Recently, I took a trip to the lovely land of Verizon Wireless.
I embarked on this journey due to the fact that my family’s chocolate lab, Portia, had chewed up my cell phone the day before, after it accidentally fell out of my pocket. Poor phone!
Needless to say – I was desperately in need of a new phone.
Before I elaborate further on the story, one thing you should know about me is that one of the things that I feel is unnecessary in my life is a smart phone (i.e. a phone with internet, chat, Facebook, etc capability). I am a big fan of regular phone calls and text messaging, but I realize that with my personality, I would be way too addicted to a smart phone if I got it. Just think – a PF blogger having 24/7 access to their email and blog. My friends would never let me hear the end of it!
Nevertheless, when I entered the store, I was amazed at how numerous the options for smart phones were (Droid, HTC, Blackberry, Palm – just to name a few that I saw). In fact, the options were so numerous that upon checking out, I inquired with the clerk as to if she could give me an estimate of the percentage of people that come in using smart phones.
She mentioned that definitely more than half of people are using them currently. This definitely wasn’t very surprising, considering how common it is to see people using their smart phones in public.
However, this got me thinking – just how much is having a smart phone / data internet plan costing consumers in the immediate and long term? Let’s take a look, shall we?
Smart Phone Data Plan Cost Analysis
According to Verizon’s website, an unlimited data plan (what I hear from my friends that most people choose) costs $30 per month on top of the regular phone/calling charges. That’s a whopping $360 per year!Â
In order to make this analysis more applicable to real life, let’s consider that our imaginary friend, Jim, is a tech-savvy 25 year old. He’s in the generation that grew up when social networking was becoming popular. He lives and breathes Facebook, Digg, Twitter – the works!
We’ll then consider two competing scenarios.
Scenario 1 – Jim pays the $30 per month every year from now until he retires at age 65.
Scenario 2Â – Jim instead saves the $30 per month every year, and invests the savings in a Total Market index mutual fund. His savings in this fund will be assumed to earn 10% per year in interest.
Results
- In Scenario 1, the total cost of Jim’s data plan is $14,760.00. Quite astounding if you ask me!
- In Scenario 2, not only does Jim avoid this ~$15k expenditure, but his savings accumulate to $175,626.65 as a result of the miracle of compound interest.
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Note: for the specific calculations performed to obtain these numbers, please see the Google Docs spreadsheet below at the link below. Simply save a copy to your computer to allow for editing the file.
Conclusion
The final step in this analysis is to try to make some sense out of these numbers. Clearly, $14,760 is a significant sum of money to be spending over the years for a data plan. Furthermore, if compound interest is added in to the mix, the magnitude of the savings amounts to something along the lines of a down-payment on a person’s house during his/her retirement years.
While for me personally, having a smart phone data plan isn’t worth it, I think it is up to everyone to determine individually whether having a data plan provides enough value in your life. I know that for some of my friends, their smart phone is a “part” of their life – something they wouldn’t want to do without.
The key is to know how much it is truly costing you, and to make your respective decision from there.Â
So, I leave you with a final question – Is it worth it to you? Share your thoughts by commenting below!
