Having reliable cell phone service is definitely a need. You might have a landline phone at work, but chances are pretty good that your home phone is a cell phone. Could you theoretically survive without a cell phone? Sure! People did just that before they became widespread around the turn of the century. Nowadays, though, you cannot even visit a ballpark without a mobile ticket.
If you are among the 97% of adults in the United States that own a cell phone, it is worth taking time every so often to make sure the money you spend on cell service is being used effectively.
Which phone should I buy?
Go to the website of any cell phone provider and you will see myriad options for purchasing a phone. Even specific models have their own levels.
For instance, take the latest iPhone. You can select from an iPhone 14 or iPhone 14 Pro—the difference being the camera’s capabilities—and for each of those, you can select the regular or Plus/Max version—the difference being the phone size. Thus, you could buy an iPhone 14, iPhone 14 Plus, iPhone 14 Pro, or iPhone 14 Pro Max. Once you select the phone, you will have to choose the color, and finally the memory size. Depending on the model and memory size, a new cell phone in the iPhone 14 series may run you anywhere from $799 to $1599 before sales tax. (The color you select, assuming it is available, does not impact the cost.)
But do you need the latest iPhone? Or could you get by with a prior model? You can pick up an iPhone 12 for as low as $599 or an iPhone SE for as low as $429. (Prices current at the time of writing, and may have changed in the interim.) If you do “need” the latest iPhone, consider waiting until September when the next version will likely be available.
While a cell phone itself is certainly a need, a particular cell phone usually is a want. Follow the same general framework that you would for buying a car. First, you probably do not “need” the latest model, and can save a lot of money by buying a slightly older model. If you decide to purchase the latest model, compare the costs between different models and make sure that the extra cost is worth it. Second, once you buy the phone, use it for several years until it wears out. Buying a new phone every year or two adds up quickly!
You can still purchase a “new” older model, such as a never-before-owned iPhone 12 or 13, and you can save even more by purchasing a refurbished phone.)
Cell phone companies will tempt you to buy the latest models by letting you purchase them interest-free over an extended period, usually 24 to 36 months. Do not be seduced! If you are going to purchase a phone—particularly the more expensive models—be sure to save up in advance so you can pay cash. As with all your happiness goals, the monthly contribution towards your cell phone fund would be part of your regular budget. Forcing yourself to save rather than buying on credit gives you a built-in waiting period to consider whether you really want to make the purchase (and you earn interest!). If you can delay buying a new phone for an extra year each time, that additional money you save can go towards another purpose!
You can usually save on your purchase by trading in your old phone, but only if it is a more recent model. If you have had the phone for three years or more, you will get a minimal trade-in allowance at best. However, the tradeoff between upgrading your phone every two years with a trade-in allowance versus upgrading your phone every three or four years without a trade-in allowance still saves you money over time.
Finally, consider switching providers when you upgrade your phone. (Your phone number, and possibly even your contacts, can be ported over.) You can often get huge savings on new phone purchases when you switch services. Read the fine print, though, to be sure the new-customer savings is actually worth it. You typically need to sign up with a minimum plan level—more on that below!—and keep it for a certain amount of time since the savings is applied as a bill credit over that time period.
Which provider should I pick?
This one is easy. Pick the provider with the lowest-cost plan that meets your needs and actually works where you live, work, and frequently visit. Even the best plan is useless if you have no service.
What about the plan?
Gone are the days of monthly limits on minutes talked or text messages sent and received. (Remember nights and weekends minutes, anyone?) Unlimited minutes and texting are ubiquitous. The key variable these days is data.
The path of least resistance is to simply get an unlimited data plan. However, these are the most expensive plans. Yes, you need some data, but do you really need an unlimited plan? (Depending on your occupation, the answer might very well be yes.)
The best way to get a handle on your data needs is similar to budgeting generally: look at your historical data first. Your monthly cell phone bill (yes, they still exist—just log onto the website or open the app for your cell phone provider) will tell you how much data you are using every month. From there, you can get a breakdown of how you are using the data (streaming, e-mail, social media, etc.). If you regularly use 7–8 gigabytes of data per month, a 10-gigabyte data plan will meet your needs; no sense in shelling out extra money for the unlimited plan. Also consider where and when you use data. Why pay for data that you use at home when you could be on wifi instead? If you get in the habit of making sure you are on wifi whenever possible, or even just the places where you frequently visit, your data usage will likely go down considerably.
Additionally, it may be worth making an effort to cut down on certain data usage, like watching videos when away from home, that has become a habit due to boredom. With a bit of planning, like bringing a book or Kindle along for a long ride, you may be able to considerably reduce the data you use.
Prepaid plans are a great bargain. Mint Mobile offers plans for as little as $15/month! Their lowest-cost plans give Xa and I plenty of data for our needs, but they have various options all the way up to $30/month for unlimited data. If you are not sure of your data usage, sign up for their unlimited plan for a three-month trial period, and then switch plans accordingly just before your trial period ends. (As of this writing, Mint Mobile is offering a three-month trial period on their unlimited plan for $45 total.)
I highlight Mint Mobile because that is the cell phone provider Xa and I use, but most carriers offer some sort of prepaid plan option.
Two examples
About two years ago, I was helping someone with their finances. They were paying hundreds of dollars a month on their cell phone bill and often incurred late-payment charges. The bill included the costs for multiple devices, data on devices that were no longer used, and multiple unlimited data plans. They used savings to pay off the remaining amounts owed on the devices, canceled the non-phone data plans (since those devices were only used at home where wifi was available), switched their plan to a $25/month prepaid option, and made sure the bill was set up on autopay so they would not have to worry about making the payment. There was no change to the phone usage itself, no reduction in service (after all, they stayed with the same provider), increased savings, and decreased stress. Wins all around!
Last year, our niece took our suggestion to sign up for a Mint Mobile trial period to save money on her cell phone bill. Unfortunately, the T-Mobile network that Mint Mobile uses has spotty service where she lives, so she had to switch back to her previous carrier. She was not able to realize the same savings that she would have with Mint Mobile, but when switching back she selected a prepaid plan for considerable savings. Still a win!
Now what?
Think about your cell phone needs ahead of time so you can pay cash for a new phone instead of financing it, but be sure that your phone purchase is a need, not a want. And just like you should shop around for car insurance periodically, check out various cell phone plan options every so often. Cell phone bills and plans have gradually grown for many folks in recent years, so monitor where you can realize savings. You do not want to spend money on your cell phone plan that could be put to another use!
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