#18: How to be wrong, or contract vs prepaid

This podcast forces me to do an annoying amount of personal growth. This week I had to work out what I disliked more: being wrong or being irrational.

My early 20s was a haze of red wine and shopping on credit. In three short years I managed to rack up debt ten times my monthly income. If you've ever had debt you couldn't honour, you know how terrifying that is. When I finally worked up the courage to tackle my debt, I developed a strong aversion to big corporations taking my money.

Cancelling my cell phone contract was one of the first things I did. Getting a new phone every two years was part of my consumer mindset. Naturally I didn't want a manky-ass entry level phone either. Top of the range, baby, or nothing. What a moron I was.

Cancelling the contract saved me a huge amount of money. At the time I kept my airtime to a minimum and I started holding on to my phones and replacing them with second hand phones when needed. It was an important part of developing the financial discipline I needed to get out of debt.

It's been three years since I settled my final debt. I stayed on prepaid, when along came Petrus Booyens, who apparently thought it was a good idea to ruin my life.* His calculations indicated it was more cost effective to get a contract to buy a new phone. "Surely not," I thought right away. "If this is true, I've been wrong for a very long time, and that totes doesn't sound like me." Ha!

This podcast is me eating a huge serving of humble pie. Here are some of the incorrect assumptions I made about being on prepaid:

• While I only budget R300 a month on airtime, in reality I spend on average R553 per month.
• I remember the cost per minute being much lower on prepaid than contract when I researched this long ago. That either was never true, or it stopped being true since then.

Over a two-year period, I spend R29 178 on my phone. The three Vodacom contracts I looked at worked out to R27 816, R29 256 and R21 096 respectively. Only one contract is more expensive by R87, and that contract has 700 minutes of talk time, vs the roughly 200 I get in a month. Dogdarnit, Petrus. What did you do?

I hope I made a mistake somewhere and I'm wrong about being wrong about this. If I am, let me know at [email protected].

Please also let me know what you think would happen if all the world suddenly paid off its debt. I've been obsessing over that question for nearly two weeks now. Drop some knowledge!

Kris

*I'm being hyperbolic for dramatic effect, Petrus. I'm actually very grateful that you wrote us.