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Sweet! 900,000 anytime minutes and 17 million text/photo/video messages a month as well as a 43 Megapixel camera with flash and facebook/twitter/MySpace apps and a 16,400 gigabyte data plan! My life is finally complete!

As necessary as all of that sounds and no matter how much you may convince yourself of just how necessary you deem your cell phone to be along with the $16,454 phone bill that comes with it every month, there are some things you should know first…

Introducing the Cell Phone

Cell phones are the biggest addiction to hit planet earth in the 21^st century; in fact, there are a total of 3.3 billion (every other person has one) cell phones in use around the world today…and counting!

I hope that what I am about to say next will not come as a surprise – the cell phone industry is a huge business, and like any good business, there are out to make money. Countless carriers are offering their “BEST DEALS EVER!” to attract new customers.

But are these deals really the best ever?

Choices, choices and more choices

Do you find yourself getting lost in the number and scope of cell phone plans there are out there these days? Voice plans, data plans, messaging plans, my5, my10…my suicide.

Why in the world can’t they make choosing a plan simpler? At least that’s what we’re here for – to make your life just a tad easier and maybe even put some money in your pocket.

Of course everyone has their our own preferences when it comes down to choosing the phone they want and for some reason the number of megapixels or the inclusion of a GPS function seems to be the most important criteria when it comes to people choosing their phones. These are the same people that end up overpaying for their phones and plans by hundreds of dollars a year because they feel it is necessary for their phone to be able to tell them where to cross the street.

The quality of the camera in your phone, the applications available for it and however many gigabytes of inappropriate content can be stored on your phone can certainly be important factors when choosing your phone but it seems that too many people focus on the phone and not on the plan/contract that comes with it…and the contract is where the cell phone companies make their big bucks and where the customers lose all their money.

A rather sad reality

No, no, I won’t scream at you or explain to you your poor decision-making skills…

I’m here to simply guide you in the right direction that won’t result in you having to sell your last shirt, kitten and the goldfish in order to pay off your last month’s bill.

To prevent this disaster from happening to you, be honest with yourself: If you only have only twenty to thirty contacts in your call list and on a regular basis text no more than ten people a day, trust me, you don’t need a full QWERTY keyboard for telling your four friends hello nor do you need an unlimited text messaging plan.

Carrier vs. Phone?

First and foremost, I assume you are buying the phone for the reason of keeping in touch with others, meaning – calling and texting. Since those are the primary functions of any phone, you want to make sure you are paying the fairest price for what you are using your phone for.

Choose your service provider first; be sure you are fine with the price you are paying and after that worry about the phones they carry. More than likely, the carrier will have the phone you are looking for, so the plan should always come first.

Also, Smart phones often require more pricey plans – often for no apparent reason, so unless you absolutely need that iPhone or Blackberry, you will definitely save quite a bit of money by opting for the less intellectual phones.

Choosing a plan

If you aren’t sure which plan to choose, chances are the simplest (and cheapest) one will fulfill most, if not all, of your needs. You always have the chance to upgrade to the more expensive ones without any penalties or fees since all you are doing at the end of the day is paying your cell phone provider more money.

However, if you choose a more expensive plan and in a week or two you figure you don’t need those 400,000 minutes a month, changing the plan to a less expensive one is a royal pain in the ass. You will often end up paying some ridiculous penalty – I guess it’s because cell phone providers don’t like it when they start making less money.

Virtually every single cell phone provider has a fave5 or fave10 program that might end up saving you quite a bit of money. These “fave” five or ten are the people you contact most frequently out of your contact list (friends, parents, siblings, rodents, etc) and as it goes, you can call and text them for free for as much as you need (or want) to.

Taking this into account, really do choose the cheapest plan there is from the start; you can always upgrade from there. And to add to that, a lot of providers offer free weekend calls and free evening calls after a certain time. If you’re a chit-chat like me, call your friends up at those times when it’s free to call instead of paying for every minute.

Contracts

Now for the deadliest part about cell phone providers: if you go buying a phone without a single clue of what you are doing, your wallet will end beaten with a sack of money-stealing potatoes without your knowledge. All providers have a sleazy little trick up their sleeves called contracts. A contract basically leaves you locked in with your provider, your plan and your phone for the amount of time specified in the contract. Typically, the longer the contract, the cheaper a phone is to buy.

Usually, there are three types of contracts – for one year, two years and three years. Tell you what – if the phone you want is not very expensive, go with the one year contract. Though you may end up paying an extra $50-100 or more for the phone initially, it leaves you with the flexibility to switch in a year if you do not like the service. There is also a choice of doing “pay-as-you-go”  but you’ll have to pay in full for the cell phone on the spot.

After you initiate the contract, you are stuck with the phone and with the plan and the provider until your contract expires. After a couple years you may be eligible for an “upgrade” which allows you to get a new phone… with the added bonus of renewing your contract by another few years.

The wonders of capitalism

You may not have thought of this in these terms before, but having this incredibly large number of cell phone users shifts the power from the business to the people – a very nice scenario.

Since there are only so much people walking the planet and since toddlers do not yet ask for a phone on their first birthday, providers have already started the “best-deal” wars to win over every possible customer from their rivals. Making good use of this information can lead to something more than wonderful – paying less for your phone!

It’s simple; all you need to do is call your cell phone provider and tell them that their rival (for example, Rogers vs. Bell in Canada and AT&T vs. Verizon in US) is offering you a lower rate and don’t hesitate to tell them the real numbers.

Most of the time, your current provider will be more than happy to match the price or even beat it. If that’s not the case, make a BIG DEAL out of it, ask for a supervisor, go emotional, whatever it takes; tell them you’ll drop the contract even if you have to pay another $100 to cancel it. Bottom line is making your provider fight for you, show them whose boss, and get what you want. You’d be surprised what the cell phone companies will do to keep you as their customer…and ultimately keep sucking money out of you.

YOUR MONEY

So how much will you save if you do as I suggest?

Considering the average cell phone bill adds up to $56, simply said –that’s quite a lot. With some providers, for $25 you can get a plan with 100 daytime minutes and with free/unlimited calling between 7 p.m. and 8 a.m. On top of that you get unlimited text messages and no system access fee.

You save: $56-$25= $31 per month or $372 a year!

Now…if you invest that $372 a year growing at 25% annually (visit the Business & Investing section for help with this), you can easily have almost $4000 in five years, over $15,000 in ten years and $160,000 in twenty years (see our compounded interest article to understand how this works).

…or you could have sent videos of dancing monkeys to your friends while driving your car into a lake because you were too busy trying to fill up an extra 9,000 minutes for the month by arguing with your girlfriend/boyfriend/mother/father/priest/rabbi/friend to notice where you were driving.

A few Big Fat Moneybags rules of thumb on choosing the right phone for you:

1. Pick a phone relevant to your lifestyle, no need to pay for the extras you don’t use.
2. Choose the provider first, worry about the phone later.
3. Use all the options to your advantage.
4. Make your provider give you a deal – regardless.
5. Keep track of your phone bill; make sure you’re not overpaying for anything or have services you never signed up for.

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