Your Next Cell Phone- Contract Versus Buying Outright

So unfortunately, the Frugal Rock Household just encountered the first unexpected large expense of 2016. My cell phone has been on it's last leg for a bit now. It's battery life has been waning for a while and would unexpectedly shut down when the charge was lower than 30%. Being a frugal lady, I just kept a charger on hand so that it was never low. In November, it fell out of an open pocket while biking and cracked the screen- but still worked! So I soldiered on- than recently I dropped it AGAIN (I know I'm still kicking myself) and this time the screen is truly done for.

I was not looking forward to this new phone purchase- I clearly have been putting it off for a while. I thought long and hard about going without a smart phone as I like the idea of being less attached to my electronics and the time-waster internet sites like Pinterest, Facebook, Buzzfeed, etc. There are days that between work and home, all I feel that I have done has been stare at screens. While I seriously considered going back to 1995 and living without my smart phone; traveling for work and the need to check emails pretty consistently between meetings during my day led me to realize that my dream of being smart phone free was likely unrealistic. (Sigh)

I am a fan of the iPhone and so if I needed a new smart phone, wanted to keep all of my apps and contacts easily transferable. The big question for me was whether to a do contract of purchase the phone outright. Now we often don't think about this- but when you purchase a phone through a carrier it is often highly subsidized by the carrier. Most cell phones are expensive- which in a way makes sense when you think about all the things we now expect our phone to do. Our mini pocket computers make calls, but they do much more than that now. Cell phone companies and producers, like Apple, market the next big change in phones in a way that leaves many consumers rushing out to get the next phone.

To make the purchase more palatable to consumers, they will charge you an upgrade cost and tack on an additional monthly payment to your bill. This makes it much easier to manage for monthly payments- and helps consumers avoid noticing how much their phone actually costs. This is a time tested marketing trick used by car dealerships, furniture stores and the shopping network. $30 a month doesn't seem bad, but really it's a payment plan for your phone. To give you some perspective, the current base IPhone model, the 5s, with the smallest amount of memory, retails for $450, other phone varieties can sell for between $600-800 to purchase outright.

 Now does buying it outright save you money in the long run? Short answer is: it might. The answer varies depending on your carrier. As an AT&T user, they no longer do contracts, so I didn't have to worry about the need to avoid signing another contract. If I was with another carrier, I would have been even more likely to buy outright to avoid having to get locked into another round of contracts for services I may not need. By buying outright I did avoid a phone upgrade charge, but this amount, while saved money, was pretty small- I believe our sales person said $20.

Being aware of how much you are actually spending is one of the first steps towards being a good consumer. It also gave me a different perspective on taking care of my phone. I probably shouldn't feel this way- but I will likely take care of my phone differently thinking of spending hundreds for it, as opposed to just a few bucks a month.

Introducing: A Frugal Household Rule of Frugality:

If you can't buy it outright- you can't afford it. Yup- if you can't see spending $600 outright for a cell phone, due to draining a bank account, I would hold off on that new phone. Now there may be reasons to re-sign a contract or do a payment plan depending on your plan and your phone company's current specials. You may get a deal that way depending on the carrier/time of year, BUT if buying it outright would create a hardship for your monthly finances, it's time to reprioritize, possibly buy a cheaper phone or wait to upgrade.

 Have you ever bought a phone outright or found a good deal on a cell phone? Would you ever consider purchasing your next phone outright?