How Not to Waste Money on Smartphones

— -- Your smartphone is likely a huge part of your budget. The average American pays $90 a month for coverage, $111 if you are an iPhone owner, according to a recent survey by financial firm Cowan & Co.

With such a big expense comes plenty of waste, so the opportunity for savings is big.

Monthly Bill:

Getting your coverage from an alternate carrier (i.e. Cricket, Metro PCS, GoSmart, Boost) can save you 50 percent on average, but many are wary of using these alternate carriers. To get the best advice about reliability, ask friends which carrier they use and whether the coverage is good in your area.

In many cases, you need to buy your phone outright, but that can be a big savings even if you stick with the big four carriers: T-Mobile, Sprint, Verizon and AT&T. Coming up with $600 to $700 upfront to buy a phone is a challenge, though, and the process of figuring out your approach (lease monthly or buy up-front) isn’t simple.

Here’s a secret: The cellphone plans are confusing, even to those of us who study them and try to deconstruct what’s cheapest. Also, the plans change all the time. The only way to figure out the best plan for you is to run the numbers over a two-year period and see what will save you the most based on your phone model, your data habits and your talk time averages. Sadly, there is no clear rule here. It all depends on current promotions and personal habits.

The Biggest Waste

The minute you put that old phone in a drawer with the thought you’ll use it later is the minute it starts leaking dollar bills in value. Old phones can net between $50 and $150 if you trade them in to Apple or your carrier. Third-party services like Gazelle and Nextworth may offer slightly more, and the best resale value, in my research, came from eBay.

Be sure to do a factory reset and erase all the data on your phone, but whatever you do don’t put it in that drawer. The next time you think about it, the phone will be worthless.

Family Plans Aren't Just for Families:

According to our expert, Jeanie Ahn of Yahoo! Finance, being on a family plan can save you $50 a month. Her advice is that even if you’re not family, you can start up a family plan. With the rise of money transfer apps like Paypal and Venmo, confabbing on a monthly plan with a friend you trust could save you $600 a year.

Don’t Overbuy Data:

The average American uses 2.9 gigabytes of data, one-third of smartphone users don’t break 500 megabytes. Do you know how much data you are using? Check your monthly cellphone statement or, better yet, log onto your account, click billing and then see whether they have a way to create a report of usage over six months.

Downsizing your data plan can make a big difference. For my carrier, 15 gigabytes of data monthly costs $100, but 5 gigabytes costs only $50. Rightsizing data can save another $600 a year.

Cables:

Buy them online or in a big electronics store. Amazon Basics and Monoprice cables are one-fourth the cost of cables we found in the carrier stores. One note is to make sure you buy Apple-certified cables for an iPhone so they don’t get bricked with the next Apple update -- Apple can use software to stop some third-party cables from working -- or worse, pose a safety hazard.

Insurance:

Thirty percent of smartphones in America have cracked screens, according to a Motorola study. In my anecdotal experience, 100 percent of smartphones belonging to teenagers and 20-somethings have cracked screens (I’m joking, maybe it’s more like 99 percent). So if you are prone to dropping your phone or you are younger than 30, insurance seems like a good bet, but the tech site iMore says carrier and some big box insurance programs are probably not worth the cost. Also, iMore recommends Applecare+ (you buy it from Apple directly) or Squaretrade (a third-party company) for insurance programs that are much more cost-effective.

Each of those insurance programs costs around $65 a year and will pay for replacement or repair in cases of cracked screens, water damage and other malfunctions, but all options have a hefty deductible.