How Buying Out My Phone Contract Saved Me $720 A Year


How Buying Out My Phone Contract Saved Me $720 A Year

A while back I decided to change the way my mobile device plan was set up. This change has resulted in an  annual savings of $720 a year.

Initially I signed up for a two year contract on my mobile phone. This way I could receive the generous discount on the purchase price of the phone, all while thinking I was saving a lot of money.

This resulted in initial cash savings due to the reduced purchase price of the mobile device but as I found out later on led to numerous disadvantages throughout the term of the two year contract.

It wasn’t until talking with a friend that I realized his mobile device plan was much better then mine. I tried to enrol in his mobile device plan but was unable to. I talked with my carrier and soon found out that the only way to be eligible to enrol in that plan was to not be under a two year contract. I did the math and decided to buyout the remainder of the existing mobile device contract and participate in the bring your own device plan (BYOD) that my carrier offers.

Buying out my contract provided the following benefits.

The Benefits

It will increase my bargaining power because when you buy your phone outright you are free of the ball and chain relationship towards the mobile device carrier that a contract naturally implies. At any time the company changes to undesirable service plans or you become unsatisfied with the customer service you are receiving from the company, you can easily change service providers. After buying my contract outright I have found that the customer service experience has been much more pleasurable as they are aware of the fact that I am able to switch carriers at any time.

The biggest advantage enabling me to save $720 a year was that once my contract was bought out and I owned my mobile device. I had the option to select better plans at a lower cost. These plans are cheaper then what was previously available when I was under the restrictions imposed by the two year contract. Along with increased options on offered plans we were also granted a 10% discount on the selected monthly plan all because I now owned my own device and was participating in the (BYOD) program.

How I Saved $720 A Year

Before buying out my mobile device contract the best plan available was $85/month. The $85/month plan had about one 1GB of data and various calling features. The next step up plans while being under the two year contract included roughly double the data and more generous calling features for $120/month.

I was averaging around $120/month for my mobile device consistently. Once buying the mobile phone outright I had access to very similar features as the $120/month plan for $70/month and with the 10% discount it works out to $63/month.

Paying $63 a month for my mobile device results in roughly $60/month or $720/year in savings.

The Significance Of Saving $720/yr.

Just like investing the savings from cutting cable  this $60 a month in savings is being put towards investments as well.

As mentioned yesterday this savings is a double edge sword. This extra $60/month going into my investment portfolio will increase it’s value and resulting dividend distributions it is able to generate. While at the same time it has reduced the required size of my investment portfolio account by $18,000 ($720 X 25 = $18,000) and the required passive income required to cover my annual expenses by $720 a year.

The significance becomes even more profound when you look at the results from investing the $60/month over a ten year period. Investing $60/month over a ten year period with a 7% return on investment will be worth $10,263.


Obviously a lot can change throughout a ten year period but the main point of this post is the benefits from owning your phone outright compared to being under a contract. The resulting savings will be different for every individual due to the resulting savings from there current plan to new plan if they start participating in BYOB programs. How long your phone lasts, investment returns, and changes to plans or carrier services. All that being said I believe the best way to go is to buy your mobile phone outright, avoid the contract, and use your phone as long as you can to maximize your savings.

Let me know your results and how you conduct your mobile operations. I am always looking for ways to reduce my expenses.

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I have learned a lot over the past seven years on topics involving Financial Independence, Investing, Frugality, and Simple Living. So, if any of these topics interest you, I hope you stick around as I have a lot of stuff to talk about from lessons learned over the past seven years. If you have any questions about a topic or post send me an email at

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