Sharing Daily Discoveries About Personal Finance And Business Topics

Upfront Cost Funds Versus Monthly Fees

I was just thinking about the financial costs when it came to a phone service that was kind of interesting. Basically, in one option a person could get everything they wanted where the monthly fee would be about $65/month and the phone hardware itself would be free. This would require the person to stay on the plan for at least three years. In the other option you would only pay about $40/month and the cost of the hardware is about $600.

I couldn’t immediately tell which one would actually be cheaper overall. By quickly doing the math, the first option over three years would be about $2340 and for the second option it was about $2040. So savings wise clearly the second option was better. But one thing I was thinking about is that for the second option there is a huge upfront fee as you have to pay $600 for the hardware. When you do the math, it takes two years for these options to reach an even $1560. That is when the second option will start saving more.

So the question on my mind is while you eventually save more, would it be better to go with the first option as that way you can use that money that you would have paid for the hardware upfront to say invest in something to try and make more money? While technically you need to take away about $25/month from the $600 if you were thinking of trying to use it to make more money, you basically need to make more than $300 to make it better than the first option.
Doesn’t seem to be unfeasible in many ways and I wouldn’t be surprised if a person could end up making way more.

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