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6 Ways You Are Overspending on Your Smartphone

How much are you spending on your smartphone every year? Here are 6 ways that you might be overspending on your favorite device to help you reduce this big cost centre of your life.

Singaporeans love their smartphones. In fact, the smartphone penetration rate in the country is already at 150%, an extremely high number that suggests an average person carried about 1.5 smartphone with him. Not only that, Singaporeans spend a lot of time and money on these devices. For example, a study from 2017 found that Singaporeans spend over 12 hours on smart devices per day, while devices and mobile plans themselves can cost over a thousand dollars per year each. Given the significance of this technology in everyone's life, smartphones also represent a potential source of big gains and savings. Here, dis cuss 6 ways you are overspending on your smartphone to help you minimise mistakes you can easily avoid.

Paying for Your Phone Upfront

Back in the days, consumers had to pay the full price of a phone upfront or pay a rather large monthly payment for their plans to get a smartphone for free. However, buying a phone through either of the methods turned out to be either burdensome (some phones cost almost a thousand dollars even in the past) or extremely expensive (monthly payments eventually added up to a sum much higher than the cost of the phone).

Thanks to new entrants rising competition in the telecom industry, carriers in Singapore have been introducing innovative plans that let consumers lease their phones while only paying for the SIM card of their plans. By utilising these plans, consumers can now reduce both the upfront cost and total cost over time by leasing a phone instead. For example, Singtel charges S$20 per month for its SIM only plan that comes with 5GB of data, 150 minutes of talk and 500 SMS. With this plan, you can pay S$62 per month for a 256GB iPhone X, or S$45 per month for a Samsung Galaxy S9+. Even if you were to pay S$200 to change your phone once a year and include unlimited talktime, the combination of these two plans would cost about 5-8% less over 2 years than buying the phone with a Combo 3 Plan that also comes with 5B of data with unlimited talktime and SMS.

When including the cost of mobile plans, it costs about 5-8% less over 2 years to lease a smartphone than to purchase it

Replacing Your Smartphone Every Year

As mentioned, our calculation above assumes that a person who chooses the leasing option would change his phone after the first year. However, this is actually not a financially savvy move. Unless you are hell bent on having the latest smartphone for the sake of self-satisfaction of some sort, there should not be a pressing need to replace your phone every year. In fact, most smartphones last more than 2 years now, with Apple devices averaging more than 4 years of usage. Not only that, smartphone innovation has plateaued significantly in the past few years, meaning consumers don't have much to gain technologically by constantly upgrading their devices. If your battery starts running out quickly, it's often more economical to simply replace your battery than get a new phone, with even iPhone battery replacement costing less than S$30. If you were to replace your phone every 2 years, you can save S$200 of the device upgrade fee, which further increases the financial advantage of leasing versus buying. However, one caveat to this rule is that it could still be more economical to purchase your device upfront than leasing if you plan to keep your device for 3 years or longer.

Not changing your phone every year can help you save dramatically

Paying for Unlimited Voice or Text

With many messenger apps like WhatsApp, Facebook Messenger and iMessage (for Apple devices) being so popular, paying for unlimited voice or text messages is no longer a necessity for most people. In fact, these technologies actually consume very little data for voice and texts, so that you could easily get by by leveraging these apps for calling or messaging your friends over data and Wifi. Unless you are constantly watching videos by using your mobile plan, the allocated 150 minutes of talk and 500 SMS per month are likely sufficient to cover most of your communication needs that can't be fulfilled through these messaging apps. Therefore, actively utilising these services can help you avoid paying S$16-18 per month (or about S$400 over 2 years) just so you get unlimited voice or SMS that you don't actually need.

Unlimited voice and text add-ons are often unnecessary for most consumers

Not Switching Your Plan or Carrier

Because most people simply set up an automatic monthly payment for their mobile plans, it's easy to forget about shopping for a new plan. In fact, most people generally renew their existing plans because it can be quite difficult (if not daunting) to look through all the different options again on their own. However, this can be a big mistake, especially given the rapidly changing landscape in the country. For example, since Circles.Life came into Singapore in 2016, the market has already changed significantly, with many players launching aforementioned SIM only plans (and now leasing) that are economically better for consumers. Competitive pressure only seems to be growing, with Zero Mobile being the latest player to join the market with its unlimited everything plan. When new entrants are disrupting the market, consumers can benefit by paying attention and switching to the latest and cheapest plans being offered by telcos.

Not Earning Rebates on Your Monthly Payments

Because telecom bills occur regularly, it's easy for people to simply link a credit card to their accounts to make automatic payments without having them need to worry about them. However, if you aren't linking these accounts with proper cards, you could be losing out on bigger savings through maximising your rebates. For example, some cards like OCBC 365 Card provides 3% rebate on monthly telco bills, while there are other cards like UOB One Card that provide a fixed amount of rebate as long as you consistently satisfy their minimum spending requirements (which could be a great fit for large monthly payments like telco bills). There are many other credit cards that are excellent for monthly recurring bills. By finding one that provide generous rewards on expenditures that tend to be large parts of your budgets, you could earn hundreds of dollars each year in cashback or miles.

Spending Too Much Time On Your Device

Last but not least, you could be spending too much time, and hence too much data, on your smartphone. It could be very easy to lose track of time while browsing through your Instagram feed, playing mobile games or while watching Youtube videos. However, videos and pictures tend to consume a lot of data and inflate your telecom bills. Furthermore, these pass time activities aren't very productive ways of spending your time. Instead, spending 5 hours a week learning something could not only help you avoid overspending on your mobile plan, but also help you improve your finances significantly over time.

Duckju Kang

Duckju (DJ) is the founder and CEO of ValueChampion. He covers the financial services industry, consumer finance products, budgeting and investing. He previously worked at hedge funds such as Tiger Asia and Cadian Capital. He graduated from Yale University with a Bachelor of Arts degree in Economics with honors, Magna Cum Laude. His work has been featured on major international media such as CNBC, Bloomberg, CNN, the Straits Times, Today and more.

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