Reduce your phone bill

In December and January, The Simple Dollar is posting a daily series focusing on specific activities you can do right now to set the stage for a great 2011. Out with the old, in with the new.

By , Guest blogger

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    Is your phone 10 years old? How about your phone plan? This 11-year-old photo of cell phones highlights how much phones have changed in the past decade. But have you rethought your usage in that time? If you're like most people, you don't use your phone as much as you think you do, which means you're paying too much for your plan.
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Reduce your phone bill.

Two episodes in my own life are relevant here.

A couple years ago, I cancelled my business phone line and moved to Skype. It reduced the monthly cost of my business related calls by about $30 a month.

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I figured that there would be significant drawbacks to the switch – limited availability and so forth. What I actually found was that Skype was, for my purposes, as reliable as an ordinary phone. I simply cannot remember a single time where using Skype for work purposes put me at any sort of disadvantage versus a landline.

This, of course, raised the question: why not just use Skype for personal use?

Similarly, for a long time, I had unlimited minutes on my cell phone – but I paid out the ear for them. I had this impression in my head that I used my cell phone a great deal and thus I needed unlimited minutes.

For six months, though, I kept my cell phone bills and took a look at how many minutes I was actually using each month. Even if I chose a limited minute plan that covered significantly more minutes than the heaviest calling month, I’d still be saving about $30 a month by switching plans.

If I chose a more restrictive plan, one that covered five out of the six months, I would be saving almost $50 a month.

These two stories have some key factors in common.

Knowing your actual needs for phone usage directly leads to saving money. Most of the time – and I’ve certainly been guilty of this in the past – people pay extra for a monthly service that covers everything that they actually do plus everything that they think they might do. The problem is that the “maybes” rarely occur and usually wind up being very expensive to pay for.

A much better approach is to simply pay for what you normally use, then deal with the exceptional situations as they come. For example, if you have a plan that covers 99% of your calling needs and saves you $30 a month compared to what you’re paying now, then you can use a small bit of that $30 a month to cover that extra 1% and still find yourself way ahead.

How vital is a mobile phone, really? In truth, most of the mobile calls we make can be handled at home, leaving the mobile for specific needs that can’t be met from a non-mobile device.

For example, over time, I’ve gradually moved most of my calling to Skype, which I can use on my iPod Touch anywhere where I find a wi-fi signal and (obviously) anywhere at home as well. This has reduced my cell phone usage and because I keep up on that, I was able to reduce my cell phone contract to a lower level, directly putting money in my pocket.

In fact, were it not for travel, I would probably move entirely to a “pay as you go” phone. I’ve ran the numbers several times and I seem to consistently find that my cell plan is just a bit cheaper per minute for an average month than a pay as you go phone.

I don’t suggest that people abandon their mobile phone. However, I do encourage people to rethink their overall phone plan. Replacing your landline with Skype, then making an effort to use Skype for many of your calls, will not only drastically reduce your monthly landline bill, but it will also lead to a reduction in your mobile bill as you reduce the number of minutes you actually need.

In any event, there are many options for reducing the monthly cost of your phone usage – and any reduction you can get in a monthly bill is money that goes straight towards improving your financial situation, whether through savings or debt reduction.

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