my butt for hours with no bathroom breaks.
But I digress.
The Dave Ramsey Counter-Argument For Using Cash
Dave Ramsey fans will argue that it’s always best to pay with cash right away, and in full, if you’re able to.
And it’s understandable why.
If things all really go to shit and you somehow don’t have emergency cash reserves, can’t find any gig side hustles via Instacart or Uber, and maxed out all your credit cards and lost your job, it would be nice to know that your tech is paid off and that you don’t have monthly installment payments coming due.
Apple did mention in the apple wallet something about calling them to discuss your hardship, so they might be able to delay payments until you get back on your feet.
So situations will vary.
Assess your situation, as everyone’s situation is different.
Run the numbers to see if the monthly installments make sense in relation to your take-home pay, and see if future take-home pay will increase to lower the monthly percentage you’d have to pay.
That way, you also free up your cash flow, for example, to invest in stocks to build wealth.
Hope this helps.
Share it with friends who have the Apple card!