smart spending

Upgrade your phone? Not if you want to save money

"The unsubsidized plans usually include a discount on your monthly payments. These discounts can shave up to $25 a month from your bill. So in the long term, you'll actually pay less with the unsubsidized phone," Ramirez says.

Scenario 3: Getting a new phone with a cheaper carrier

As Nitzsche points out, many cellphone carriers are changing their business models. There's a lot of competition, and consumers are starting to realize that lesser-known services are often equally worthwhile.

Republic Wireless, for example, offers a $25 monthly plan that includes unlimited talk, text and data. Unfortunately, there are really only two phones you can use with the carrier, so fancy iPhone upgrades aren't an option. If you buy Republic's Moto G phone at $149, here's what your numbers will look like over time (minus taxes and fees):

Major carrier vs. specialized carrier

Upfront price of phoneMonthly billTotal 2-year costTotal 4-year cost
AT&T, unsubsidized$649$60$2,089$3,529
Republic Wireless$149$25$749$1,349
Difference$1,340$2,180

Over two years, that's a savings of more than 50 percent over upgrading on a large carrier.

Then, there are more conventional discount providers like Straight Talk, which is operated by TracFone Wireless. It charges a flat fee of $45 a month for unlimited talk, text and data (although data is throttled after 2.5 GB).

While shelling out the cash to buy a brand-new shiny iPhone 5s on Straight Talk (or most late-model smartphones) can be tough, you're likely to save money over the long term compared with a major carrier.

Major carrier vs. discount carrier, new phone

Upfront price of phoneMonthly billTotal 2-year costTotal 4-year cost
AT&T, unsubsidized$649$60$2,089$3,529
Straight Talk$650$45$1,730$2,810
Difference$359$719

Although not as cheap as Republic, your total costs are still significantly less than with mainstream carriers, especially if you bring your own phone.

Scenario 4: Taking your old phone to a discount carrier

If you're able to unlock your current major-carrier phone and take it over for free to a discount carrier like Straight Talk, H2O Wireless or Ultra Mobile, you can save a substantial amount of money.

Ramirez cites another discount carrier, Virgin Mobile, as an example of how much is potentially at stake.

"You're looking at $35 a month on Virgin versus $80 a month on Verizon (considering a similar prepaid plan)," Ramirez says. "On a yearly basis, you're looking at savings of at least $540. Over a span of two years (which is the length of the average phone contract), you'll save $1,080 by choosing a discount carrier like Virgin Mobile."

Overall, it's clear the longer you can hold out for that new phone, the better. Especially once you have a totally paid-off, unlocked phone in your hands, there is a huge range of carriers and plans that can save you big bucks over the long haul.

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