I'm on a real roll with these super-exciting (sarcasm) personal finance posts where I reveal my tricks for not hemorrhaging money. Last time I covered why new cars are terrible for your wallet. Following the official Noah cost-cutting dogma of finding economies that have absolutely no effect on your life.
Every expense you have in your life can be put into one of two categories: mandatory and optional. Mandatory expenses are bills - mortgage, electricity, etc. Optional are any purchase you make that is voluntary (ex: any time you go into a store and plunk down your credit card). You can buy essential things (food and medicine, for example) as voluntary expenses, but there are often ways to do better (like going to a cheaper groery store). This often requires effort, leading to the requirement to calculate whether the juice (benefit) is worth the squeeze (effort).
To be sure, there are efficiencies to be gained through better management of voluntary expenses, but trimming those mandatory expenses is where the biggest savings usually are. Previously I went through how to minimize investment expenses (which are a mandatory expense if you ever invest). Now I'll focus on trimming down another recurring expense - the dreaded phone bill. Maybe you can use it, maybe not.
Avoiding The Bleeding Edge
With certain types of products - usually technology - there's something I like to call the bleeding edge. This edge is the often-small difference between the very good and the great. It's an easy concept to understand: if you want to have the latest and greatest, your wallet is going to bleed.
I love taking pictures, so I'll use cameras to illustrate the bleeding edge: Currentlt I use a seven-year-old Nikon D5100 DSLR. I paid $500 bucks for it (including a kit lens). The D5100 is a basic consumer camera, very high quality, very tough. It's been with me to five different continents and it takes nice pictures.
If I wanted to upgrade to the next level, I would get something like a Nikon D7100. It's a three-year-old "prosumer" model costing about $550 on Ebay. There's no doubt I'd be getting a definite upgrade for my money: The D7100's body is weather-sealed (for shooting in waterfalls), there are a few more buttons that more experienced photographers know how to use, and the sensor has an extra 50% more megapixels, among other things. It's a sensible purchase, should I choose to make it.
But let's say the D7100 isn't enough. I want to move to the bleeding edge of photography - I need the D7200, the newer version of the D7100. Cheapest one on Ebay is $804. The thing is, I don't really get much more for the extra $254. The sensor's the same and the new features are really only incremental. The main thing I'm buying is the privilege of having the newest thing for the 12 months until Nikon rolls out the D7300. If you really want to be bleeding edge, buy a D4, the top-of-the-line pro camera for $3,000 (without a lens).
Obviously, price increases exponentially as you approach the edge. The real shame of it is that most people wouldn't be able to distinguish a D5100 from a D7100 from a D7200 from a pro camera. You're paying for prestige, in effect. Since I don't give a shit what people think of my camera, I find the idea of needless upgrading an unfullfilling expenditure of my hard-earned dollars.
The Bleeding Edge in your Pocket
While photography is great, I want to apply The Bleeding Edge concept to cell phones and plans. For the past twenty years or so there's been a rapid expansion in the functional capabilities of electronic devices (driven in part by Moore's Law). This meant buying a new computer every three years was essential if you didn't want as outdated POS paperweight cluttering up your desk. However, the rate of tech advancement in devices has tailed off in recent years. New devices sometimes offer only incremental improvements over old devices. To keep profits up, tech companies have introduced products with only marginal improvements, using flash to conceal the lack of increased functionality. Apple is great at this - they made the iPhone bigger, the iPad smaller, and made a watch with fancy band options they use to jack up the price.
Instead, Let's focus on the opportunity created by this technological plateau: For the first time in history, you can purchase a phone that has 95+% of the capacities of the newest thing for 10% of the price. As of today, the iPhone 6s plus was $750 at Best Buy. There's an iPhone 4s in my pocket that goes for $80 on Ebay. Literally 10% of the price. Main difference - screen size.
At this point, I could rail about how phone companies sell you $750 phones that you subsidize with disastrously expensive phone plans. However, since you can now easily buy a phone that's just as good, we can skip that and move on to the really important stuff.
Cell Phone Plans
Personal electronics are only a tiny bit of the story. The phone plan is a recurring bill - if we can cut it, we can save money every month for the rest of our all-too-short lives.
Here's the brutal truth - the US lags behind many (maybe most) other countries in terms of our cellular networks. In one way, we were a victim of our technological advancement - Americans were early adopters of phones and, in doing so, we built a massive (and expensive) network of telephone wires. When cellular communication emerged, private companies were understandably hesitant to dismantle their hard-won wired networks. They made it expensive to join new cell networks to deliberately slow the flow of customers from their legacy infrastructure.
This was not a problem for countries that skipped over using wires. In Korea, for example, a cell plan costs much, much less and is much faster. Once, in Japan, Susan and I rented a mobile hotspot that had faster data transfer rates than my home internet. Cost was $4 a day (some of which was the optional extra battery).
So yeah, we've been getting ripped off for a long time on cell service plans. This is evidenced by the relative implosion of plan rates, as even the big companies cut costs - plans that were $80 are now $50, and so on.
I'm going to let you all in on a secret: This "biggest network" pissing contest companies sell you in TV ads is largely crap. Like the iWatch's band options, it's there to distract you from the truth. There are only a handful of actual telecommunication companies who set up and maintain towers. Many (if not a majority) of cell service providers are MVNO (mobile virtual network operators). In effect, MVNO's rent space on existing towers from one of the existing networks. So if you use Cricket, you're using the AT&T network, FamilyTalk (AKA the WalMart plan) uses the Sprint Network. That's it - there's no effective difference between using FamilyTalk and Sprint... other than price.
With no infrastructure to maintain, MVNOs gain certain efficiencies that allow them to operate cheaper (more cheaply? cheaplessly?*). That said, why not go to the bottom of the barrel immediately. If you'd care to join me there, I'd like to introduce you to FreedomPop. In addition to sounding like a patriotic porn video company, FreedomPop is the cheapest MVNO (Sprint Network) that I know of at time of writing. Currently, FreedomPop does a 1GB month (Unlimited talk/text) for $80 A YEAR on the same network. Are you shitting me? There's also a free plan. I have no idea how they do that. Yes, you can bring your number. Yes, you can use your Ebay iPhone 4s. Yes, their customer service is shit and their app can be glitchy.
In conclusion, I made a chart illustrating how switching phones can get you into a sketchy Thai massage parlor (or a real one, if that's your thing) less than twelve months.
*too lazy to look up the correct use.
Noah's Inner Monologue
Scribblings of a man who can barely operate an idiotproof website.