This new mobile phone can wait!

Before you take the plunge and upgrade your mobile phone, take a moment to think about the total cost of locking yourself into another 2 year term.

  • Most people already have a cell phone at the age of 18 (the truth is, it’s more like 12, and that age is getting younger).
  • Most people will own a cell phone for their lifetime with an average ownership span of at least 62 years (we’re conservative at 18-80).
  • Cell phones vary in price and plan, but this latest new smartphone could cost you up to $1,500.00 if you were to buy it outright!
  • Most Canadians spend an average of $101 per month on their mobile phone (Canadian Radio-television and Telecommunications Commission’s 2019 Communications Monitoring Report), but in reality, that’s probably closer to $115 per month if you take all taxes, additional costs, and surcharges considered.

Based on the above, most people will spend between $75,111 and $85,560 on their mobile phone over their lifetime (excluding inflation). Those who update their phone every 2 years will spend even more!

How can you save money?

Consider the missed investment opportunities. Let’s look at the money.

Assuming an average cost increase of 5% per year (not counting all those apps and subscriptions) and using after-tax money (what your mobile phone and plan is costing you), all that money, if it is invested, could grow tax-free.

All the money you (spend) represents a missed opportunity to invest. Let’s look at the lifetime (missed) investment opportunity cost of your mobile phone and plan at different levels of return (depending on your risk appetite) using an annual cost of $1,380:

  • 4%: $1,322,648
  • 6%: $2,309,402
  • 8%: $4,844,418
  • 10%: $10,560,088

So what if you keep your current cell phone a bit longer (yes, they last 2+ years) and upgrade to a more basic phone and texting plan (use data at work, home or WIFI hotspots for emails, internet and calls). Assuming a very basic plan of $15 per month ($180 annual cost) – your lifetime (missed) investment opportunity costs would be:

  • 4%: $74,547
  • 6%: $160,517
  • 8%: $371,604
  • 10%: $903,398

With the difference invested, your lifetime savings could be:

  • 4%: $1,248,101
  • 6%: $2,248,885
  • 8%: $4,472,814
  • 10%: $9,656,690

We understand that nowadays we all need to be connected for work, for family. Think about it, just 25 years ago, not everyone believed that they would ever need a cell phone or that they had to be always connected to the internet. How things have changed.

So before you rush out to buy that new mobile phone or upgrade your contract, think about these numbers and let’s talk about you. Let’s talk about your estate plan.

Sources:

Disclaimer
The content of this article is for informational purposes only and is not intended to provide financial, insurance, legal, accounting or tax advice, and should not be relied upon by you in this regard.

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