One of the simplest places I found to reduce expenses was our mobile phone bill. When my partner and I were on Verizon over a year ago, our plan cost roughly $160 each month.
After our daughter arrived, I wanted to trim spending without lowering our lifestyle. We dropped our carrier contracts, purchased unlocked handsets and moved to prepaid plans. Now our monthly bill is only $63, cutting nearly $100 every month — about $1,200 a year.
That experience convinced me I’ll never sign another cell-phone contract.
1. Two-Year Contracts Rarely Benefit the Customer
The typical two-year phone contract doesn’t favor the consumer.
I often hear people wait for their agreements to expire so they can renew and snag a discounted handset. For instance, an iPhone 6 on contract is listed from $200, while buying it unlocked costs $650 on Apple’s site. Paying $650 upfront seems insane, right?
That’s precisely the impression AT&T and Verizon want to create. They don’t hand out a $450 discount out of goodwill. They recover that amount through higher monthly charges while keeping you tied to their service for two years.
It’s even more troublesome with family plans — staggered contract end dates make it harder to leave. Being off-contract means I’m constantly looking for a better deal and can switch carriers immediately if something better appears.
Even though Verizon recently announced an end to two-year contracts, it won’t change much. While monthly service might appear lower, customers will soon pay separately for new phones, likely spread across 24 monthly payments.
Also, Verizon devices use a CDMA network, meaning they aren’t as portable between carriers. AT&T, T-Mobile and most prepaid companies utilize GSM networks, which make switching carriers far simpler.
So even if Verizon no longer offers formal contracts, buying a handset through them effectively keeps you locked in. No thanks, Verizon.
2. Prepaid Plans Can Cut Your Monthly Bill
Here’s what my partner and I currently use:
$35 Cricket Wireless (Partner)
- Unlimited calls and texts
- Unlimited data (2.5GB at high speed)
$30 T-Mobile Prepaid (Me)
- Unlimited texts and data (5GB high speed)
- 100 minutes of talk
- Save an extra $2 buying refill cards online using a Target Redcard and Ebates
If you’re moving to prepaid, I strongly suggest Cricket. It’s owned by AT&T, so you essentially receive AT&T coverage at a lower cost. Cricket caps 4G speeds at 8 Mbps, but I hardly notice a difference compared to my T-Mobile LTE.
My T-Mobile prepaid plan only includes 100 calling minutes, which I work around by using Google Hangouts to place calls over data. That makes traditional calling slightly less convenient — which is why my partner prefers Cricket — but I save $7 more per month, amounting to $84 yearly.
3. I’m Less Tempted to Upgrade Frequently
I get it — everyone wants the newest model. Advertising convinces us we need “The Next Big Thing.”
But honestly, nothing transformative has occurred since the jump from 3G to 4G. Screens are a bit larger and cameras a touch better, but there’s rarely a compelling reason to upgrade immediately. My iPhone 5s works perfectly for now, and I’ll keep it until performance degrades or our daughter accidentally ruins it. (Did I just jinx that?)
4. Consider Total Cost, Not Just the Monthly Fee
When I advise someone to go off-contract, the biggest objection is they don’t want to pay full price for a new phone. I don’t either!
Consider buying a used handset on Craigslist or via sites likeSwappa. I focus on iPhones here because they’re popular, but you can find excellent near-new Androids like the Moto X or OnePlus One for less than an iPhone.
If you’re on a contract, you’re still covering the full cost of the phone — it’s just concealed in monthly fees. When you calculate total expenses across similar plans, the savings with prepaid become clear:
Cricket (2.5 GB) for Two Years, Prepaid
New iPhone 6 = $650
Plan ($35/month) = $840
Total = $1,490
AT&T (3GB) Two-Year Contract
New iPhone 6 = $200
Activation Fee = $40
Plan ($80/month) = $1,920
Total = $2,160
New Verizon (3GB) Two-Year Service
New iPhone 6 ($27.08/month) = $650
Plan ($65/month) = $1,560
Total = $2,210
Total Savings = $670 vs. AT&T, $720 vs. Verizon
Choosing Verizon or AT&T might feel like getting top-notch coverage. While I won’t claim those carriers aren’t reliable, I believe coverage from most providers is adequate in many populated areas. Living in LA County, I’ve used AT&T, Verizon, Cricket and T-Mobile — all worked reasonably well.
Is Verizon or AT&T’s superior coverage worth an extra $670+? Not for me.
Even though buying an unlocked phone upfront seems costly, you ultimately save significantly.
Many people ignore trimming their phone bill because they can “afford” the monthly payments. But shaving $10 off your bill frees up $120 a year!
Switching to prepaid allowed us to direct that $1,200 annually toward more meaningful goals like retirement savings, accelerating our mortgage payoff or funding our daughter’s 529 plan.
Your Turn: Have you tried prepaid phone plans? What did you save, and was the switch worthwhile for you?
Disclosure: We have an unhealthy Taco Bell habit in our household. The affiliate links in this article help us afford occasional dollar-menu runs. Thanks for the support!
Alex is a down-to-earth dad residing in a modest home in a Los Angeles suburb. After becoming a parent, he sought ways to cut costs while living a richer family life. Find Alex on his blogDad is Cheapor connect with him on Twitter.
