In this article, we're going to be talking about the center of our universe in the 21st century: cell phones.
Phone companies want you to believe that having the newest phone, the latest upgrade, or the unlimited plan with the most perks will put you a step above your peers.
What they don't want you to know is that a lot of the time, these supposed upgrade "deals" are costing you a fortune. And getting ripped off is not the way to be considered cool or successful among your friends, family and colleagues.
I'm going to teach you how to save money when it comes to cell phones. We'll cover how long you should keep your phone, when you should upgrade your phone, and how much you can save on your phone bill.
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The idea for this article came from Phil Van Drunen from the Bikeshop Agency We share an office space, and he helps out with our MoneyBru podcast.
He was telling me what a rip-off phone upgrades can be, and how he saves money when upgrading his phone. He inspired me to do some digging because I was considering upgrading from my Google Pixel 2, which I'd had for 2 to 3 years.
"In 2016, the average American said that they upgrade their phone every 22 months."
A lot of people look to upgrade their phone after less than two years because the upgrade is worked into their phone contract. These contracts put people in the mindset that they need a new phone every year.
To further perpetuate this mindset, phone companies are constantly releasing new phones and encouraging customers to upgrade to the latest release.
Because of this cycle, people become addicted to upgrading. With almost every product you buy, the enjoyment you get out of it starts to expire after a year. That's why you might feel excitement at the thought of upgrading to a new phone: You've grown bored of your old phone.
But this upgrading addiction is costing you a lot of money! You'd be better off buying a new case every year instead to reignite your excitement.
If you can avoid falling into these traps, honestly you can save a ton of money.
Here's the Math:
It can cost upwards of $650 to upgrade, plus an extra $25 a month here and there, in addition to the cost of the plan's extras like unlimited data.
It may sound nice to pay off your new phone over a 24 month period, but you can't forget to calculate all of the add-ons, like data and insurance.
You can save some serious money on your phone bills by cutting down your data usage. Keep track of how much data you and your family use for a month or two, and then switch your plan down to the lowest (and cheapest) option based on your usage.
Insurance is also an extra $15. I recommend always cutting the insurance that is worked into your plan by your phone company because you can get a better deal at other places.
"As far as a cheaper cell phone insurance company goes, I've found the best alternatives to be Squaretrade or Asurion."
Unfortunately, you can't avoid the taxes, but with these tips, you can get your plan down to as low as $20 a month.
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Trading in Your Phone and Upgrading - Getting the Good Deals:
My phone, the Google Pixel 2, is only trading in for $49 right now. But a quick Google search will show that the cost of a used Google Pixel is going for $115, refurbished.
This is proof that most of the companies use phone trade-ins to make money off of you. And if your phone is damaged? It's an even worse deal.
"They also get you by encouraging you upgrade to an unlimited plan which costs you even more."
My real-life example:
I wanted to upgrade from my Google Pixel 2 to a Samsung Galaxy A71. Upfront, they told me it would be an extra $10 a month for 24 months. Doesn't sound too bad right?
But what you don't see behind the scenes is the actual cost of the plan. The retail price of the phone itself is $649, and then you have the add-ons: There's the $25-30 plan, plus the $40 unlimited charge, and the $15 insurance fee.
That's actually $80 a month, not $10. And $80 x 24 months = $1920 for your phone.
That's messed up.
Here's the Workaround:
Phil told me to go look on Amazon. The same Samsung Galaxy A71 that was $600 through my phone company was only $351 on Amazon.
If you have an Amazon Store Card or an Amazon Prime Account, you can pay that off over 6 months with zero interest.
They also have an insurance plan that is just $4.99 a month instead of $15.
They also give you the option to choose whatever plan you want. If you do feel like you need unlimited, it's an option for $30 a month. But I recommend using my tip from before and looking at how much data you are using to decide the right plan for your family.
Once you have your phone from Amazon, you can go to your service provider, who will help put in your SIM card and update your account. And then, you're all good to go!
In the end, it's not worth it to trade in your old phone because that $49 is not going to do much to soften the blow of that original $600 price. It's cheaper just to buy your new phone off of Amazon. And if your old is still in working condition, you can always sell it online.
How Long Should You Keep Your Phone Before Upgrading?
I have found that the optimal holding time for a phone is 3 years.
Phones do depreciate in value quickly, so going for the newest phone every year doesn't save you money in the end. If you hold onto your phone, pay it off, and then buy a model that is 1 or 2 years old, it will have a lower price, and you will save money on your bills.
If you follow these tips, you should be able to get a phone for a third of the price compared to the top phones on the market.
Trust me, you don't need all of the fancy gadgets and cameras that these companies use as selling points. These features don't really benefit your life in any way.
You can take the money you save on your phone bill and use it on other things.
Here is the video that relates to the article above:
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