In this day and age, the internet is a basic necessity for middle-class American families. We rely on the internet to do homework, pay our bills, and funnily enough to write about how to get cheaper internet rates. As long as we have good enough internet that it’s not painfully slow we can survive. Have you ever asked yourself how much internet speed do you really need? Just as we did, you might find that you are paying for speed that you don’t really need.
Not All Expenses Are Created Equal
We don’t derive the same amount of value from different expenses. For us, the internet is a low-value expense. We didn’t even blink before trying to optimize as much as we could because we don’t truly derive joy from it. High-value expenses are expenses from which you derive joy, like our travel expenses. Going to museums, observatories, or just sightseeing is very important for me because I derive more pleasure from experiences than stuff. Therefore, travel is a high-value expense. On the other hand, Mr, DMD likes to upgrade to new phone models from time to time. I could care less about which phone I own as long as I can call, text, and have a reasonable data plan. The internet did not fall in our high-value category so it was very easy to target it.
Now, lets talk numbers!
When we first moved to the US of A we had an introductory “First-time customer” deal. At that point in time, we were paying $56/mo which wasn’t bad… or so we thought. After the first year, we saw our rate go up from $56/mo to $93/mo. WHAT?! It almost doubled! Do you ever get that feeling where you know you are paying to much for utilities that you “need”, but it fills you with agony whenever the rates go up for an inexplicable reason?
Yeah, I’ve been there too.
Anyhow, once we decided to lower our internet bill the next step was to research what other providers were available. I’d recommend you just google “internet providers in my area” and stick your zip code in to see which internet speeds are available for your location. In our case, we concluded that our current provider offered the best rates in the area at the speed that we had at the time.
Faster Isn’t Always Better
Next, I looked at different internet speed offerings available in our area. Now, this is where we messed up initially. Our internet plan speed was 150 Mbps which supports about 5 devices. Because there are only two of us, we didn’t need that much speed so we downgraded to 25 Mpbs. And just like that, we had lowered our bill to $53/mo ($40/mo cheaper!). Finally, to bring our bill down to $43/mo we bought our own modem/router combo. The $53/mo breaks down into $40 for the 25Mbps Internet Plan, plus $13 for Equipment Rental.
Please do me a favor and look up your internet bill statement. Check if you are still paying your internet provider for a modem/router rental fee. I’ll wait… I was incredibly annoyed when I learned that I was paying $13/mo for something that I could’ve bought for a $70 one-time payment in Amazon. I was paying $156 per year for something that I did not even get to own at the end. But, how are $13/mo, going to help me save enough money to reach Financial Independence?
Excellent question! The answer is compound interest? A what now?
The Power of Compound Interest
Wikipedia defines compound interest as:
Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously accumulated interest.https://en.wikipedia.org/wiki/Compound_interest
Clear as mud? Let’s break it down, shall we?
All that mattered to me when I was learning this concept, is that compound interest is what allows us to create wealth through investments. In my head compound interest is the profit you make by lending someone your money. If you want to feel warm and fuzzy inside plug in some numbers into a compound calculator and see how the money you save -and invest- can start working for you! The trick is that we need to let the interest/dividends that we obtain for lending our money get reinvested back into the principal. If you let your profits reinvest themselves your principal grows faster, therefore the interest paid increases as well. Whoa, that was a mouthful, let me demonstrate with you guessed it…Numbers!
Compound Interest in Action!
Let’s go back to the router/modem example in which we started saving $13/month or $156/year by buying our own. Let’s see what would happen if we invest our $156/year in the Stock Market. There is a couple of assumptions we need to make. Let’s assume the market has been returning 7% and that this is my initial investment. I considered adjusting for inflation, but for the sake of simplicity let’s assume there is 0% inflation. I’ll assume that I’m contributing $13/month for 10 years, starting from $0 and never withdrawing money from the account.
We plug in our numbers in one of the thousands of Compounded Interest Calculators available on the internet and watch the magic happen. The $13 a month, will grow to $2,263.15 in 10 years.
Do I miss those $13/month? NO! I just went on Amazon, bought a router/modem combo, read the instructions, installed it, and boom! You made yourself $2200 dollars. Out of the total balance your money, returned $703, which is a little over a third of your balance. Seemingly small amounts do matter. By optimizing our expenses the more we can save and invest. After that compounding does a lot of the heavy lifting for us! Now, I’d be lying if I said investing is a smooth ride we’ll you’ll just see your money rise and multiply. That will not necessarily the case. The market is unpredictable and is definitely not for everyone, so make sure that you do your research and are willing to ride both the highs and the lows.
So, there you have it! This is how we optimized our internet bill by adjusting our internet speed and buying our own Router/Modem combo. I hope this post prompted you to ask yourself: How much internet speed do you really need? Have you ever found any easily fixable expenses that you were just not aware of? Let’s hear it in the comment section below!
Full Disclosure: I had to return the first modem/router unit I got because of a manufacturing issue, but it only took like 2 days to get the new unit through Amazon. Easy peasy! Here is a link to the one we bought: Motorola MG7315
*The content posted on this website does not constitute professional financial advice. Please consult a certified financial planner or investment advisor for professional financial advice*