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Savings Quick Tips: Don't Let Them Cell You a Bad Plan

Americans today spend far more on their wireless phone service than their home phone service.

Households that pay for wireless phone service spend an average of about $84 a month, according to TNS Telecoms as shown in the table below. That's 66 percent more than households spend on a landline phone.

Household Spending on Phone Services
Service Average Monthly Expenditure
Local $37.31
Long distance $13.60
Wireless $84.41

Source: TNS Telecoms, 2007

The most basic advice is to shop the phone plan instead of the phone handset. You'll ultimately be satisfied or dissatisfied by the service rather than the device. Even if you pay $200 or $300 for a fancy handset, you'll pay far more than that on service during your first six months.

Here are other ways to cut wireless spending:

  • Ditch it. Think critically about the convenience of having a wireless phone versus the cost. Fifteen years ago, people seemed to get along well without one. Having a cell phone plan "for an emergency" is mostly a lame excuse. Just about any charged cell phone can dial 911 with no service plan at all. A friend or relative would be glad to give you an older cell phone that she has stashed in a drawer. Canceling service may require you to pay an early termination fee, but it may be worth it. For example, paying $175 to cancel service seems like a lot, but it's cheaper than continuing to pay $50 or $80 a month for another 18 months, which amounts to $900 to $1,440. Another option for getting out of your plan is to transfer the contract to someone else. Until recently, that meant you had to find friends or family members interested in assuming the contract. But now, an online service can match wireless customers who want to dump a contract with ones who want one. One swap service is found online at www.celltradeUSA.com. The benefit for the buyer is avoiding activation fees in most cases, being responsible for only the balance of the contract, and possibly receiving a negotiated cash incentive from the seller. Be aware that the company charges the seller about $20 for making the match. You also should check the transfer details in your own contract and be careful how you complete the transfer if you want to preserve the same phone number with a different wireless provider. Including a wireless phone in the deal is optional.
  • Right-size. Compare how many minutes per month you actually use to the number of minutes in your plan. Are you paying for more minutes than you need? Most people are. It might be a good idea to downgrade your plan to include fewer minutes, even if you have to pay extra on occasion for exceeding your allotted minutes. It could be cheaper than paying $10 or $20 more every month for a bigger bucket of minutes. To help determine your ideal number of minutes, use a rule of thumb provided by the nonprofit Telecommunications Research & Action Center: If you regularly use 200 minutes fewer than your monthly allotment, drop down a tier of service. If you consistently exceed your allotment by 100 minutes, consider going up a tier.
  • Skip the extras. Lighten up on the text messaging, extra ringtones, and cell-phone video games, all of which cost extra. If your teen must have text messaging, which is basically like sending short e-mails from phone to phone, examine your provider's price packages. Make sure the package fits your actual texting use. When you are near a computer, send text messages from the PC to a friend's phone, which is free. And consider whether you really need Internet access on your cell phone. Is it really useful or just a toy you haven't used since the novelty wore off?

More on: Family Finances

From Living Rich by Spending Smart Copyright © 2008, FT Press. Used by permission of FT Press, and Pearson Education. All rights reserved.

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