Cell Phone, Unshackled: YNAB Podcast Episode 94


This transcript coincides with Jesse’s post describing how he saved over $1,800 per year on his cell phone bill.

Hello YNABers. My name is Jesse Mecham and this is podcast number 94 for You Need A Budget, where we teach you four rules to help you stop living pay check to pay check, get out of debt and save more money.

Today I have my calculator out because we’re going to talk about saving more money using the new iOS7. YNAB came out with an update to our iPhone App and Android is on the way. The iOS7 App for YNAB is pretty slick. We’re looking at the Favorites issue – by that I mean we pulled it out and found out there was a workflow that people really loved that we hadn’t thought of, so we’re looking at how that might be implemented again. It may be a way that’s more specific and elegant to that workflow. So, rest easy. We hear you, we’re working hard.

$46,500 would be the amount that my nest egg would have to increase… excuse me, the amount that my nest egg would have to decrease in order to… if I were to give up my cell phone habit. Let me say that one more time. $46,500 is the amount my nest egg could decrease if I would give up my cell phone habit. Julie and I use Verizon. We both have iPhone 5. Not 5c, 5s, 5f, 5g or whatever other 5s came out – just the 5. I have a really cool bamboo case that the team gave me that has the YNAB logo on the back of my iPhone. I get a lot of comments about it. It has a little wooden button for that top on/off button. It’s pretty cool. The device itself is impressive – the iPhone. Sure, Android devices are just as impressive, but I’ve always been impressed by the iPhone and the new generation that come out and get us all to buy them. But, I’m going to give it up.

So, Julie and I together, two iPhones, spend $165 a month. I actually have the business cover it because it makes sense to for me. It’s used mostly for business, honestly. So $165. If you look at it after taxes it may be $100 it would cost me, but still… I’m in the realm of pre-tax because for a lot of people they can deduct it, and $165 is $165. Honestly, if you were in a normal tax bracket and you’re spending $165 on something, that means if you make an average income you probably had to earn about $220 to pay for that $165 cell phone habit. To get that I divided by 0.75, so I assumed that you had a marginal tax rate of 25%, which is probably about average – I don’t know. I just threw that out there.

$165 to talk to each other, to update Facebook statuses, to check Twitter and my email. Sometimes I’m working with one of the kids at the piano. They’re doing their practice and I’m kind of supervising and I’m multitasking – which means I’m not really in the moment. Phone are fantastic devices at keeping us from being in the moment. You find yourself sitting there for what, four seconds, and you reach to your pocket and pull out your phone because who needs four seconds or minutes of dead time? You’re there getting your tires changed. Where we used to leaf through magazines that are nine or ten months old, we now pull out our cellphones and text and tweet and talk and chat and update.

It’s interesting because I remember this bit… Mark, YNAB’s blogger, and I, we were watching Louis CK, a man with colorful language, and he was on Conan. He was lamenting… well, he was making fun of the fact that there was WiFi on board, and WiFi flying through the air at 30,000 feet and then the WiFi broke down and this guy next to him was just, “Oh, I can’t believe this. Unbelievable!” And Louis CK said, “You know, that’s hilarious…” something along… I’m butchering his writing, but, “You know, you’re just absolutely dismayed that you don’t have this service of which you had no idea it existed 30 seconds before.” And if you think back to when there were no smartphones, what did you do? Were you happy then without that device in your pocket? Were you happy not being able to update Facebook and all these social outlets and check your email and receive texts constantly? Were you happy then? Or were you just a shell of a person? And now that you have your cell phone with that data plan that’s $165 a month, are you happier?

I think back – and maybe nostalgia kicks in a bit – but I think back on a simpler time where I can honestly say to myself, “I’m not any happier now with my cell phone than I was before. So why am I paying for it?” “Convenience,” you say. And I say, “No.” There’s nothing more convenient about it. I mean yes, of course, there are more conveniences attached to it. But I’m talking about happiness, not convenience. I don’t want to necessarily pay for a convenience. I want to pay for my happiness. And my ultimate value in life is that I and my children and my wife, that we can be happy and lead happy, fulfilling lives. Not convenient lives, happy lives, fulfilling lives. And I don’t know if a cellphone necessarily fits into that equation.

I did some hacking because I know that this would be like a Band-Aid that you’re ripping off that would be painful. Or just going cold turkey on something could be difficult. So I’ve looked at, “Okay, Julie needs to reach me. She’s very used to being able to reach me, has been for years and years and years. She needs to be able to reach me. Okay.” Well, in iOS7, Apple came out with this thing called FaceTime Audio. It only works over wireless and the audio quality is using something I think called Dual Wideband or Wideband Audio or something like that, something very fancy. The quality is unbelievable. I tested it. So I told Julie. I said, “Hey, you’re at home most of the time on our WiFi network that we paid money for, and I’m at the office a lot of the time on the WiFi network that we pay money for. So we’re paying money for this data that we’re not using as we’re calling and using minutes.”

Now, we have unlimited minutes, but I’ll get there in a second. So, we are paying for wireless that we are not really using fully and the audio quality is even better. And we both have iPhones on this new iOS so we can do FaceTime Audio. The same thing could be said for using Skype, though. You could just do an audio chat over Skype, use the wireless network, not even have to use your data, not have to use your minutes. So, I’ve solved the problem for 99 point something percent of mine and Julie’s talk time is the fact that Julie is at home holding down the fort, making sure the kids are all safe and I’m at work funding the holding down of said fort. And that’s just how our life is set up. That’s where we are a lot of the day. Or I might be at home where a cell phone is necessary, right? Julie has been known to text me when I’m in the basement and she’s on the top floor. We’ll get past that.

So, what if we were to just use Skype or FaceTime Audio and not use our minutes? That would cut down on our minutes. I looked at our Verizon bill – that would cut our minutes down by 45%. If Julie would use Skype with her mother, my wonderful mother-in-law; if she would use Skype with her, we would… and combined with she and I together, that would drop our minute usage by 65%. If we tapped on one of Julie’s very, very good friends – that I won’t name because I didn’t tell her I would name her on a Podcast – that would bring us up to a savings of 71% of minutes. Tap on Julie’s good sister that lives close by, and we’re down to 75%. If I take our top 20 uses, we’re at 98% of our minutes. And 99 point something percent of those minutes are used while we are at home, sitting, just basking in a bath of wireless data for which we are already paying – high speed, quality bandwidth that just floats around us untapped. So, we can get rid of our minutes.

What if I’m broken down on the side of the road and there is no WiFi? WiFi is becoming more readily available every single day, but in the rare event that that will happen my plan is to get an emergency phone for each of the cars, have a little prepaid SIM on there for some tiny amount of money – I priced it at about $25 from WalMart, $50 for both phones and with some pre-loaded SIMs. And even the chargers that come with the phones that I could stick in the glove boxes so we’d be ready to rock and roll. I’d just basically leave them charging all the time or figure out some way to not have to worry about them – out of sight, out of mind. The odds of us having to use those emergency phones are super, super slim. Remember, we existed for decades, decades, decades without the use of cellphones. I think we’ll be just fine. So that solves my minutes problem.

If someone calls me and I’m not in a WiFi area, I’ll just return their call when I am. And the chances not being in a WiFi area, given my lifestyle, are about two out of 100. So, it solves the minutes. Texting – I’ll be using Google Voice and I’ll be writing it out to my email. If I’m in a WiFi area, I will receive a text that will be transcribed into an email and sent to my email. And that will solve the texting. When I reply in my email to the text, it will bounce back to the person as a text and they won’t know the difference – and I will get free texting. So that solves the texting issue. Julie and I, over wireless, can still use iMessage using Apple’s system. There are a bunch of free texting Apps that can be used, so that’s not an issue there.

What about the data? The data is the most expensive aspect of this whole thing. I dug and dug and dug, and looked at a company called FreedomPop. I didn’t like their marketing. I thought they were trying to pull a fast one. I found some pretty poor reviews that led me away and I thought I wouldn’t be able to find a solution. BUT, I found a company called Karma. They sell a little device, I don’t remember how much I paid for it – I think it was $100 for the device, part of my upfront costs in switching and saving a ton of money. It was $99, free shipping, and then it’s $14 per Gig, which is pretty cheap. They use the Clear network, which doesn’t have as good a coverage as Verizon here, but it is good enough for a data emergency. The odds of me needing data in an emergency situation are very slim because again, I’m not in a WiFi area about 2% of my life. And if I’m out camping I shouldn’t want data anyway.

So, that gets me to a spot where I can cancel my Verizon contract, which will cost me $240. Julie’s, luckily, ends October 6th, so we will wait and save the $120 cancellation fee. My props go to the Verizon customer service person who pointed that out to me so I didn’t pull the trigger prematurely and end up paying $120 for a cancellation that is literally two weeks away where the contract is up. So, I will buy two lines from Skype – one for me, one for Julie. We will both import our numbers from Verizon over to Google Voice, and then we will route our Google Voice numbers to those Skype numbers, that won’t be given to anyone because Google Voice will be the entry point. We can control all sorts of things from Google Voice – it’s a wonderful free service. It’s just a routing service. It’s not free phone calls and things like that. It is free texting and really cheap international calling, but it doesn’t replace a phone number for you. It just routes for you.

All in, that means that if I use my emergency data very little – we use about 1 Gig a month when it’s not an emergency because it’s readily available and we’re lazy at the moment. But if I were to just pop out the Karma when I really needed it, my guess is I would use… I don’t remember what I had on my spreadsheet, but I have a pretty good number in mind. I’m going to pay $99 to Karma – I already did – to get my mobile hotspot sent to me that will give me data when I need it. I’m paying the $240 Verizon contract cancellation fee – I have one year and six days left. So my start-up costs are $339. My two phone numbers from Skype for unlimited domestic US and Canada calling are $6 ($5.98). And then my data cost will be $2, bringing me to a monthly cost… I’m guessing on the data cost right now – $2 is probably about right though. That brings me to $7.98 in my cost. My current Verizon bill is $165.34, meaning my monthly savings is $157.36, meaning that I will pay back my start-up costs – which is important when you’re evaluating any decision – I will pay back that start-up cost in 2.2 months. And that is how I’m going to get rid of my cellphone, unshackle myself from that thing.

Going back to that nest egg idea – this will be coming up in a Podcast here shortly where I talk with Mr Money Mustache – but for every dollar you save you basically save yourself 25 times that in what you need in your nest egg to retire. So the fact that I save myself $157.36 times 12, that’s a cost of $1,888, and that means my nest egg can be – as I said at the beginning – $47,200 smaller to support my lifestyle. I know there are a lot of numbers here and I might have been talking a little fast, but this has been on my mind for the last several days. There is a blog post coming up about it, and I will go to the nitty-gritty analysis and answer any questions, and see if I can get a few people maybe thinking along these lines. This is significant savings. $150 a month for us. For you I’m sure it’s also significant, because most people are paying through the nose.

If you want something a little easier, check out Mark’s blog post on Ting, which is a great replacement if you want to part with your lovely iPhone and go with a somewhat… I don’t know what the word is… lower end Android phone.

Until next time, follow YNAB’s four rules and you will win financially. You have not budgeted like this.