Cell Phones

Cell Phones and Plans

Cell phones have become an integral part of our lives and for good reason. Their use has extended far beyond the essential calling and messaging features to that of a computer. Indeed the modern smartphone has its own operating system and its own package management system that allows you to install a myriad of apps to perform such helpful tasks as managing your bank account to messaging a friend halfway across the world. However many individuals are grossly overpaying for both the device itself and the device plan that enables mobile service.

I shake my head at the ridiculousness of people buying $1,000+ cell phones! I was a holdout for many years still happily using my flip phone but I finally bit the bullet and purchased a used iPhone 4 for $50 from an intern I had at the time. I’m pretty sure the newest iPhone at the time was maybe an iPhone 6 but coming from a flip phone the iPhone 4 was a huge step up. Times have changed even for me since then but I still refuse to overpay for a device that will quickly depreciate in value. There are some basic guidelines I follow when I’m in the market for a new smartphone which I’ll share below.

Decide on the Maximum You are Willing to Pay

The absolute maximum I think I would be willing to spend on a new or used smartphone is $500 – after taxes. Your maximum might be higher or lower but you should establish this upper bound and stick to it. So far I have never spent more than around $300 on a new smartphone. Scoff at me all you want but unless you have a huge amount of disposable income there is no reason to spend >$500 post tax. If you have to think about getting a protection plan or insurance for your cell phone then you are paying too much in my opinion.

You will absolutely be paying a premium for an unlocked cell phone but this will be worth it once you get your plan. I’ve generally stuck with getting new phones from Samsung but if you feel more comfortable with an iPhone that’s fine but you’ll have to either get an older model, lower base model, or used to stay within your maximum spend. Whatever you get make sure it’s a quality model and don’t try to get something super cheap either because this phone needs to last a number of years for you to get the most value out of it.

GSM or CMDA

Never heard of GSM or CMDA? I won’t blame you but essentially it’s the technology that powers (or used to power) different cell phone providers. Because the major mobile providers are retiring their 3G networks this terminology might be going away but you still need to know about it. What it really means for the end user is compatibility between your unlocked cell phone and the service plan you end up using. Please be aware of this because your unlocked cell phone and your plan must be compatible. Many modern smartphones can work over a variety of networks but do your research to ensure your phone will work with the plan you select. Most providers will have a method to check your phone’s compatibility with their network and you should always take advantage of these tools.

Skip down to the section on Plans before you decide on a new/used smartphone if you’ve never done this before. Your phone and your plan must be compatible! It’s not the end of the world if you mess up because there are other good plans to choose from but you don’t want to limit yourself. I recommend choosing an unlocked phone that will work across almost any network. You can look to see if supports both GSM/CDMA or it may display the list of all the networks. The last couple of smartphones I’ve purchased have supported all the mobile networks so I recommend you do this as well to make things simple.

Purchase an Unlocked Smartphone

One of the recommendations I stick to is purchasing an unlocked cell phone, but why? The main reason is it’s essential in order to proceed to the other half of this blog post – the cell phone plan. You won’t be able to take advantage of the savings by switching to a different cell phone plan unless you have purchased an unlocked cell phone. There are some exceptions to this rule but in general you will save yourself some headaches if you stick with the unlocked cell phone criteria.

I’m sure you can find unlocked cell phones on a variety of different websites but I can only vouch for my own personal experience. When I’m in the market for a new smartphone I have only used either Amazon or Best Buy. Simple, I know right? Just make sure when you purchase a new or used smartphone you are getting an unlocked version which will work with a variety of different plans and services that we’ll cover later.

Use a Free Payment Plan if Money is Short

I still consider a smartphone a major purchase and sometimes I don’t feel like paying the full amount all at once. The major networks realize this too which is why they will get you locked into a contract and a payment plan of their own. What I’m suggesting is use something like PayPal credit or maybe you have the Amazon credit card or store card where you can split those payments up interest free over 6 months. You will retain full control over the financing and you can pay off the balance anytime you want.

You will miss out on the credit card rewards by doing this so it’s not the smartest financial move, but it can protect your immediate cash flow. Why not take a free short term loan and use someone else’s money up front? Just be sure you can easily repay the balance at any time and don’t get caught unawares when the full balance is due. You must stay on top of this to avoid the eventual interest charges they are hoping you have forgotten about.

Plans

Arguably the hard part of this exercise is deciding on your phone. Once you’ve decided on that you either already have a plan or you’re ready to go shopping. Take a look at what you’re spending now and make note of all your current plan offers. You need to understand your usage patterns too and you may not like what I’m going to recommend next.

Confirm You Are Not Under Contract

You won’t be able to cancel your current plan without a large fee if you are currently under contract. You might have to wait until your current contract is over so do your research.

Try to Avoid Unlimited Plans

I hope I didn’t upset you already but you should try to avoid unlimited plans if your usage patterns don’t require it. Collect some data over a few weeks to a month and ask yourself do you really need unlimited data, minutes, and texts? Chances are you can get away with reducing at least 1 of these categories in order to save yourself some money.

Choose a Provider

I like to keep things simple so I’m only going to tell you about 3 service providers. These providers all fall under the umbrella terminology of MVNO or mobile virtual network operators. Do a cursory search for MVNO to learn about how these providers work and provide service.

This is the big secret on how you can save a lot of money on your cell phone. You can do a web search for terms such as “best MVNO”, “best pre-paid plan”, etc to find others but I will list 3 I know of:

You’ll find comparable plans under all three providers. Currently I have my wife using an annual Red Pocket plan and I am using a Tello data only plan. My wife’s plan was available on eBay only and it is 8GB/month + unlimited texts/minutes for $20/month – all in after taxes. My data only plan from Tello works out to $6/month – I get my minutes from a voip provider which is another topic for another day.

Order Service and a SIM Card

Once you decide on a service provider you’ll need to order a SIM card from them. You’ll need to be comfortable with installing your own SIM card and setting up the service. There is always a chance you could lose your current phone number and you’ll need to make sure your phone number is free and clear and not under any kind of contract.

Things can go wrong so be prepared and I wouldn’t advise porting over your number until you have a few hours of time available to make sure things go smoothly.

Take your time and follow the instructions of the provider which should have been provided in the SIM card kit they sent you. I haven’t ever lost my number but I’ve heard it can happen so it’s best to prepare for the worst or you can avoid the entire hassle of porting your old number and just be assigned a new number. There is some minimum amount of work you have to put in order to port your old number over so be prepared to gather the information required, having to chat with tech support across both your current and new provider, etc if required.

Estimate your Monthly and Annual Savings

Below are some examples of what you could potentially save by switching to a less expensive phone plan and purchasing a less expensive unlocked smartphone. The assumptions are the new plan will cost $20 per month vs an existing phone plan of $100 per month. In summary by using a cheaper plan you could save roughly $1,000 per year!

Unlocked Phone Cost	Savings vs $1,000 Phone	Ongoing Plan Annual Savings	First Year Annual Savings
$700	$300	$960	$1,260
$600	$400	$960	$1,360
$500	$500	$960	$1,460
$400	$600	$960	$1,560
$300	$700	$960	$1,660