The One Money-Saving Hack That Nobody Talks About
By: Jon Peters
Tags: Smartphones, Opinion, Saving, Advice, Money

The One Money-Saving Hack That Nobody Talks About

Spend money now to save money down the road

Who wants to have a little extra cash in the bank at the end of the month?

Most of us probably, considering that 21% of Americans don’t save any of their annual income, and roughly half of those who do only save 10% or less of what they earn, with many citing that the cost of living is too high to enable them to save.

Luckily for us, the internet is filled with tips on how to save our hard-earned cash. Many websites advise ditching expenses like your morning Starbucks, Netflix subscription and gym membership if you don’t use them, but there are other ways as well. Today, I’d like to talk about one money-saving hack I swear by, one that has nothing to sacrificing your morning cappuccino, and everything to do with the smartphone in your hand.

An iPhone costs how much?

If you’d have told me twenty years ago that one day you’d be able to buy a phone that costs over £1,000, I’d have told you to lay off the Kool-Aid. But then Steve Jobs went ahead and invented the iPhone and everyone lost their minds for it.

But for those of us who don’t have a spare £1,000 lying around for when the newest smartphone comes out, what’s the solution? Simple, in the same way that you’d finance a car or a new kitchen, you just pay around £50 a month for two years to pay for your shiny new phone and your minutes/data. It’s a great deal. Right?

Not necessarily. Let’s take a look at two scenarios.

Scenario A

Imagine that I’m bored with my phone and I decide I’d like to take out a new pay monthly contract on an iPhone XR. I’m a little tight for cash as I don’t get paid until next week, so I want to pay the minimum amount possible upfront. I find a deal for £46 per month over two years. That’s not too bad, right? And I only have to pay £9 upfront! What a bargain! I place my order, excited to receive my new phone in the post the next day. By the time my contract runs out two years later, I’ve spent a total of £1,113 on my iPhone XR.

Scenario B

I’m still bored with my phone, and I really like the look of the new iPhone XR. I have some savings in the bank, and I don’t want to be tied into a contract for two years, so I look at how much it would cost to buy the phone outright. £629. Plus, I will get £100 off the price of the new phone if I trade in my old handset. Taking off the trade-in value of my old handset, I buy my new handset outright by spending £529. In addition, I buy a SIM-only deal which costs £10 per month, with no contractual commitment. After two years, I’ve spent £240 on the SIM, giving me a total cost of £769.

As you can see, the decision to spend more money buying the phone outright nets me a saving of £344 over two years.

But what if I don’t have the money to buy a phone outright?

If you don’t have the money to buy the phone outright, you could consider making the purchase using an interest-free credit card. These allow you to make larger purchases without having to pay any interest. They usually come with an interest-free period of 12 or 24 months, so be confident you’ll be able to pay off the outstanding amount before this period ends, else you’ll be switched to a higher rate of interest.

For the example above, if you were to borrow £529 and pay it back over 24 months, it would cost you £22.04 per month. Adding the cost of your SIM card at £10 a month means your total spend is £32.04 per month, which works out over 24 months to a total of…yes, you guessed it, £769. Still a saving of £344, you’re just spreading the cost of the phone without paying any interest.

Credit cards aren’t for everybody. If you have a tendency to go on spending sprees, then this method might not be for you. But what I have known people to do in the past is to make a purchase using a credit card, and then immediately cut it up. This way they can carry on making the repayments, safe in the knowledge that they’re unable to spend any more on the card.

Final Thoughts

Want to make some larger savings? Consider the following:

Do you need the latest model? The newer the model, the more expensive it will be. If you’re willing to settle for a slightly older model, the savings can really start adding up to the several hundreds of pounds/dollars.

Do you need to upgrade every two years? As phones have become more advanced, innovations between generations are becoming less and less, and phones are lasting longer. This may seem obvious, but the longer your phones last, the fewer handsets you end up buying, which means more money in your pocket.

Search around for the best possible SIM deal. I pay £10 a month for 30GB of data, which is absolutely plenty for most people. But in the earlier scenario, if I were to pay even just £20 per month for my SIM, it would cut my total saving from £344 to £104 over two years.

Choosing to buy a phone outright won’t be for everyone. It entirely depends on your individual circumstances, and it’s not my place to tell you what to do with your money. If you’re happy paying more in the long run to avoid a larger upfront cost, then more power to you. But if you’re looking to save a little extra cash, and you’re someone who doesn’t necessarily need a new phone every few years, consider buying outright. I swear by it. And I guarantee that if you do it once, so will you.