Products of all types — cars, incandescent bulbs, your iPad and iPhone — are designed with planned obsolescence in mind. The need or desire to replace products quickly and a shorter product life-cycle are a consistent drain on wealth. In the previous generation, the latest television sets were big household expenses, just like they are today, but they stayed operational and sufficient for a couple of decades.
Today, I don’t know anyone whose main television is older than five years. And with new technology continually entering the market — high-definition, internet connectivity, LED backlighting, 120, 240 or 480 frame-per-second interpolation, applications, 3-D, wide color gamut, and 4K — salespeople always have a reason to convince consumers to upgrade. The older relatives of today’s technology still work fine, but this is the core of planned obsolescence. Products are designed in a way that consumers don’t want to keep the old.
The automobile industry is a great example. Every year, manufacturers release slightly updated versions of the same cars that have a slightly updated look and feel. The body is a little sleeker, a signature feature is more pronounced, and the dashboard technology is a little more advanced. What was perfectly modern last year is now stylistically out of date. There can be a social stigma to owning a product that isn’t the latest iteration, and this encourages consumers to spend more money.
There’s nothing wrong with boosting the automobile industry or lining Apple’s pockets with cash. It helps the economy. But if you’re doing so to the detriment of your own personal finances, take a minute to evaluate how you’ve been psychologically manipulated into spending your money. Although I had the same mobile phone from late 1999 when I purchased my first to about 2003, when my finances had improved, since then I’ve regularly upgraded every twenty-four to twenty-eight months.
I had and continue to have three reasons for upgrading:
- The new phones have features I want, making communicating or working easier for me, like the upgrades from a voice-only device to one that could sort-of browse the internet in a Gopher-like interface to one that could receive email and send text messages to one that can fully browse the web.
- After a few years, the phone batteries don’t hold a charge as well and the software gets sluggish. If I’m going to buy a new battery, I think to myself in a situation where I can afford the purchase, I might as well just buy a new phone.
- Owning a newer device makes me feel immersed in the exciting world of current technology.
If you can afford constant materialism like what I continually exhibit, there’s no reason for criticism. It’s always true that if you save your money rather than succumbing to the latest upgrade cycle, and repeat this each time you are tempted to upgrade, your savings will build up. Invest your savings in a broad stock market index fund, and your wealth will most likely grow over the long-term at a rate that will allow you the freedom to do more with your life later on. Immediate gratification often takes precedence over long-term savings, and that’s a person decision. It helps, however, to be aware of the choice and make the decision as consciously as possible, recognizing how manufacturers and retailers are working together to manipulate your brain.
You don’t even need to sacrifice much in the way of technology to choose savings over buying the latest product. In the mobile phone industry, last year’s models are often given away for free as long as you sign up for a two-year contract. I paid $150, an already discounted price, for one of the latest phones a few years ago; the next year, the price was down to $50 although there were more than enough methods of paying nothing for the device. When the desire to stay at the forefront of technology repeats itself, this behavior is costly.
When I needed a reliable way to get to work everyday — I couldn’t use a broken-down car as an excuse for being late — I purchased a theoretically reliable Honda Civic new from the dealer. It was a 2004 model when the 2005 models had already arrived at the showroom, but that didn’t provide me much of a discount. I’ve kept the car for so long mainly because for the most part it still runs like new and somewhat because I don’t have a garage to keep a fancier car protected.
Much more than the biannual phone upgrade, upgrading cars every few years would be significantly damaging to my personal finances. Why take on unnecessary debt? Why spend $16,000, or $25,000 or $40,000, or however much for a replacement when the 2004 Civic is working fine at 140,000 miles? It’s a part of conscious decision-making.
The goal isn’t depriving consumers of enjoying the products they use, especially when the products are used everyday and have become, for better or worse, an integral part of life. This path isn’t right for everyone, however. Replacing and upgrading products that aren’t malfunctioning can be a habit that drives a consumer further away from financial independence, whether it’s one phone at a time over the course of many years or one unnecessary large purchase that takes resources away from more important goals.
Another part of planned obsolescence is when the products you buy are designed to fail after a certain amount of time. Quicken, for example, is a piece of software wherein some features like online connectivity are disabled after several years. The company thus encourages its users to upgrade at least every few years. For more concrete products, manufacturers have moved towards cheaper materials in order to reduce production costs, but the result can be products that fall apart sooner.
The best solution, though not always complete, is making conscious spending decisions.
- Recognize that you are not fully in control of your actions. Manufacturers, retailers and marketers understand human psychology better than you (unless it is your job as well). You’re being manipulated.
- Although you’re being manipulated, you can adjust your behavior to compensate for the direction in which you’re being subconsciously pushed.
- Consider whether the product you’re interested in purchasing is a need or a want. It’s fine to buy products that are nothing more than wants, but it’s better to do so after you’ve given some thought to the alternatives.
- How many hours did you need to work to be able to afford this product, after taxes? If a new mobile phone, not including the two-year contract, costs you one hour of work, it may be a better choice than a phone that costs twenty hours of work.
- What percentage of your net worth are you spending to make this purchase? If your net worth is negative and you owe more in debt than you own, how far back will this put your debt-reduction progress?
- If your purchasing of the product were the lead story in the New York Times, what would the headline say? “Man buys sports car, delays retirement by 5 years?” “Woman upgrades to latest iPhone again, tells children to pay for their own college education?”
- Choose products that aren’t designed to fail quickly.
Do you resist planned obsolescence in favor of maintaining a strong financial situation for yourself and your family? Do you make better decisions for large purchases, “allowing” yourself to splurge on some of the less expensive upgrades? How do you balance planning for financial independence with keeping up with the latest products and technologies?
Published or updated October 29, 2012.