Budget Hack: How Do I Reduce My Cell Phone Bill?

As part of an ongoing series, we are going to go through each of the major expense categories that make up one's monthly budget and discuss ways to reduce your expenses in those categories in order to save more money and build your wealth faster! Often we focus on helping you figure out how you can earn more so the gap between your monthly nut and your income begins to widen. But today, we are focusing on the expense side of the equation.

First up, is your cell phone bill. 

What's great about being in our profession as financial advisors is everyone tends to open up to you and share their process for spending / saving / budgeting and the key tools and strategies they use. This is a huge benefit because it helps us as advisors find new and better strategies for tackling money problems.

Today's strategy was just that, one I learned from a client. Before hearing from this client I thought we were all pretty much price takers when it came to cell plans and that whether I switched from Verizon to AT&T or even to Sprint (whose network is inferior) would not result in meaningful cost savings when I compared apples to apples.

A few months ago, I was sitting down with a couple and reviewing their monthly budget, line by line. This is a fairly normal exercise for me and I have a pretty good general idea for where most expenses are going to end up. When we got down to the Cell / Mobile Plan line on their budget he said, "Yea so on that we spend about $70/month."

I said, "Okay great, so $70/month for each of you, that's $140/month combined, and your kids obviously don't have phone yets because they are too young... $140/month is actually really good, are you on one of those new Sprint plans?" 

He replied, "No it's $70 combined, total, that's all we pay per month."

I choked on my coffee. "What? Is one of your parents paying for one of your phones or something?" (I'd seen that quite a few times before... you lucky ducks out there). 

"No we pay for both of our phones."

Me: "Well... what kind of phone do you have? Are you on one of those old school Nokia prepaid plans or something?" (I probably shouldn't have said this in case they were!)

Client: "Naw, we both have iPhones. Not the latest model, but the model right before that. We do it through Cricket Wireless."

Me: "Cricket? They must have a shoddy network right? No way they can compete with the big boys on all those capital expenditures to put up the towers."

Client: "No they lease the AT&T network, so the call quality is the same as if you were using AT&T as your service provider."

Me: "Well what do you know, you learn something every day."

As you can see on the Cricket site, the $70/month for two phones ($35/line) include 2.5GB of data and unlimited talk and text. You can boost it to 5GB of data per line if you bump up the price to $50/mo/line. 

The one caveat here is likely the cheapest way to do it is to bring your own phone that is compatible with the AT&T GSM network. You can buy phones through Cricket, but we don't think they are going to be any cheaper than buying anywhere else.

This is the perfect kind of plan if you are someone who doesn't need to have the latest model but can have the 2nd to latest model. 

Right now on eBay, the iPhone 5S is going for about $250-$300. The iPhone 5 is going for about $150-$200. This implies that 1yr of depreciation on the 2nd to best new model is likely about $100/yr. Meaning, you could purchase a new phone and sell it each subsequent year and only be out $100. 

Factoring this $100/yr depreciation on two phones results in approximately $17/mo of additional expense for a couple.

$70 for the plan + $17 for the phones = $87/mo for your cell phone bill for two people. That's pretty incredible. I know that's less than half what I currently pay at Verizon.

If you want a link to start with an extra $25 off shoot me a note here and I'll send it over to you.

Think about this for a minute... this strategy saves you around $100/month. If you are young and have at least 35 years of life left, that $100 should be worth $1,000 in 35 years. So by switching, you are likely increasing your lifetime net worth by $12,000/yr! That's meaningful.

Now don't say I never did anything for you.