How to defeat your $100/month cell phone plan

This post is long overdue, as cell phone hacking is low hanging fruit in terms of expense optimization. Here’s how I have done it for the past decade, saving us over $10k in the process.

 

Google Voice – The Key Ingredient

Google Voice (https://voice.google.com/) is the critical component of our phone setup. What does Google Voice do?

  • Gives me free personal phone number.
  • If you download the Google Hangouts app, you can make and receive calls to any US number for free when connected to wifi.
  • If you download the Google Voice app, you can text for free when connected to wifi.
  • It provides me a free land line at home when coupled with this device.
    • My wife and I both have our GV accounts linked to the OBI device and have configured it to give distinctive rings for my calls vs my wife’s.
  • When someone calls my Google Voice number, I have configured my Google Voice Account to route to my work, my cell, and my home VOIP box.
    • No matter which device I pick up on, the person calling me has no idea of the underlying “complexity”. They just know that I pick up or not.
  • Google Voice handles my voicemail for me, providing excellent voicemail transcription. I never listen to voice mails any more.

The above is how I make/receive free calls and texts at home/work, where I spend 90% of my waking hours.

 

The below image shows my Google Voice settings. 2 linked phone numbers, one for work and one for my prepaid phone.

 

Prepaid Cell Plan

What about the 10% of my waking hours I’m elsewhere, like biking to/from work or at a kid’s soccer game? I use my prepaid cell phone plan and pay by the minute (I use Tello, which runs on Sprint’s network https://tello.com/rates/pay_as_you_go). You can use this strategy with any prepaid plan if you don’t like Tello.

 

Downsides of the Above Configuration

When I make outbound calls from my home VOIP device (or alternatively the Google Hangouts app), I simply dial a number and the outbound caller ID works great.

When I make outbound calls from my work, I initiate the call on the Google Voice webpage. Google calls me first then completes the call. Outbound caller ID works great.

When I make outbound calls from the road, the outbound caller ID shows up as my throw away prepaid number. There are probably ways around this but I frankly don’t care enough to implement them. I simply tell my friends/family the following. Enter into your phone two contacts for me:
* FrugalProfessor=GoogleVoiceNumber
* FrugalProfessorPleaseDon’tEverCallOrTextMeAtThisNumber=PrepaidSimNumber

 

What about Data?

If you are like me, you spend 90% of your waking hours with free Wifi. So data is pointless here.

If you use your phone for navigation, like I do, you can download and use the offline version of google maps. I have my entire state downloaded. When I travel for work, I download a map of the city I’m going to, usually at the airport.

Podcasts download automatically for me overnight at home, yet I listen to them on the road.

However, if I’m in a pinch I’ll pay $0.02/MB for data. I simply turn data on, do my business, then turn it off. Simple as that. For reference, calling an Uber takes about 2-3 MB.

 

Wrapping it up

Without committing to anything, you can sign up for Google Voice, get a free number, download the free apps, link your cell phone, and maybe even try the VOIP box. If you try it out and like it, port your cell number to GV and call it a day. It may take you an hour to get used to the above configuration.

The upside is that you can pay less than $10/year for a perfectly functioning phone system. The downsides are…..uh….you won’t be able to stream Netflix while driving (well you actually could if you simply planned ahead and downloaded them ahead of time for offline use)?

 

 

*** My friend Scott left an insightful comment below that is worth checking out. He makes a great suggestion for a low cost plan if you need to use your phone on the road more than I use mine.

Financial Update Sep 2017

Another month, another update. A few random comments.

Good Reads/Listens/Watches

  • This MyMoneyBlog post (link) on the rising cost of insurance + the viability of purchasing insurance on the open market was interesting. The rate at which healthcare expenses are rising is alarming.
  • A friend of mine forwarded me a video of a recent MMM interview (link). Watching that video reminded me of why I like him so much, mainly that he challenges societal norms by thinking logically about problems and strategically solving them. I’d like to think that I am similar to him in this regard.

Life

  • My wife has dreamed her whole life about going on a cruise, and she finally went on one with her sister and parents. I managed to keep the kids alive and the house from burning down in her absence….just barely.
  • Fiber internet is relatively new in town and my colleagues were discussing this over lunch (I brown bag daily, others are a mix). One of them mentioned that he had signed up for the full 1GB/s speed. When I questioned him whether he had first tried out the intermediate 20MB/s ($45/month less) or 100MB/s ($25/month less) speeds and found them to be insufficiently fast, he laughed…perhaps because he thought I had a good point or perhaps because he thought I was crazy. There is something profound going on here. Just as my colleague with 1GB/s internet, our society readily adopts excess without ever asking if it will make us happier. We have larger homes, bigger/costlier cars, more TV channels, more cell data, more restaurant expenditures than we possibly need. Many of us have incomes to support the excess. Many of us don’t, but we indulge in the excess anyway. The monetary cost of this excess is easily computed, and the rich person will somewhat rationally argue that he/she can afford the excess. However, I prefer to view the costs of excess in terms of time. Time away from family. Time away from pursuing hobbies and worthwhile pursuits. When reframed this way, I find it hard to argue for the rationality indulging in excess (where “excess” is defined as consumption that does not increase happiness like perhaps an unused 980MB/s of internet bandwidth).
  • Our good friends asked me for 401k allocation advice after I had touted myself as a bit of an expert. I looked through their 401k menu and picked the 3 lowest cost index funds to achieve a three-fund portfolio. I think they were skeptical of the advice, despite the fact that decades of academic research have concluded that reducing investing costs will raise long term returns. I suppose it’s analogous to me asking a doctor what the secret to health is and them responding 1.) wash hands, 2.) exercise, 3.) eat broccoli, 4.) wear sunscreen, 5.) and sleep. Index investing is almost insultingly simple, as is following simple steps to improve one’s health, but it is empirically the best way of investing. Will this immunize you against market declines? Of course not (much like eating broccoli won’t keep me from getting run over by a bus), but over an investing horizon of several decades, it’s the best we can do.
  • I contacted my state treasurer to point out that the excessive 529 administrative fees were going to  cost me $10k over the coming decades. I proposed two solutions: 1) lower the fees, or 2) allow me to contribute to another states’s 529 plan (CA has the cheapest total stock market fund at 0.08% total expenses, compared to my state’s 0.32% of the same fund) and maintain my state’s tax deduction (a few states currently allow this). Unfortunately my request was not very well received. Solution #1 seems unlikely b/c our state is small enough that we can’t negotiate better fees. Solution #2 would require a law to be passed in our state. This is a perfect example of how things get screwed up when government gets in between myself and my investments. I’m considering writing my local legislature to propose Option #2 but I’m skeptical that it will make much progress.

This month’s finances

  • The good:
    • Dumped another $13.1k into taxable brokerage.
  • The bad:
    • We went without A/C for 5 weeks by using windows. In less humid environments, this can work fine. In the oppressive humidity where we live, our home got to the upper 80s which felt more like 95. We finally cried uncle and had a repairman slap a $250 band-aid on our aging A/C unit. I’m hoping we can get a few more years of life out of it.
    • The price of my trusty TWC/Spectrum 3MB/s internet rose from $15 to $20 per month. Bummer. Even after the fiber internet rant above, I feel the irrational compulsion to upgrade my internet to 20MB/s. Then I snap out of it and realize that the 3MB/s works just fine (VOIP, streaming, remote desktop telecommuting, etc).
  • I’ve changed my financial reporting a bit to interface with Personal Capital. I’ll post the updated sheet after I finish my tweaks.
    • I now include a trailing 12 month sum for the income statement.
    • I now calculate a % to FI value on a monthly basis, calculated as the projected retirement income (based on Safe Withdrawal Rate (SWR) percentage) divided by the previous 12 months of expenses. This % to FI measure is increasing in the size of the investment portfolio. Likewise, the % to FI measure increases when expenses are reduced. I’m hoping to increase the numerator and decrease the denominator to accelerate my path to FI.
    • I break up taxes into each individual component now (federal + state + social security + medicare).

Full version is downloadable here (link).

 

Footnotes:

  1. Don’t lend money to friends/family.
  2. I lazily approximate home value as my historical purchase price.
  3. I have a 15Y mortgage; which results in a faster rate of repayment. The true cost of the mortgage should exclude repayment of principal, which I show above.
  4. $15 internet and $0 cell phones as described here.
  5. All expenditures at Costco & Walmart are classified as “Food at home” for simplicity (even if it’s laundry detergent, clothing, etc).
  6. I prefer Vanguard funds but my employer offers Fidelity instead.
  7. Nobody knows the perfect asset allocation. Just pick one and run with it. Use a target date retirement fund as a benchmark if you want some guidance (link).
  8. My low portfolio expense ratio is the primary reason why I don’t hold target-date funds, which have expense ratios anywhere from 0.16% to 1%. I can achieve a much lower expense ratio on my own due to Admiral shares, etc. And it’s not hard. Plus, a DIY portfolio allows one to tax-loss-harvest more easily.
  9. ETF’s are a pain to own relative to holding index funds directly. You have to deal with bid-ask spreads as well as the inability to buy partial shares. With a simple index fund, you don’t have to deal with either of these issues. I am currently invested in VTI b/c it’s $10/year cheaper than VTSAX in my Saturna HSA.
  10. The one blight in my expense ratio analysis is my 529 plan. The underlying Vanguard fund is almost free to hold (0.02%), but the high administrative fees bring the total cost of holding the fund to 0.32%. I abhor fees and would likely avoid 529 plans if I didn’t get to deduct up to $10k of contributions per year on my state return, saving myself $700/year in state income taxes.
  11. The only other administrative cost not captured by my expense ratios is a $19/year administrative fee for my HSA at Saturna Capital ($15 per transaction + 4*$1/dividend reinvestment).

Disclaimer:
This site is for entertainment purposes only, as disclosed here: https://www.frugalprofessor.com/disclaimers/

Frugal Analogs

I’ve enjoyed the podcast ChooseFI very much. I like that the hosts are normal dudes (probably more normal than me) stumbling through life like the rest of us. The hosts talk a lot about the idea of frugal analogs, which is an incredibly powerful concept.

Examples of frugal analogs in ***my*** life include:

  • $100/month cell phone plan => $1/month prepaid plan
    • Save $100/person/month
    • voice.google.com
    • Free VOIP
    • Hangouts app (apple, android)
      • Somehow I got lazy and went 78% over my $1/month cell phone budget last month due to travelling (spending $1.78 total).

  • Real golf => Frisbee golf
    • Save $20-50/person/round
  • Movie theater => Home projector
    • Save $10/person/movie
  • Eating out => Eating in / Brown bag
    • Save $7-50/person/meal
    • Save large amounts of time by not having to drive to restaurant, wait in line, etc.
    • Gain huge health benefits by eating foods with ingredients you control that aren’t laden with salts and saturated fats
  • Morning Starbucks => Water
    • Save $3-5/person/cup
  • Drive to work => Bike to work
    • Save $0.53/mile per IRS reimbursement rates.
  • Gym membership => Home gym & bike commute
    • Save $50/month
    • My current workout routine is 1-2 sets of following:
      • Pullups (currently 20-25 depending on how hard I push)
      • Plank (currently 4 minutes of hell)
      • Pushups (currently 40 reps)
      • Squats (currently 10 reps of 115lbs…weak, but still kicks my butt)
      • Bike 12 miles total to work and back
    • I purchased a $250 squat rack from Amazon a few years back for Squats + Pullups. It’s unbelievably cheap to set up a home gym when you recognize how little equipment is required. Gravity is ubiquitous. Body weight is quite ubiquitous as well. Gravity + Body Weight = home gym whenever you want one. Not having gym equipment is an unacceptable excuse.
  • Buying books/audio-books on Amazon => Borrowing from library
    • Save $5-10/book
    • Overdrive (has apps for android + apple) is fantastic if your library hosts this, though some libraries are more generous in their offerings.
  • Exotic overseas vacation => Visit family in minivan or week long backpacking trip in US mountains
    • Save $1k/person
  • Pay financial advisor => Do it yourself
    • Save 1% of assets per year in fees, resulting in hundreds of thousands of dollars in savings down the road
  • Barber/Hair Stylist => DIY with clippers / CreaClip
    • Save $20-50 per cut
    • Save time of driving across town
  • Grocery stores => Costco
    • Save 20-40% on groceries
    • Save time buying in bulk and avoiding decision fatigue through letting Costco curate the 1 ketchup option for you
  • Skiing => Sledding
    • Save $75/person/day
  • Consumerism / Keeping up with the Jones’s => Being happy with “Enough”
    • Save $$$$$/year
    • Gain happiness and peace of mind
  • Live in San Francisco CA => Live in low cost of living (LCOL) area
    • Save $$$$$$/year
    • Avoid horrific traffic and crowds

To ***me*** this is pure arbitrage. In every instance the frugal analog is 99% (if not 100%) as good as the real deal, yet it costs 30-100% less. I grew up skiing and golfing as a kid (I got free golf through working at a golf course). In college skiing was pretty cheap ($100/season). Once I grew up and these activities got more expensive, I dropped both hobbies like a bad habit because there are perfectly good frugal analogs which make ***me*** just as happy.

Said differently, the above is how we continue to live like poor college students into adulthood. Remember how great college was when we had no money? We were poor, but it didn’t matter because so was every else. Life was great. We had freedom, friendship, autonomy, and a deep sense of community. Then somehow we grow up, get jobs, incur seemingly insurmountable financial obligations, and decades of our lives pass by as we spend the entirety of our paychecks while trying to keep up with the Joneses chasing this elusive thing called happiness, all the while losing our autonomy and sense of community while living in McMansions.

The best things in life are free. Playing catch with a child. Playing a board game with family. Going on an evening walk with a spouse. Going on an afternoon hike.

The effect of each of the above substitutions is almost imperceptible to one’s financial well being over the immediate future. However, when cumulated over decades, it is literally the difference between poverty and abundance in retirement. MrMoneyMustache, the godfather of PF blogging, has a similar post here: http://www.mrmoneymustache.com/2012/10/08/how-to-go-from-middle-class-to-kickass/

 

*** Several commenters have rightfully responded with the following arguments: “FrugalProfessor, this article represents your preferences and not mine.” Totally agreed. For me, I get just as much joy/happiness out of the cheap stuff as I do the real deal. Others may not feel that way. Others may enjoy overseas vacations substantially more than the frugal analog. Others may enjoy skiing substantially more than the frugal analog. Others may enjoy spending $150/month on a cell phone bill that they could get down to $1/month. Fine. No problems here. The point of the article is that systematically adopting “frugal analogs” is the way pretty much anyone can retire in comfort rather than being impoverished. And I’m not exaggerating here. Some people, like myself, were born frugal and genuinely enjoy the frugal analogs as much as the real deal. Other people feel much less happy participating in the frugal analogs. For people like me, the decision is a no brainer, which is the case I make in the post. For others, they have to make the trade-off of more happiness now for less money (substantially less money after accounting for forgone compound interest) and happiness in the future. I’m fortunate to not have to make this decision too often, because I’m perfectly satiated with our current standard of living and, once the kids are out of the house & home is paid off, could easily see my spending go to $20k/year.