10 Reasons to Save in a Roth IRA

10 Reasons to Save in a Roth IRA

I’m a millennial, so I’m no stranger to my fair share of think pieces on self-love and self-care.  While I’m not wont to pair financial products with words like “love,” and especially not with the word “radical,” I do want to think for a moment about “radical” and its use to mean far-reaching and affecting the fundamental nature of something.  When we use radical to mean an act that will fundamentally change the course of your life, opening a Roth IRA is one of the most radical ways you can love yourself.

Before I dive into what makes these accounts so special, a few basics.

One, I’m not your financial planner, and this isn’t financial advice.  Got it?  Good.  Two, I know well that there are millions upon millions of Americans who are unable to meet their day to day needs.  If you’re in that situation, I don’t fault you for a moment for prioritizing the costs of the moment rather than the needs of the distant future.  Survival is the most fundamental act of self-care. If you have any ability to save at all, though, if you have any small voice in the back of your mind that says this could be possible for you, I’d ask you to please love your future self enough to invest in her.

Three, well… what’s a Roth IRA?  A Roth IRA is a retirement savings account that (almost) anyone can open, offers tax-free growth on your money, and allows you to withdraw your money tax-free after age 59 1/2.  

Roth IRA accounts aren’t tied to your job.  There isn’t a complicated process involved to open the account.  To contribute to a Roth IRA, you’ll need to have earned at least as much income as you put into the account each year, and you can’t contribute more than $5,500 a year unless you’re nearing retirement age – those 50+ can contribute $6,500 to catch up on their savings.  There are a few other restrictions tied to exactly how much income you can earn to take advantage of this great deal (though even then, there’s flexibility), but don’t get bogged down in them.  For the most part, the average American can utilize this incredible savings vehicle quickly and easily and might just change the course of her life in the process.

Here are 10 reasons why saving in a Roth IRA is jaw-droppingly awesome:

  1. Roth IRA’s are easy to open.  If there’s one thing I’d like you to take away from this piece, it’s that investing in the stock market doesn’t have as many barriers as you think.  Setting up my Roth IRA took me a total of 10 minutes, and I did it from the comfort of my home, i.e. in my pajamas.  If you have the computer skills to complete an online shopping order, you can open a Roth IRA online.  My venue of choice was Vanguard for their low fees.
  2. Roth IRA’s let you own a share of the market.  Roth IRA’s allow you to put your money into index funds.  An index fund is a portfolio designed to track or match sections of the market or the market as a whole. For example, the S&P 500 index is one of the most common, and investing in this index fund gives you a small piece of the 500 largest American companies. With index funds, you’re not actively trading different stocks, you’re matching the market. Since 86% of actively managed funds didn’t beat the market in 2014, and we see that pattern time and time again, I’d much rather put my money in index funds, trust the strength of the market through any storm, and enjoy the longterm gains.
  3. Roth IRA’s allow you to access your principle.  This might be my favorite perk of a Roth IRA.  When you place your money in a Roth, it’s. still. your. money.  You can withdraw the principle (the amount you yourself put in) at any time without penalty.  There are even some situations (like being a first time homebuyer) that qualify you to access your interest before retirement as well.  While I don’t recommend that you use a Roth as an emergency fund – it’s much better for your future to allow the money to grow – I personally take an enormous amount of comfort in the fact my money is still there for me if I need it.
  4. Roth IRA’s give you tax free growth. This is why you put your money in a Roth IRA.  You were already taxed on your cash when you earned it.  The government does not come for it again AND you aren’t taxed on your money’s growth within the Roth IRA account.  You’ll be able to withdraw with ease in retirement and enjoy all the fruits of your labor… plus its tax-free interest.
  5. Roth IRA’s require just a small initial investment.  I cannot stress enough that a Roth IRA is an incredible option for those who think that retirement savings isn’t for them. You can, and deserve, to retire with dignity.

    I’m most familiar with Vanguard, so to speak to their process first, Vanguard allows you to open a Roth IRA with a $1,000 contribution.  While $1,000 is decidedly large sum to save for many Americans, you don’t need to have that $1000 today.  What you do need to do is prioritize having $1,000 on a timeline that’s manageable for you.  For some, that’ll be a few months, for some a year, for some longer.   Making the decision to set aside that money for yourself is frightening and overwhelming, but it’s love. Anything as powerful as love is terrifying.

    If $1,000 dollars is an insurmountable obstacle, and for some it will be, there are other options.  A little internet sleuthing led me to T. Rowe Price, which allows you to open a Roth IRA with a $50 a month contribution rather than Vanguard’s initial investment.  I can’t speak to T. Rowe Price’s fees, and as a Vanguard fan I’m prone to prefer saving $1,000 to start a Vanguard account, but the plan proves there are options out there that make retirement savings possible with the smallest of initial investments .

  6. Roth IRA’s benefit your heirs.  Let’s jump from money to everyone’s second favorite topic: death.  While it might not be polite to talk about, we will all die someday, and we all want our loved ones to be as taken care of as possible when we do.  A Roth IRA will allow your heirs to withdraw funds without tax.
  7. Roth IRA’s offer the chance to diversify.  The next two points are more critical for those who already have their feet wet in the world of personal finance and investing.  Because Roth IRA’s aren’t tied to your job, you’re able to take your investment into your own hands and diversify your retirement strategy.  Whether that be by choosing different funds than in a plan you have through work or by adding an account to your portfolio that uses after-tax money rather than your pre-tax work contributions, a Roth IRA gives you autonomy and options.
  8. Roth IRA’s allow spousal contributions.  This is another benefit that may seem niche but is hugely impactful (and a personal favorite.)  If you’re married, a Roth IRA allows your spouse to contribute to a Roth IRA in your name with their earned income, even if you don’t work yourself.  Why’s this important?  Because currently women are twice as likely as men to be in poverty in retirement.  There’s a host of factors behind the trend, but the fact that women work on average 12 fewer years than men in their lifetime, often due to childrearing duties at home, is largely at play.  Roth IRA’s allow your family to recognize a stay at home parent’s contributions to the family by investing in their retirement.
  9. Roth IRA’s might just make you a millionaire.  Let’s get back to the fun stuff.  Let’s imagine that you’re a 25 year old reading this piece.  You have your first salaried job, and you’re ready to make one of the biggest adult decisions of your life.  You decide to open a Roth IRA today, and from here on out, you contribute $5,000 a year until age 65, and you average an 8% return each year.  My friend, you’re going to retire with $1.4 million, and you’re not going to pay an additional cent of taxes on it.
  10. Roth IRA’s are not intimidating.  It all comes back to this.  The vast majority of us do not have anyone to invest in ourselves but ourselves.  You’ll need to figure this out, and the sooner you do, the more the magic of compound interest will work in your favor.  Roth IRA’s allow you to quickly set up an account online, begin to fund your account with a manageable initial investment, and passively invest your money into index funds that match the market.  You don’t need to know anything more about stocks themselves; even the people who are paid to manage stocks for a living don’t often beat the market.  What you need is the bravery and self-love to take this step forward.  You are in charge of your future, and you can act to make it as secure for yourself as possible.

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Using Raise to Save at Sephora

Using Raise to Save at Sephora

I’m not really someone who clips coupons or goes through complicated schemes to save a few dollars. In general, I try to set up my finances so that I’m comfortable with the amount I’m allocating towards different spending categories, and then I embrace the results. I came across a savings idea online, though, that I recently put to the test as part of my yearly budget for makeup–using giftcards from Raise to save money at Sephora. The process was so simple that I had to share it with you all.

What is Raise?

Raise is an online giftcard marketplace that pairs sellers who have unused giftcards with buyers looking for discounts at those stores.  Raise takes a cut of the giftcard price, so my experience as a seller was that it would be vastly more beneficial to sell any unused cards to my own network, but as a buyer, you’re able to quickly and easily buy giftcards at a discount.

My Raise and Sephora Process

I knew I was in the market for primer, foundation, and make up brushes.  I happened to have a connection to a generous soul who works at Sephora, and she shared her 20% friends and family coupon with me for Sephora’s annual event.  With one discount already in hand, it was a perfect time to try out Raise and pack even more purchasing power into my transaction. I can’t stress enough how easy this process was.

  •  Log into Raise.  If you don’t yet have a Raise account, consider using my link to get started: http://geta.raise.com/mparrish.  When you sign up with this link, you’ll add a $5 savings to your first giftcard purchase.  I signed up with a friend’s link and was able to bump another $5 off my final Sephora tally.
  • Search the marketplace for EITHER Sephora or JC Penny giftcards (Sephoras inside JC Penny accept Pennys giftcards, which are often more heavily discounted.)  I personally wanted to shop online, which you can only do with a Sephora giftcard, and the discount difference between the two options was only 5% on the day I bought. Your own threshold for inconvenience and the price differences when you’re in the market might lead you to a different decision than mine did.
    Sephora Options on Raise as of 11/1/2015 at 11:30 AM
    Sephora Options on Raise as of 11/1/2015 at 11:30 AM

    JC Penny options on Raise as of 11/1/2015 at 11:30 AM
    JC Penny options on Raise as of 11/1/2015 at 11:30 AM
  • Choose your denomination based on the amount you plan to spend and the discount offered.  I wasSephora able to purchase $150 worth of giftcards for roughly $135, already saving me $15 before I was even on the Sephora site.  Here’s where the ease of purchase comes into play.  I opted for “egift” giftcards, so once I paid for my two purchases, I received the cards instantly in my email.  It takes less than 5 minutes to complete a Raise transaction, start to finish, which I would certainly say was worth the $15 I saved.
  • I headed on over to Sephora with my vouchers in hand and used my 20% off coupon to boost my savings even more.  I filled my cart with the products I’d planned and then easily entered the codes from my emails into the giftcard checkout box. You can see the final result of my work below!

Screenshot 2015-11-01 11.40.32

In the end, I had budgeted $200 for make up and I would have paid roughly $195 after tax without my discount and Raise giftcards. By investing the small amount of time that I did to take advantage of my friend’s generous coupon offer and Raise, I spent about $142 for the exact same products.

Keep in mind that Raise doesn’t just work for Sephora–there’s a host of different giftcards on the marketplace, from restaurants to spa options.  The discounts vary, but I found the process to be so straight forward that I’m going to make it a habit to check Raise before any big purchases.  I’d recommend you do the same.

This post was sponsored by….absolutely no one.  If you’d like to sponsor me to continue creating tips and content, though, consider using my Raise link to sign up for your own account and netting us both $5 in the process. http://geta.raise.com/mparrish

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Three Reasons to Love the Power of Asking

Three Reasons to Love the Power of Asking

Life’s been busy as a human lately, if not as a blogger.  As I thought back on the two weeks I’ve had between Hat posts, though, one trend stood out: I’ve seen the power of asking come up again and again, and I’ve noticed that asking for what I need (and giving what I can when others asks) makes for a better relationship with money and with my community.

Since my last post, I’ve received two care packages, one with a gorgeous purse and one with an adorable pair of shoes from two separate women whom I’ve never met.  We had nothing in common save for our alma mater and the fact that we like gifting economies.  I worked a wedding vendor showcase with my wedding photographer–I lent a hand to help her incredible business, got to know her better, and learned a new set of skills– because she asked. I was able to put together a network of supports for a friend having a tough time and surround her with a caring community who was ready to give…because I asked.  It was a hell of a two weeks.

There are millions of reasons why we keep our needs to ourselves.  We’re proud, we’re ashamed, we think we don’t deserve or shouldn’t ask for help.  If you’re brave enough to take the plunge, though, the power of asking might just turn your life around.

  1.  Asking for what you need builds social bonds.  For the most part, people are good.  We like to give, and we remember the times we were able to give and the people we gave to fondly. Am I saying you should demand help from your family and friends as a way to strengthen your relationships?  Of course not.  If you take a true inventory of your life, though, and realize that a well placed extended hand could change everything (or change something small that gives you the motivation to change everything), what’s the harm in asking for that hand?  Hopefully you’re living in a way that your network would already love to support.  It’s okay to let them know how.  
  2. Creating a culture of asking makes others more likely to give.  Giving is contagious.  Harvard research even says so.  When we ask for help, and when we give help, we’re acknowledging that we’re all interconnected.  That reminder lasts longer than any individual exchange, and it starts a chain reaction that strengthens our communities.
  3. Asking for help is an act of self-love.  Stick with me here.  I honestly believe that most of us reject the idea of asking for help or asking for what we want because we think we don’t deserve to get it.  The moment that you say to yourself and to your network that you’re willing to graciously accept help is the moment when you own your own value.  When you get the chance to contribute back to your community to honor what you gained, you’ll feel your self-esteem rise even more.

I said at the beginning of this post that it was the people I engaged in asking with (whether I gave or received) who stood out to me when I reflected on my life lately.  I don’t think that’s a coincidence.

It’s Sunday night now.  What can you ask for next week that would change the next fourteen days for you?  What can you give? Who will look back on you in two week’s times?

Finding Freedom Through Joy and Happiness

Finding Freedom Through Joy and Happiness

If you woke up tomorrow with enough in the bank to comfortably withdraw a salary for the rest of your life, how would you spend your time?  Can you articulate what your actual “dream” life would look like?

I spend too much of my time thinking about the purpose of life, how I want to use the finite number of hours I have, and recently, how to use money to fuse purpose and happiness. For a current example, I turned to my husband at the end of a date night last week, and apropos of nothing asked, “Do you know what the biggest tragedy of being human is?”  He just laughed– it was impressive that I’d made it all the way back to our apartment without touching on the human condition. (For anyone wondering, that evening, I thought the fact that humans can conceptualize our own deaths was the greatest tragedy.  Our greatest boon is the ability to feel love, but our cat can feel love and doesn’t spend her time evaluating whether she’s spending her time well enough.  Catch me with a new answer next week.)

I focus too much on something I’ll never understand, and like everyone else, I’ve got pretty much nothing in answers to show for it.  That’s a real problem when you’re trying to live your life in a way that maximizes your freedom, sense of purpose, and happiness.

When I started this blog, I said my objective was to live in a way that gives me possibilities, and right now, that is the number one goal.  I can’t shake the nagging question, though: what will I do with freedom when I get it?  And, what can I do, where I am now, that makes me more free?

I once read a definition of happiness that said we can only experience happiness in reflection.  Happiness is the timeless feeling of complete engrossment in a task or a person.  I believe it.

After writing lists and lists of things that make me happiest, I’ve seen two patterns emerge; I need joy, and I need satisfaction. Things that cause me joy are effortless–spending time with my husband and our pets, reading fluffy novels, traveling and living in the moment of a new situation and new thought patterns, laughing with friends.  Satisfaction, which is almost more interesting, comes from tackling things that are difficult and working through them–writing and managing to distill the idea I’m searching for, planning the trip that will let me lose myself in the moment without losing my nest egg in the process, learning a new skill, solving a tough problem, doing something physical that makes me sweat.

If you couldn’t tell from the constant existential crises, I’m a tightly wound person, and pushing myself can sometimes be easier for me than letting myself bathe in joy.  I know that in my best life, though, I would balance and embrace both.

Joy and satisfaction.  No matter what else comes up in this journey, I know those are what I’m working for when I dream of financial independence.

What are you working towards?

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Why ClassPass Wasn’t Right For Me

Why ClassPass Wasn’t Right For Me

Has ClassPass swept into your city yet? If you don’t know the name already, just wait. ClassPass is next in line to the smart phone assisted services-on-demand throne, and it’s making fitness an all you can eat buffet in 32 cities across the nation so far. The basic gist of the service is that, for $80/month in most markets, you can have access to fitness classes at countless gyms in your area. We aren’t talking about second string options that no one wants to take either–ClassPass serves up barre, spinning, hot yoga, you get the idea, at the trendiest spots in your town.  As a secret admirer of/aspirer to all things LuluLemon, I was salivating as soon as I opened the app, even if I should know better.

(Sidebar Hatters: I read a theory the other day that most multi, multi, million dollar tech start ups simply connect users to services that already exist with more ease: think Uber, Seamless, and Instacart. I can’t shake it, or shake how unnecessary a lot of these services seem, and I’ll definitely be taking a more in depth look at the impact of these ubiquitous apps on your wallet later.  But for now, back to ClassPass.)

On the surface, ClassPass seems like a bargain. I took a gander through their Seattle offerings, and a membership at any one of the gyms ClassPass grants access to would run you at least $100 a month.  The only catch to ClassPass’s $80 deal is that you can only visit the same studio three times in a month; if there’s a hot yoga studio you love by your apartment, you can’t use ClassPass to turn a $120 membership into an $80 plan and visit the studio every day.  Gyms get to fill empty class spaces, ClassPass provides a fitness service without any of the hassles of running a brick and mortar fitness center, and you get to take classes to your heart’s content.  Win/win/win, right?

Unfortunately not for me.  And I do mean unfortunately; this isn’t about to morph into a snappy putdown of what ClassPass does.

I used the power of asking on Twitter to get access to a two week free ClassPass trial, and after five days in, I’ve ended the trial early.

I didn’t do it for any dramatic reason.  I attended one class, and I enjoyed it (though I did have trouble jumping into a studio setting with habitual practitioners as someone who hasn’t worked out in a few months.)  I think the service is well-designed, and if I put a great enough value on fitness classes in particular, I’d cough over the $80 at the end of my trial to keep the service going.

What I realized this week, though, as I scheduled my classes after work and found myself dreading them, as I wished I could just go for a run instead of worrying about parking at a studio, as I wondered what I would wear in a more upscale workout setting…was that ClassPass wasn’t bringing me any joy. The purpose of this blog is to explore the things in life that make us really want to stand up and sing and to have the financial freedom to use our brief stint of time on Earth the way that we want to.

Every time I decide to save instead of to spend, I add freedom and security to my life; why would I trade those things for anything less than absolutely, knock you off of your feet, joy?  ClassPass didn’t bring me that joy.

There’s value to working out, absolutely, but when I can do it for free (or as close to it as anything in life is), I’m not going to risk the chance that I’ll like ClassPass enough to settle for trading $80 a month for it.  The trial was interesting, but it seemed like if I stayed any longer, I’d talk myself into accepting a monthly debit for something that was useful, sure, but not worth my freedom. Maybe some of you with more self-restraint could do better, but what I lack in self-control, I like to think I make up for in self-awareness.

And that was all there was to it.  ClassPass seems like a fantastic service to meet the needs of folks who adore fitness classes and want to jump up and down at the chance to sample the different options their city offers.  I’m not that person (as much as I wish I were), so I’m not trading my freedom for what ClassPass is selling.  If you’re currently in a gym membership or another automated monthly debit for recreation system, I’d ask you to think deeply about how much joy the service brings you and whether you’re giving yourself a fair trade.  Do you keep your gym membership because you absolutely value what you get from it on par with the money you trade for it, or do you keep it out of unexamined habit?  Is it worth your freedom?

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Stop Answering Personal Finance’s Biggest Questions Automatically

Stop Answering Personal Finance’s Biggest Questions Automatically

Before I start this post, I want to thank all of your for the incredible response to the Life as a Hat launch and to extend a hello to any new readers who came from my Apple Announcement series (Part 1 and Part 2.)  I’ll turn an eye back to cell phones and personal finance soon, I promise, but today, let’s take a break from everything Apple to talk about an even more vital “A-word” in our lives: Automation.  That’s right, we’re doing vocabulary today.  It’ll almost be useful enough to make up for the headline.

Automation, or rote behavior, is one of the biggest factors at play in your financial success or failure.  As a former middle school teacher, I know how important repetition is, so let me just say again–

Automation, or rote behavior, is one of the biggest factors at play in your financial success or failure.

And for those in the back of the room doodling–

AUTOMATION, or rote behavior, is one of the biggest factors at play in your financial success or failure.

So, what’s automation?

When I say automation, I mean the purchases you make throughout your month without any thought.  We all understand that the gym subscription that takes $70 from you account every month is automation in action; I’m not here to waste your time with what you already know (you should really cancel your gym subscription if it isn’t bring you joy, though.) I want to expand the definition of automation until it includes the four biggest expenses of most of our months: housing, transportation, utilities, and food.

All of us have the big four, but most of us don’t think about them beyond our month to month defaults.  We live where we live, it costs what it costs.  It’s these choices, though, that define the flow of your monthly income.  We grow our wealth by either earning more or saving more, and the big four are the places where savings pack the most punch.  By putting more thought into our big four, we can change the course of our financial future.

So how can you stop seeing housing, transportation, utility, and food costs as automatic, and unchangeable, expenses?  The best method I’ve found is active interrogation–sitting down with your big four expenses and making them justify their cost.

Put your brain where your money is:

  •  First, take out a paper and pencil and write your four expenses in columns across the page.  A digital spreadsheet would work just as well if you prefer, but I personally value the weight of the pen in my hand when I’m dealing with weighty ideas.  The four expenses you’re about to investigate constitute some of your biggest budget hits, and they deserve the deliberation the analog world offers.
  • Calculate the monthly cost for each category and note it below its name–don’t cheat yourself when it comes to your own money.  When you calculate transportation, for example, include your car bill, your insurance, your gas, your toll costs, any figures that play into the ways you move from place to place.  When you calculate your food costs, take an honest look at your grocery bills, your morning coffees, your dinners out.  If you’re not tracking these expenses yet, there are posts coming soon to help, but I highly recommend adopting a habit of logging and reviewing all purchases ASAP.
  • Write out the underlying assumptions that go into the amount you spend.  If you need a model, you might consider something like this…Rent:  I assume that I need to live within 10 miles of work.  I assume that a large apartment complex will give me the most safety.  I assume _________ neighborhood will give me the opportunity to socialize with friends and walk to the amenities that make me happy.  I assume that I cannot live with a roommate.  I assume that I need a 1 bedroom floor plan.  I assume I need a parking spot included with my rent.  I assume…
  • After you’ve written as many assumptions as you can muster, honestly evaluate each one.  This is again where time and deliberation are important.  Some of the assumptions will hold weight for you.  If one does, you’ll feel it deep in your bones and know it’s worth the hours of your life you trade for it.  Some of the assumptions, though, will strike you as off.  Maybe you could switch from a one bedroom to a studio without a major hit to your quality of life, maybe you could add a roommate, or maybe you could take the bus (and enjoy it more) than supporting the commuting costs associated with your car.  Circle the assumptions that seem wrong or off to you.
  • On the back of your paper, write out the assumptions you question.  Jot down a few notes about what seems wrong and then create an action plan to address the assumptions that don’t make sense.  Break your action plan into steps that make the change realistic and achievable to you.
  • Get to work implementing your action plan and changing your automatic big four spending to a well thought-out system that makes more sense for your finances and your goals.

A word of warning–this is HARD work.   Depending on your personality, the interrogation might not be the sort of project that you can knock out in an afternoon, and the solutions you find will certainly take time to implement.  That’s the whole point, though; the biggest monthly purchases we make, and make again and again, should have an excess of thought and care behind them.  You’re worth the work this is going to take.

One last thing, Hatters.  This process?  It doesn’t end.  Over time, your big four will become automatic again.  When you realize it’s been too long since you’ve given them thought, break the pen and paper back out.  Not every interrogation will call for sweeping changes, but they will all give you valuable insights into your own behavior and the reasons behind it.

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Apple Announcement September 9th: What You Need to Do (Part 2)

Apple Announcement September 9th: What You Need to Do (Part 2)

If you read part one of this post series on the September 9th Apple announcement, you might think it’s all gloom and doom here on Life as a Hat.  You know there’s a new iPhone coming out soon, but you also know that the pricing model is designed to rope you into a quasi contract– you’ll pay a low initial deposit, sure, but you’ll owe your cell phone provider money for months and months to come by way of a hefty monthly bill.

apple announcement, technology, debt free, personal freedom
Licensed under CC0

Gloom and doom are the antithesis of everything Hatters are about, though. I want you to be able to manage your money in a way that gives you the greatest utility for your purchases and lets you keep as many of the hours you trade for wages as you can.  That’s freedom, baby, and the Apple announcement is going to help you get it.

How You Should Take Advantage of the Apple Announcement

You’re going to use this announcement to buy your own phone, and you’re going to take that phone to a pre-paid plan like we talked about.  Here’s where I might lose some of you, though; it’s not going to be the iPhone 6s Plus.  It’s not going to be the iPhone 6 Plus.  It’s not going to be theiPhone Trending Ebay Prices 2015 iPhone 6.  Hatters, I want you to put some serious thought into buying the iPhone 5s this October.

Take a look at the chart to the left.  I’ve priced out the current line up of Apple phones plus a few older models of the iPhone based on their trending prices on Ebay (as of 9/7/2015).  I made a few choices when it came to the phones I selected–namely, I opted towards prices for “unlocked” phones that can be taken to any carrier, and I chose the midrange storage capacity when options were available.  Those choices mean the prices you see might be slightly inflated depending on your needs, but they’re the phones that will work best for the average consumer in the second hand market.

Right now, an iPhone 5s with a 32 GB storage capacity will set you back about $320.  That’s only a little over the $299 most consumers are willing to pay for the latest Apple release, but when you spend your $320 on an iPhone 5S, you aren’t locked into a contract or a payment plan.  You own that phone, and you can take it where you choose, to what deal you choose, at any time.  Choices, my friends, choices.

Here’s where it gets even better.  These prices?  Give them until October, and they’re all going to fall.  The new iPhone will push the 5C and potentially the 5S (depending on how Apple chooses to incorporate the “Plus” options) out of the line up, but those options will stay available on the second hand market.  You can see from the chart that the 4S, a great phone, is down to about $120 because it’s an older model that’s left the line up already.  I don’t know about you, but I would much rather stop paying $90 a month for cell phone service, and take two month’s worth of savings from the $30 T-Mobile plan to buy my very own, no-subsidy, no-contract iPhone.

So why the 5S?

I’m recommending you consider the 5S for a number of reasons this October (I say October because the price drop from the September release won’t happen immediately, but keep your eyes peeled.)

The iPhone 5S offers some of the fan favorite features of iPhone 6 and up like…

  • Fingerprint unlocking
  • 8MP camera
  • IOS 8.4
  • A powerful processor
  • 1 GB RAM
  • ~One day of battery life with medium use

It also offers a few of my own personal favorite perks like…

  • Freedom from bulky monthly contracts
  • More money for your emergency fund/your retirement savings/your dream trip/your home downpayment
  • The pride in knowing that you own your phone, and you’ll take it to the network that gives you the best deal

I’ll be upfront with you.  There are some downsides to choosing a second hand 5S.  Your camera won’t have the upgrades of the 6S, though it’ll still take incredible photos with ease.  You won’t have the slightly faster processing of the 6S, but you’ll still be able to use your device for more than we could have imagined a few years ago.  You won’t have the convenient larger screen for gaming, but you will have a proficient system that will rarely make you wish for more.

I think the perks far outweigh those costs, though, don’t you?

How to Buy a 5S (Relatively) Safely on Ebay

This last portion is for my readers who might not feel comfortable buying a phone second hand.  There is always going to be risk associated with the second hand market, but there are things you can do to mitigate those risks.  When you buy your iPhone 5S, I want you to make sure…

  • There is a clean IMEI number advertised on this listing.  This helps ensure the phone wasn’t stolen and that you’re able to activate it on your own network. It’s important that the clean IMEI is advertised in the listing because it helps ensure Ebay can protect your purchase if you receive a phone that can’t be activated.
  • You pay close attention to the condition description of the phone.  I’m personally comfortable with anything listed from “Good” condition on up; your comfort level might vary.  Do understand that the photos on eBay are often stock pictures, and they aren’t involved in any purchase protection from Ebay.  The condition description is what the seller is obligated to match.
  • The phone is listed as “Factory Unlocked” or listed for use on the carrier network you intend to use. Factory Unlocked will allow you to take your phone to any network, and I personally prefer that freedom.
  • The Ebay seller you choose has plenty of positive reviews from other iPhone sales
  • You make purchase using a method that will provide you secondary protection beyond Ebay–I like to use AMEX because of their great customer service, but PayPal also provides a set of purchase protections.

Got through all that?  You’re ready to take on the Apple announcement this week like a personal finance pro and make it work for your own freedom.

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