I’ll start by saying that I think technology is simply amazing. We live in times where we are more connected than ever, more aware of what is happening around the world which leads to a ton of good…and bad. But this post is not about the impact technology has had on humanity. This post is about how much impact cellphones have on your budget. Let’s dig into how we lowered our cellphone bill by over $100/month!
Before we get into how we lowered our cellphone bill, there is some background we need to cover. There are a lot of cellphone carriers out there, some have been around for decades like AT&T, T-Mobile, Sprint, and Verizon which we’ll call the big 4. The good news is that we have more options now! We can get very similar coverage, text & calls for a fraction of the price switching to a different type of provider. If you have ever heard of GoogleFI or Republic Wireless or Cricket Wireless, you’ve already been exposed to this new type of provider. These are known as Mobile Virtual Network Operators or MVNO. Let’s briefly review how are these different from the normal carriers we are accustomed to.
The main difference between the big-4 and MVNOs is that the former has to build and maintain all the towers from which we obtain service, while MVNOs utilize those same towers established by the big carriers which result in MVNOs charging a fraction of the price in comparison to their counterparts. If you have a preferred network out of the big 4, check if they have an MVNO counterpart that you can switch to. Some MVNOs even have several networks that you can switch between. Make sure that you do your own research to learn which MVNO might be right for you.
Since MVNOs operate under someone another provider’s network you might experience some data speed limitations when there is high use since clients that do business with the big4 provider might have priority. But that is just what happens when you are playing against the big guys, so just keep that in mind and read the fine print when doing your research.
Time to switch to the MVNO team!
We ended up going with GoogleFI because we really liked their international offerings and with travel being one of our passions we wanted the security of good phone reception when visiting international locations. You don’t want to have shitty reception if -hopefully not- you have an emergency half a planet away from home. It has worked pretty well, their customer service has been excellent so far. I do get a patchy signal at times but you have to keep in mind that the type of phone that you buy or bring you can bring your own unlocked phone if you’d like- will impact the service. The newer phones coming out can manage to switch between networks seamlessly but other phones might not be able to switch automatically or as seamlessly.
Switching was incredibly easy too. First, we called our previous carrier and paid off al remaining balances on our units, so that we could unblock them. After unlocking my phone (Mr. DMD’s phone was already a Google phone so no unblocking was needed) I started the process at the GoogleFI website. I think it took maybe a couple of days to have everything set and moved to our new MNVO provider. As a side note, I’m not receiving any sponsorships from GoogleFI. We have been loving the service so far and we’d only recommend products and services that we trust and have used ourselves!
We’ve had a great experience and encourage you to find which MVNO works for your specific needs!
Now, let’s talk numbers!
As the title gave away, we’ve been able to reduce our cellphone bill by over $100/month by paying off remaining debt for both of our cellphones and then switching to GoogleFI. The graph below shows our monthly expenses for a six month period.
You can see how we were able to go from a little over $150/month to $50/mo. In our post about how we reduced our internet bill, we introduced the concept of compounding. Let’s plug in our numbers into a compound interest calculator for a performance projection. Check the link under the table below if you’d like to play with the exact calculator I’m using. Just google compound interest calculator and you’ll get way more options than what you asked for.
By investing that $100/month for 10 years and reinvest the interest, we would end up with approximately 17K! That could cover a year of expenses in a low living cost country! Now, obviously we have been contributing a $100/month in this hypothetical scenario which equates to $12,000 of those $17,000. Our profit from investing this money can be observed in the bottom row of the Total Interest column. In this case, our money would be working for us and producing $5,000 in a period of 5 years. The true power of compound interest is unlocked with no other than the most valuable resource we have…
Let your money do the work!
Letting the $100/month grow for 20 years, we get an interest gain of $28,000 while our deposits would total $24,000. In those additional 10 years of continuous contributions, something miraculous happens. Your Money Making Machine will start generating more money through dividends than what you can contribute to the total balance. Investments don’t sleep or take vacations. Luckily investments only take sick time during market crashes (check out this post for my perspective on market crashes). But they’ll recover if you give them time and leave them alone. The money you’ve invested will become more efficient than you! Let your money work for you and if you play your cards right, you won’t have to trade your time for money ever again! If that is what you desire of course.
But, what would happen if you stop contributing? If you were to stop contributing the $100/month, your money will continue to grow without your contributions. Letting the $52,000 balance you’ve accumulated ride for another 10 years will result in a final balance of over $100,000. If that does not blow your mind, I don’t know what will.
Bringing it full circle
Our plan is to continue optimizing our expenses and turn the savings into investments. By decreasing expenses and transferring to investments you are increasing your savings rate. A high savings rate is what will fuel your journey to financial freedom. Your savings rate is a representation of how much money you are keeping after you’ve paid all your expenses:
Total Income Saved: All the income you’ve received for a period of time, including pre-tax & after-tax retirement savings, emergency fund, etc.
Total Income Earned: All the income earned for a specified period before expenses have been paid.
We have started calculating our monthly savings rate and have improved greatly over the past couple of months. The formula above is what we are currently using but there are other ways to calculate your savings rate. There are formulas for Net Savings Rate, Gross Savings Rate, and probably others that I’m not aware of yet. Do your research and utilize the math that works for you and your goals!
[Update 12/12/20: As I’ve said before, the purpose of this blog is to learn and share our journey. Since the time of this post, I’ve learned other ways of calculating your savings rate more accurately. Early Retirement Now has a great post on this topic]
In order to accurately translate our expense optimization into investments, we’ve been tracking our money for the past six months. Check out our post on Expense Tracking to check out what we’ve been doing to stay on track. Pun completely intended :)!
So there you have it. That’s how we lowered our cellphone bill by over $100/month with just a couple of changes. We are still looking to improve even further and are open to looking into other options! Do you use MVNOs? Which ones have worked/not worked for you? Also, how do you calculate your savings rate? Let us know in the comments below!
*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*