Update of Our Phone Strategy (Version 2012)

Like most Americans, Tiffany and I blindly paid $60/month or so for our cell phones when we were newlyweds.  Then my good buddy Spencer Grange told me about prepaid phones.  He had access to free phones on campus through his campus office, so when his wife needed to get a hold of him and he wasn't at his desk, she would call the cell phone.  Then he would walk to the office phone and call.  So he used the phone as a free pager.  I thought it was brilliant.  So we switched to prepaid almost immediately.

That was 6 years ago.  Since then, Tiff and I have paid $50/year each for our minimal use cell phones.  So we've paid $600 over the past 6 years total.  I'm venturing to guess that most families pay on the order of $100/month (easily) on cell phones.  6 years of cell phone bills at that rate amounts to $7200.

We've supplemented with cheap VOIP, which is basically free.  We started with Viatalk.  Then we moved to MagicJack.  Then we almost went to Ooma, but we did Google Voice instead.

I focus so much personally on our recurring expenses because these are the expenses that can kill us.  They deplete you of your resources without you consciously deciding to purchase something.  That's why they are so dangerous.  They're also dangerous because poor choices are amplified.  If I make a bad purchase on a pair of jeans, I'm out $20 once.  If I make a bad decision on a cell phone plan (or car insurance, or life insurance, or TV cable plan, etc), and fail to realize my failure over the course of 10 years, I'm out > $10k.

So a lot has changed with technology since I made the switch to prepaid.  In summary, the prepaid argument has never been stronger nor more functional.  Technology, particularly high speed internet, wifi, google voice, and smart phones, make paying for cell phones and data plans completely unnecessary for most of us.


Google voice is a new innovation since I made the switch to prepaid.  Before, I used to be the annoying person who would pick up my cell phone and say "let me call you back from my landline."  Now, when my google voice number is called and I'm home, I pick up my VOIP line directly.  Perfectly seamless.  Not to mention the voicemail capabilities and integration with gmail.  I love it.

Setting up this VOIP stuff in years past was a little technical and challenging.  Now it has never been easier.  Log in with your google credentials and your'e good to go.

Here's the diagram of how we use google voice's service:

Inbound calls are routed to whatever phones you have linked up.  The OBI device that I refer to is this one: http://www.amazon.com/OBi100-Telephone-Adapter-Service-Bridge/dp/B004LO098O/.  We love it.  I have google voice routed to my cell phone too, and my work phone.

The thing is, smartphones + wifi + (GrooveIP for android or Talkatone for iphones) = free wifi calling (inbound and outbound).  It takes all of 2 minutes to set this up.  OBI is just as intuitive.

The one slight annoyance with our setup is that the outbound caller ID for cell phones is different from our google voice numbers.  With the exception of that slight nuisance, the system works flawlessly.

In this setup, smartphones can save you cash by facilitating this wifi calling.  Google released their new state of the art unlocked, no contract Nexus 4 today for $300:  http://www.google.com/nexus/4/.

Other recent developments.  Need data on the road?  Trick question.  Of course you don't need data on the road you compulsive email checker!  But if you wanted data on the road, supplement the above strategy by turning your car (or pocket) into a wifi hotspot with the FreedomPop Photon:  http://www.freedompop.com/.  It offers 500MB data/month for free with the hopes of upselling you later.  Oh yeah, the device requires a $90 deposit refundable if you return the device within 12 months of purchase.  Check the coverage map before you buy.

Calling through gmail (which is what OBI and the smart phone apps technically do) / Google voice is currently free.  Surely this will end in the near future and be replaced by a trivial fractional penny per minute calling rate.  This doesn't change the goodness of the strategy at all.

So that's all I've got.  Technology makes cell phone plans obsolete, though you have to carefully tread through the marketing lie to figure out that nugget of truth.  The behavioral adjustment required to spend less is the simple act of calling while at home or in wifi hotspots.  If copious amounts of communication is needed outside of home / wifi hotspots, then this strategy would of course not make any sense.

One last thing:  I've had this discussion with dozens of people before.  And the response is usually something like this "but I love my smart phone, so I must keep my data plan."  What brainwashed individuals like this don't realize is that they love the functionality of their smart phones.  I agree!  I love my smart phone functionality.  Compulsively checking email, blogs, news, etc.  I get that.  What they don't realize is that 100% of these activities can be accomplished just fine within a wifi hotspot (i.e. work, home, school, church, etc) without a data plan.  What they also don't realize is that smartphones are pretty cool even without the internet.  I can still pull up the contacts, send emails (which won't sync until I get back to wifi), take pictures, play games if I were into that sort of thing, etc.

So that's it.  95% of the benefit of a traditional cell phone plan for less than 10% the cost of a full blown plan sounds like a winning proposition to me.

And that's in part how our family of 6 saves > $10k/year (which will fund our annual Roth IRA contributions) while making a modest grad school stipend.  And that's in part how we intend to be financially independent within the next 12-15 years.  The other part, which of course is way more important, is avoiding rampant consumerism by living differently than 95% of Americans, but that's a topic handled quite nicely by other blogs such as www.mrmoneymustache.com (be forewarned of occasional profanity).