Cell Phones

Is there a greater evil? We convince ourselves that we “need” them and we rush out to buy the hottest phones to show our status. Yet, are we really getting value for our money?

Canada is a market dominated by a few large cell phone companies. They offer expensive rates and encourage customers to sign multi-year contracts, which invariably are always more expensive than the ticket price. Then, there is always the fine print that requires a magnifying glass to read and the hidden charges that requires a degree in mathematics to decipher. Is there a better way?

PREPAID PHONES! If there is one thing you can do to save money, it is to buy the phone and then pay as you go.

The advantages:

  • You know how much you spend. If I put $20 on my phone, then I know that I will only spend $20. When the money runs out, I can then chose to add funds, or I can go without. No surprises in the mail with my next cellphone bill. Makes budgeting that much easier.
  • If my phone is lost or stolen, I don’t have to worry about losing thousands of dollars. If the thief uses my phone, then when my money runs out, they will have to go out and add more funds!
  • No contracts. If ever you are tight on money, you can always chose not to use your phone. I go weeks and months without using my cell phone and I don’t have to pay a cent in fees for a plan that I do not use.
  • No hidden costs: you pay your money and they can’t charge you more than the money that is in your account.
  • Don’t get stuck paying for useless frills. Do you continue to pay for that cool game that you downloaded two years ago and played a few times? With a prepaid phone, you are not stuck paying for features you do not need.
  • If you lose your phone (or if your phone is stolen), you are not left stuck paying for a plan that you no longer use.

I do find a cell phone useful from time to time. If I am on the road, I like having a cell phone with me. There are also times that I may need a cell phone to make a quick call. But, if I want to talk endlessly with friends or family, I can use my regular phone at home. Switching to prepaid phones was a painless solution.

Two years ago, I bought a cheap phone at Future Shop for Virgin Mobile. It cost me $50 and I got a $10 credit with the phone. It does what I need it to do: I can make calls, it has an alarm clock and a simple phone book. How much have I saved? Well, I spend on average $20 every three months on my cell phone. The cheapest plan would have cost me at least $30 a month with taxes and all the other fees. These past two years, I have saved at least $500 simply based on what I did not spend on a plan. Also, because I am careful of how I use my phone, I did not use it unnecessarily. When you know that your money will run out, you do not waste minutes. With a plan, you don’t know how much you are spending, so you talk more. This, of course, will lead to much larger bills that will easily dwarf your monthly plan.

The Penny Pincher therefore recommends that you dump plans and go for a simple prepaid phone. If you want to play games, get a Nintendo or other handheld gaming system. If you want to take photos, get yourself a cheap digital camera which will take much better photos. If you want to listen to music, get an Ipod. Don’t get caught up in the hype, and save money.

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