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Spending Money to Save: Focus on the Total Cost of Ownership

April 24, 2012 by Lazy Man 14 Comments

My friend Kosmo over at The Soap Boxers wrote an article that reminded me to write of something that I’ve been meaning to write about for some time. Many consumers focus too much on the cost of something now, and rarely take the long term financial considerations into account. The Total Cost of Ownership (TCO), is a business term for analyzing all the ramifications of purchase decision. Microsoft has used this for years to keep customers from defecting to Linux, a free operating system.

[Note to Regular Readers: I know you may already know this. However there are still millions of consumers who don’t. If you know someone who this could help, please spread the word.]

The Total Cost of Ownership of a LightBulb

Let’s start with Kosmo’s article: Is a $50 Light Bulb Affordable? The article shows the math of why spending $50 for an LED lightbulb will end up saving you around $75 over the life of the bulb. It doesn’t sound like much, but if you are as Lazy as I am, you like not having to buy and store a bunch of incandescent bulbs and changing them, while saving money.

This is a no-brainer to me. The only question is whether you prefer to save even more money by going with Compact Fluorescent Lightbulbs (CFLs), which have mercury and require special handling.

I suppose there’s the small percentage of people out there who can tell the difference between the types of light. I would imagine that most of those people would adapt to it. Chances are if CFLs came first, incandescent bulbs would seem odd.

The Total Cost of Ownership of a Mobile Phone Service

Like the lightbulb, people focus too much on the cost of the phone itself. They ignore the more expensive component, the cost of the service. When the iPhone came out, I thought it was pretty cool, but I already had a smart phone that did email better (physical keyboard) had music, the web, and a bunch of other stuff. It was the Palm Treo 600 (or 650). The data plan cost me $30 a month. The iPhone evolved (even learning how to SMS photos), but the plan jumped up to around $80 for most people. That’s a large chunk of change.

For awhile I jumped on board the expensive cellphone plan with Sprint. For around $70 a month, I could use a Palm Pre. It was good for awhile, but finally, I saw the light and went to Virgin Mobile’s $25 unlimited data plan (it’ll cost you $35 now). I’ve got an Android phone in the Motorola Triumph. While I think it is a large step back from the Palm Pre, the mass market has spoken and they like Android slab phones. So instead of spending $840 a month on service ($70 times 12), I’m spending $300. Each year I save around $540.

The difference in the price of the phone is miniscule compared to the $540 I’ll save every year.

The Total Cost of Ownership of Landline Phone Service

Let’s take the mobile of the above example. I used to pay around $40 a month for plain old telephone service (POTS in industry jargon). When Vonage came out, I switched to their $15 plan saving me $25 a month. It was a simple subscription change, I didn’t have to buy anything upfront.

However, a year ago, I switched to Ooma Telo free home phone service, and it has been awesome. I paid around $150 upfront (I got a deal) and now only pay about $3 in taxes and regulatory fees a month for home service. Since I had to pay those with Vonage, I have saved the full $15 a month that I paid with Vonage. In ten months, I broke even. The last two months have been savings. Each year I stick with Ooma, I’ll save $180.

The Total Cost of Ownership of Fresh Water

Okay ownership of water is a weird one. I know a number of people who don’t own a Brita water pitcher. I see these same people buying bottled water. I don’t understand it at all. A one-time investment for a Brita pitcher is under $20 and the filters last months working to give you many, many gallons of water.

I get that there’s a convenience factor to bottled water. However, with just a little planning ahead, you can save your $1 very easily, and get a better product. What? A better product? Yep. Bottled water isn’t necessarily filtered or as pure as Brita. In fact, it is about the same as tap water. In addition, with the Brita solution you can avoid that whole BPA nastiness.

The Total Cost of Ownership of Website Hosting

I know most of you probably won’t care about this one, but it home for me recently. I had be running this website using Amazon Web Services, a service that is very economical if you happen to have some Linux technical skills. I didn’t choose Amazon Web Services just to save a couple of dollars, I did it because I wanted to brush up on some technical skills that had gotten a little rusty. It all went smoothly until my website was attacked. Then it started to take too much of my time to defend the attackers.

The solution was to move the site to WP Engine, a hosting provider that fights the attackers for you. This site is much faster now than it was before the attack. I pay $100 a month, where Amazon was costing me around $60, but it is worth it, because I don’t have to deal with any attacks. If something goes wrong, they are on it right away. In the past, when something went wrong, I would put on my Linux system administrator and spend time fixing it. Now I can use that time to write articles like this one. Focusing on my business gives me a greater return than the cost of the more expensive hosting.

Unlike the other examples, this web hosting one is more about me spending money to save time and using that time to make more money. Still, I felt compelled to include it as it is just the most recent reminder of spending more to save.

These changes don’t seem like much, but they add up to save you probably a $1000 a year or more. Do you have more tips on how to spend a little money to save more in the future?

Filed Under: Smart Purchases, Spending Tagged With: cfl, led, lightbulbs, ooma, virgin mobile, vonage, wp engine

Virgin Mobile Mess… Google Voice Saves Me $10 a Month

January 10, 2012 by Lazy Man 12 Comments

For the last three 3 months I’ve been paying double for cell phone service. That was a tough sentence to type, but now that I’ve got it out there, it’s a lot easier. Three months ago, I rushed to take advantage of Virgin Mobile’s $25 Unlimited Data, Text, and 300 Voice Minute plan. It was the last call as it’s now $35/mo.

I got my phone and got everything done on time. What I didn’t do was port my main cell phone number over. I was still auditing the service and in my opinion my old Palm Pre from 2009 blows away the middle of the road 2011 Motorola Android Triumph. If I could move my Palm Pre to the plan, I would, but alas even though it is technologically possible, Virgin Mobile wouldn’t activate it. I was very hesitant to downgrade my phone experience – so hesitant that I paid both Sprint and Virgin Mobile for three months.

Yesterday, I decided it was time to retire the Sprint contract. The $50 a month savings will look pretty nice in my bank account. So I called up Virgin Mobile and asked to port my Spring number over. They said that they’d help me and that it would be easy. First they’d just have to cancel my current contract with them and then reactivate it with the new number. You can probably guess where this is going:

Me: Okay, but when you reactivate my contract, you’ll give me the same price that I’m paying for my service now.
Virgin Mobile: Our computers are not able to do that sir.
Me: So you are telling me that I have to pay $10 more per month because your computer software is deficient.
Virgin Mobile: Ummm…

This went back and forth a bit. I clearly wasn’t getting anywhere. I decided to ask to speak to a manager. I was put on hold for a half hour and then hung up on. I tried calling back twice more and after 2 hours, I couldn’t even get through to a person again.

I figured that I could spend another 2 hours hoping to talk to someone who could help me, but even then they’d probably give me the same excuse. It certainly is convenient for computers to be programmed in such a way to generate more revenue for the company for what should be a simple and logical request.

I gave up and turned to Google Voice. I ported my existing Sprint number to Google Voice (it helped that I wasn’t under contract anymore, so no termination fees). That process took about 24 hours. I then went into the Google Voice control panel and set it up so that any calls to that number will go to my new Virgin Mobile number. I had to turn off some Google Voice features like greetings, but now anyone who had my old number will just bounce instantly to my cell phone. While it did cost me a one-time fee of $20 to port my number to Google Voice, I will save my $10 a month versus doing what Virgin Mobile suggested.

It’s quite sad that Google Voice did do what Virgin Mobile’s own computers could not. I thank you Google Voice. Virgin Mobile, I understand that you are a cheap cell phone service. That’s no excuse to take advantage of your customers, though.

Filed Under: Smart Purchases Tagged With: sprint, virgin mobile

Virgin Mobile: Last Chance for $25 Unlimited Data, Text, and 300 Voice Minutes

July 18, 2011 by Lazy Man 11 Comments

As Jonathan from My Money Blog pointed out on Friday, the best deal in wireless is about to get a little more expensive. On July 20th, the price for the cheapest plan (300 voice minutes and unlimited data/text) will jump from $25 a month to $35 a month. (Those who talk more can also save a lot of money with their plans that include more minutes). However, if you get in there before the jump, you are grandfathered in at the $25 rate. On Saturday, I rushed to three Radio Shack’s to get in on the deal. Why three? It seems like there’s a lot of demand for Virgin Mobile’s best phone… an LG Optimus V running Google Android.

I had been threatening to move from Sprint to Virgin Mobile for months now. The only thing that stopped me is that I wanted to use the best mobile operating system on the planet (excuse the fan boyism) in HP/Palm webOS and it isn’t available on Virgin Mobile. However, with the last chance to get in at $25 and the increasing realization that Sprint probably isn’t going to carry the Pre3, it seemed like the right time to make the move. I had been happy with Sprint’s service, but if they aren’t going to carry the phone I want, I might as well save myself nearly $50 a month and go with Virgin Mobile (which, ironically, uses Sprint’s network).

Three Radio Shack employees, one at each store, tried to talk me out of it. They said that the data connection wasn’t very fast (it’s essentially the same 3G that I have my Palm Pre now). They said that they throttle everyone’s speed (cell phone jargon for slowing your connection when you use what they deem is too much data). They may be speaking from experience, but Virgin Mobile, in the press release above, said that they will only throttle those who use more than 2.5GB of data a month. That’s a lot of data for a mobile phone. I’d also rather be throttled to slower speeds than have to pay more money on Verizon and AT&T. The only carrier not restricting data in some way is Sprint, and if I’m going to be forced to use an Android phone, I might as well save $50 a month or $600 a year.

I asked about the return policy because I wasn’t sure about the coverage and whether I’d be able to make the move to Android. Radio Shack said they’d take it back in 30 days. That will give me enough time to run the phone through the paces. I’ll keep my existing Palm Pre for back-up during that time.

I should note that Virgin Mobile is coming out with the Motorola Triumph, a new higher-end Android phone, the day that prices increase. If you are grandfathered in at the $25 rate, you can upgrade to the new phone without triggering the price increase. This means that one could sell their existing Virgin Mobile phone and get something almost on par with the HTC Evo or Droid. The phones are more expensive, but the data plan savings will make up for it in just a few months.

Filed Under: Smart Purchases, Spending Tagged With: cell phones, sprint, virgin mobile

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