You can’t go anywhere without seeing advertisements from multiple cell phone companies. There are many options to purchase both equipment and plans, but how do you balance the cost of what you need with what you want? To stay financially responsible, this is how I approached the decision to buy my new phone.
I like having the newest technology just like you, but buying behind the curve can save you money. Last year just before the release of the iPhone6 I upgraded my phone to an iPhone5. After doing some homework, I chose to buy my phone at Costco for $56 for two reasons: first, I wanted to stay with my current service plan; and second, I wanted to avoid the additional cost of leasing my phone.
Leasing is financing
I just couldn’t get past the idea that my phone is not a car . Why would I finance the purchase of my phone like it was a car? If I leased my new phone from Sprint it would cost $12 per month. However, I found out that if I purchased it at Costco I could keep my current service plan and pay cash for the phone.
If an offer seems to good to be true, it probably is. Make sure you do the math to make a smart decision. Don’t fall into the trap of thinking just because it’s a business expense you don’t need to be as thorough with evaluating your financial choices.
What is the trade off ?
Buying my phone for $12 per month for 24 months would cost me $288. I work with numbers everyday and I couldn’t get $288 to be less than $56. The catch is I had to sign a contract for two years of service to purchase my phone with our leasing it. The cost of terminating the contract used to be very steep, but those rules changed a few years ago. The risk I would be forced to break the contract by terminating it early was low.
Do the math
Buying any service plan that requires equipment can be confusing. Often it is better to own the equipment if you have the choice rather than lease the equipment. If you want to be a successful entrepreneur take the extra time to make smart financial decisions. Read the fine print, ask questions and do the math.
What other situations have you encountered where you made the right decision by doing all the math? Share your comments below.
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