Today I would like to spend some time writing about an expense item that almost everyone I know has – but that no one had less than 15 years ago. I am talking about cell phones – smart and not smart. A household of four people can easily spend more than $150 per month on a plan. For those who insist on having a top-of-the-line phone with unlimited data, the cost can be even higher.
For those who are younger than forty, I would like to go “back-in-the-day” to talk about how people used to pay for their phones. I am talking about the time before wireless when a mobile phone was one that let you roam around your house. The only option was a landline. My monthly phone bill varied every month. The bill usually came to somewhere between $40 to $80. Today, pricing is constant, but back then the phone companies billed for long-distance by the minute. Not only did a person pay more or less depending upon individual usage, but their bill also changed depending on what time of day they made their calls. It cost a lot more to call during business hours. The price dropped off in the early evening and then became rock-bottom after 11 pm or on the weekends. Calling after 11 was a known practice among people involved in long-distance relationships.
We pay a lot more for our phone calls today. Some people have both a landline and a smartphone, but increasingly people are choosing to do all of their telephony via one line. It should go without saying that anyone on a budget should have one or the other, but not both. According to the Pew Research Center, almost 70 percent of adults had a cell phone by 2015.
Pew reported that 98 percent of young adults had a cellphone – more than had a computer or any other kind of electronic device.
My friend Rebecca offers this money-saving idea: If you are willing to rethink your needs and then do some research, you don’t have to pay so much for your phone.
You need to ask yourself two things: how much do I want to spend and how much do I want to do?
If the answer is that you can do less, then you should consider buying texts and minutes through a “pay-as-you-go” service. You should try to minimize costs or maximize value. I the case of cell phones, this relates to per-minute costs — which of course you also want to reduce. So, just to highlight this, I’d like to talk for a minute about minimizing cost vs. maximizing value.
This concept applies not just to cell phones, but to everything. Sometimes lowest cost is the best value, but often there are non-monetary factors (quality, convenience, ease-of-use) that go into making one thing a better value than another.
Often minimizing costs in the short term results in additional costs over the long term. If you buy a cheaper thing that is of a lower quality, you will likely have to replace it sooner, so the total amount you spend will be more. But if it’s something you’re only going to use one time anyway, the quality doesn’t matter, and you should just get the cheapest thing. Cell phone minutes are a commodity. For the most part, as long as you have good reception, one company’s minutes are as good as any others.
So, as with everything, what the best strategy depends on what you are trying to accomplish. (As I’ve learned, the answer to everything is, “It depends.”)
When trying to figure out which phone service I should get, I ran into a conflict between figuring out which one would allow me to spend the least amount of money overall and which would give me the most utility for the least amount of money.
Most of the time I focus on value; I want to get the most for what I’m spending. In the case of the phone service, however, I went with a different calculation — I looked at what was going to cost me the least amount at the time I was signing up for it, regardless of what I would get for that.
This was partly because I wasn’t getting the phone because I wanted it, or thought it would make my life better, but because I felt compelled to get it by external circumstances (people expecting me to have a phone, people telling me I should have a phone for safety, etc.). But also because the calculations to determine product value can be difficult for a good that you don’t have.