I love buying premium products. I buy everything I need and I afford any hobbies I want. But I don’t become poor after purchasing all of this stuff. And most of the time I only pay 20-30% of the item’s price. How can I afford to buy an iPhone for 300€? How do I get money after buying an expensive camera? Let’s learn about depreciation.

When you buy stuff, look at 3 things: a lifetime of a product, It is hard to break, for how much will I be able to sell this stuff in the future?

Buy 1-year-old stuff

I don’t buy new iPhones, Macbooks, cameras, or bikes (i hope soon I will add cars here). Instead, I buy 1-year-old items. For example, I bought iPhone 11 pro 256 GB just for 600€, while the 12th was priced at 1200€. This iPhone was in perfect condition and was just 6 months old. I keep it already for 2 years and I can sell it for 450€ (Sep 2022). However, I broke Face-Id while swimming and now I have to give a discount and sell it for 300€. The total cost of an iPhone usage was 300€, or 150€ per year or 12.5€ per month.

Some people sell their 1-year-old phones to buy new ones. They sell it for 50%-70% of the price. That means, that to have a new iPhone each year, a person should pay a difference of 600€ between the initial price and selling price, or 50€ per month. But if you wanna have the previous model and keep it for 2 years, the monthly payment is just 12.5€. It is 4 times cheaper to have the previous model. If you keep the old model for a longer time, maybe you can even pay 10€ per month. To clarify, it does not mean that you pay someone € each month, it just shows how much value the phone loses every month.

Depreciation is the value, that an item loses each month or year. It is also treated as the real cost of usage of a good. In theory, you should take the price of a good when you bought it and the selling price after the expected time of usage. Then you subtract these prices and divide them by the number of years or months that you plan to use that stuff. For an iPhone 14, it will be (1200-600)/3 = 200€ per year if we assume that we use a 1200€ iPhone for 3 years and sell it for 600€.

Depreciation can be counted linearly, or more complicated. For easiness, assume that in the first year the item loses the same cost as in the next 2 years combined.

Used items are Inflation-free. That means if the price for new models goes up, the used items will cost the same as before. It is just a rule. For example, in Russia, there is huge inflation in cars. The previous models of a car cost 100k€ 1 year ago, the new model cost 300k€ due to the import restrictions. We could imagine, that if these cars still have the same engine and interior, the price for the one-year-old car should also rise dramatically. However, it is not the case. For example, the used Audi Q7 of 2020 with 50k km costs 70k€, while the new one of 2022 costs 250k€. The only difference between them is the small adjustment in the exterior and interior.

Different countries have different prices. For example, I bought a used camera, Sony a7 II for just 570€. When I came to Russia, it appeared that I can sell it for 1.2k€. So, I can sell it here and get a 600€ profit. It is known as Arbitrage. It is when you profit from the difference in prices without risk.

Buy high quality

Don’t buy low quality. Such items are easy to break, and their lifetime is short. You will not be able to sell it, so you just throw it in the rubbish bin after some time. Keep in mind that cheap low quality items are sometimes made with the child force and in poor worker conditions. And by buying and throwing the bad quality items in the rubbish bin, you are polluting nature.

High-quality items last long, show prestige and are beautiful and comfortable.

Also buy new

Not every item can be bought or used. Don’t buy used headphones, parachutes, or stuff you know nothing about. For example, I want to buy a bike for 2.8k€. It is expensive. I could probably find the one-year-old bike, but I don’t know how to check the bike for quality, or I don’t want to change the details. In such situations, I can either hire a professional or ask a friend for help. Or just buy a new one. The bike, for example, has a lifetime of 7 years on average, and then the depreciation will be 2800/7 = 400€. Of course, a bike can be sold even for 1000€ in 7 years, because we can change details and make repairments each year, but let’s assume that we do nothing. So, the cost of a bike will be 33€ per month. It is not too much for high quality.

What about fashion

Fashion is complicated. The fashion houses know that people want to be trendy, and the style changes each half a year. I don’t know if it is a good idea to buy used clothes, but it is a good idea to buy expensive classical outfits. For men it is easy – just buy suits for 2k€ each and use them for a decade. Buy good shirts, t-shirts, and 8 pairs of shoes for different events. The men’s classics change too slowly. There are also trendy casual outfits that should be changed more often.

For women, it does not work. Fashion for women is much more important. It is a way to show her status and prove to herself that she is the most beautiful. However, some brands like Burberry don’t change their fashion style too often. Gucci can also be worn for a quite long time. I recommend not buying the brand stuff, but quality stuff. Don’t be a crank and don’t buy an item with huge brand logos. Instead, buy something attractive. You will never find a brand on a 5k€ dress and suit.

When buying new clothes, remember how can you combine them with other clothes or whether you already have enough outfits for some occasions. Maybe you just need to buy high-quality t-shirts instead of 20 t-shirts with cheap prints. I have an excel file, where I put all the wardrobe items in my Austrian house. It appeared that I have items, that costs 6000€ in total. But I have only a few things that cost more than 100€. I understood that I have too many cheap clothes up to 25€. And the thing is that I wear such clothes for 1 or 2 years. The expensive items, however, I wear for a much longer time. I also found out that I have 5 suits, and 4 of them cost less than 200€ each.

I hope, after reading this article, you will buy quality stuff for lower prices and will afford anything you want.