The High Cost Of Mobile Phone Plans
During our May 2016 Dividend Income and Expenses update, I shared the annual cost of our mobile phone plans. Many people were surprised by how little we paid annually for our mobile phone service. Today, I’ll share how we do that….
We Pay Annually
In total, our mobile service for two phones amounted to $122.45, for the upcoming year. Yes, the entire year! That works out to $5.10 per month per phone. Yes, it’s that low!
Before I give away the secret sauce, I should probably this story from the beginning…
My Cost Per Minute
The year 2000 was the year I graduated from college. I was fantastically optimistic back then. I had a paying job, and the future looked bright. In my arrogance, I went out and purchased a mobile phone with accompanying service plan. This was back in 2001. It was a nice Nokia dumb-phone (now I’ve completely dated myself!).
I paid about $50 for that Nokia. The monthly plan amounted to $29.99 per month. Yes, I was a big spendthrift back then – don’t worry, I’ve sinced learned from my (former) wasteful ways.
Anyway, I enjoyed the use of my very first mobile phone for an entire year. Once my one year contract was up, I decided to sit down and do a little math.
Remember my tools for temptation? I decided to calculate my cost per use.
I added up the annual cost of my mobile plan, and divided by the number of minutes I actually used it (I didn’t use SMS at the time).
Essentially, I found out the cost per minute of my mobile plan, and the result was shocking. The price per minute exceeded $1. Yes, I was paying over one dollar per minute. Why so high?
It turns out, I’m not a big talker! Neither is Mrs. Tako. Back then, I didn’t use my phone very much, and I still don’t today.
I would have been better off financially using a pay-phone. Yes, they still had pay-phones back then! Instead, I switched myself over to a Tmobile pay-as-you-go plan.
Pay As You Go Plans
Pay-as-you-go (sometimes called prepaid) plans are great for people who are not heavy mobile phone users. If you’re not familiar with how these plans work, just envision a bank account. You put money onto the account and maintain a balance. You “withdraw” money from that account when you talk or text. Sometimes the money in the account will ‘expire’ depending upon the plan terms.
Over the years we’ve built up a pretty decent balance on our accounts, and only need to pay the minimums ($10) to maintain the account for a year. We actually spent more than the minimums this year, but it’s still pretty cheap at $55 per account (before taxes)!
So that’s the big secret — We know how much we’re going to use our phones in a year. We don’t use them much, so we don’t bother paying for much! A simple pre-paid plan is more than enough for our usage!
Fast forward to 2016, and not much has changed.
Our T-mobile prepaid plan is now a “legacy” plan and not available for new subscribers. We still don’t talk on the phone much. We do have much better phones now, but we still get by with minimal pay-as-you-go plans. We also don’t sign contracts to subsidize the cost of our phones. Instead, we buy cheap phones off the internet (Mrs. Tako’s phone), or used phones from Craigslist (Mr. Tako’s phone). We don’t purchase mobile internet plans because we don’t need them.
Frankly, those plans are overpriced…
The Mobile Internet Addiction
I don’t need to tell you that in the last 8 years, the world has become completely addicted to mobile phones and mobile internet access. Instead of holding their heads up and looking around at the world, every spare second of human life is now spent looking down at tiny little screens. It reminds me of drug addicts, always looking for the next hit.
Chiropractors must wake up every morning and think they’re living in some kind of dream world.
Much of the developed world is addicted to mobile internet access. Don’t think you’re addicted? Try giving it up. Oh yes, I know…you can’t live without it for a million reasons. I can hear the excuses from here.
You know what? You don’t need it!
I’ve never had a mobile internet plan and I’m far happier because of it! Let me explain further…you might just change your mind!
Devices of Consumption Not Creation
First off, mobile phones and associated mobile internet plans are mainly devices of consumption, not creation. Have you ever write a novel on your phone? How about programming the next killer app? Composing music? Building a website? Designed a building? Probably not.
Besides a few emails or photos, mobile phone usage is about consuming media. Things like music playback, streaming video, web browsing, and playing silly games on the toilet are its most common uses. That’s just entertainment!
Now ask yourself, are you really willing to give up $360 a year ($30 per month) for even more entertainment?
Is your financial freedom worth so little? For $30 a month, I can use wifi instead. If wifi isn’t available, I can wait one hour (or two) until I do have wifi.
I saved that money and invested it instead! Mrs. Tako and I have done this for 15 years now. That money, compounded at 7% for 15 years amounts to over $19,000.
I already spend too much time on computers. I’d rather have $19,000 than a few more minutes of web surfing or checking emails.
The World Has Changed
Some people might argue that the world is now more connected, and we need mobile internet service plans to keep us connected….
I totally agree that the world is more connected now, and the internet is a fantastic resource for…well…all kinds of information! But there’s absolutely no reason we need to be constantly connected to it.
In most first world countries, the vast majority of the population is going to have wifi at home. If you work in an office, most workplaces now also have wifi. Those laptops used for actual creation need wifi. So right there you already have wifi internet access for 21 hours of your day — roughly 87.5% of it.
If I go to the library, the airport, a coffee shop, the hospital or numerous other institutions there is already free wifi available.
Do we really need to be connected 100% of the time? Is it really necessary?
Alternatives
I get it, I really do. Smart phones are pretty cool. I love using mine to take pictures of the kids, or use the calculator app to do some quick math. Having so much computing power in such a small package is fantastic, but I don’t need an internet connection all the time.
As Mrs. Tako and I have found, there are lots of ways to get by without a mobile internet plan. Here’s a few alternatives that we use:
Navigation — Offline navigation is actually really good these days and it’s built right into the Google Maps application. We used it extensively on our Hawaii trip and frequently around town. Assuming you download the map data ahead of time, there’s absolutely no need to have a mobile net connection for navigation. It’s free!
Price Comparisons — A lot of people will use their mobile phone to do price shopping comparisons while actually inside the store. You know, you see a good price in the store and think, “I wonder if it’s cheaper online?” You know what, 90% of the time Amazon or Ebay is going to have a cheaper price than a retail store. There’s a reason why brick-and-mortar retail sales have been so shitty lately — ecommerce might just have a more efficient business model.
Most of the time impulse purchases are a bad idea anyway. Without a mobile internet plan, we just wait until we get home to do price comparisons. This is actually a great way to stop unnecessary spending — remember my Tools For Temptation? Patience will save you more money than paying for a mobile internet connection.
Music — I know music services like Spotify, Last.fm, or Pandora are very popular now…but in the old days people still managed to have music on-the-go without paying for a monthly service. However did they manage that? Do yourself a favor — skip the music service and skip the mobile internet. Even more savings!
Notes and Lists — One of the best list and note taking apps we use is Google Keep. We frequently synchronize notes and lists between devices and people. The best part is – it’s free. The service works offline too. A quick sync when we have wifi is enough to keep all of our notes and lists in sync.
And Many More — There are work-arounds for almost every possible situation! If you’re into financial independence like us, finding alternatives to over-priced mobile plans is actually something you might enjoy!
An Unpopular Idea
The blog trolls are probably going to disagree with me in the comments. I don’t mind! They just prove my point! Denial isn’t just a river in Egypt!
I fully expect this post to be pretty unpopular — it’s a good thing I don’t write posts to gain popularity! (I don’t try to optimize for search engine traffic either!)
Breaking an addiction (or dependence) is a very difficult thing to do. Much of society is completely addicted to their mobile phone plans. They would rather suffer in wage slavery than give up constant internet access.
My counter argument is actually a question – If mobile phones with internet plans are so fantastic, then why are productivity growth rates declining?
In the past, as new technology has been introduced to society, we have seen great productivity growth that boosts the output (on average) of every worker.
At roughly the same time as the mobile phone hit critical mass, statisticians began seeing these declines in productivity. Are people so glued to their phones they get less done? It’s a possibility. There’s a lot of good theories. Right now, no-one truly understands why this is happening.
The pace of technology advancement has continue unabated for the past 8 years, and yet we’re not producing much more.
Maybe we should try removing what we don’t need instead…
[Image Credit: Flickr]
It is true that cellular phone services are very expensive. The cost of the subscriptions and physical phones is really expensive. Those cellular service carriers know that people are addicted to social medias and text messaging – communication. In general, the majority of people cannot live without communicating with others. This behavior with the availability of the phone services causes many negative impacts to our life (e.g. driving and using a cell phone together, using social media apps during the working hours, etc.).
My wife always sends a message to her friends via Facebook Messenger and complains when her friends don’t respond right away. I once told her that she should just call that person. That is the purpose of the phone…
All true!
All of your points are true. For anyone who thinks they’re using mobile data all the time and couldn’t live without it, I suggest a simply experiment: Go to Settings and turn off your Cellular Data. Live with your phone for a couple of days.
Turns out you don’t need the data as much as you think. I was pleasantly surprised by all the times my phone didn’t work because I simply put it back in my pocket and kept doing whatever else I was doing.
That said, I still pay a ton of money for my data plan. It’s hard to give up the habit entirely!
Oh, and don’t forget that T-Mobile offers a free 200MB monthly data plan. Hard to believe, right? I switched my iPad to the free plan and have found that 200MB a month is perfectly adequate. And best of all it’s FREE!
Yeah phone plans get expensive. We were going to switch to a Republic or Ting pay as you go sort of plan and realized that our current mobile plan would be the same price. Still more than yours but fairly cheap, as we don’t use a lot of mobile data.
We also use our phones until they die and then instead of getting it at the physical store, we go to Amazon and get our phones, usually “new” older models because they’re cheaper and get them activated in the store. That way we don’t have to get a “new” plan and more expensive bundle and all of that.
Work pays for my phone (new one every 18 months or so) and plan (unlimited data). I used to pay for a personal phone as well as I was skeptical using a work phone for those types of things. But then as time went on I realized work didn’t care that I use my phone or laptop for personal things, they actually encourage it as a work benefit. I’ll miss that when I pull the plug someday.
They’re getting you hooked now. The first taste is always free. 😉
I don’t think using the phone for consumption or entertainment is necessarily a bad thing. My phone allows me to be much more efficient with my down time. Driving to work I can listen to the WSJ news, if there is a car accident on my way to work I can pull up the traffic congestion on google apps and find the best alternative route, and walking from the car to the building I can read blogs (like yours). The list goes on and on. This awesome technology and massive convenience is not something I am willing to part for 15 years and $19K.
And the amount my wife and spend would not build up over time to be $19K over 15 years, it would be less. There are cheaper alternatives for us. Yes phones and phone plans are expensive. Instead of shunning technology, the alternative we have pursued is to buy the old model phone for cheaper and get the cheapest data plan. And recently, my wife dropped her phone and only uses her work phone now (and work data plan).
I can’t argue with your personal experience, but the data would suggest the productivity benefits are minimal at best. My theory is the technology does improve productivity, but it also destroys it too! For every minute reading the WSJ, there’s a counter balancing minute spent playing candy crush (or other productivity waster). The net result is minimal productivity gains.
In my opinion, there are better places to invest our time and money.
As I read this on my phone in bed, you nailed it, so addicted. At least I’m not at the urinal!
I just switched back to Freedompop which will get me to a price similar to yours but includes 1GB internet.
I got the Note 2 as well for $90. I don’t get why people need the newest phone when a few generations back is great. I don’t even have to worry if it breaks.
I would agree with these points. I think the only reason I would keep my phone would be due to my side hustles. It would be harder to maintain communication with connections in my side hustle as they are available during my work hours and notifications are via email. My work blocks personal email so that would be difficult.
I would also add that having these mobile devices probably leads to other issues in your hands such as potential carpal tunnel. Constantly swiping with your index finger or your thumb can’t be good. This is the reason for myself that I have reduced consumption on my phone.
Can’t forget about the EMR – having that much constant radiation near your body can’t be terribly good for you either.
While the science for this is still up for debate, it’s come up enough there’s probably something to it.
Hey Mr. Tako,
we have done something very similar, we have two €5/month plans with 200 min/text per month. For internet we use wireless/hotspots everywhere we can (including at home obviously). As a backup we both have company phones as well, but we limit personal use as much as possible (most months we don’t even use them personally at all).
Think you are right, you don’t need to be connected 100% of the time.
Cheers!
I meet most criteria for internet addiction. Seriously, I am getting a bad reputation at work for it, which could cost me tens of thousands of dollars in the ling run. This post encourages me to cut my $40/mo data plan and go prepaid, minutes and text only. Thanks for nudging me in the right direction.
Hi again Mr. Tako,
As a tip, there is another service that provides free text, calls and data. They run promotions randomly and you could score 1000 mins, 1000 texts and 1 GB data easily (the basic plan is 100 each of calls, texts and data). They make money by playing advertisements when you make a call. It uses sprint network. so If your area has good sprint coverage you are good. Its called ‘RingPlus’. I have been using it for 3 months now. so far so good.