How Cell Phones Have Changed Your Budget

By Martha V. Shelton | October 04, 2012 AAA

As technology has advanced throughout the 21st century, mobile phones have morphed from functional devices used solely for voice into sophisticated portable computers. Smartphone users are now capable of texting, video conferencing, surfing the Internet, and playing music and video on their handheld devices. With this evolution in technology has come a meaningful increase in the amount of money devoted towards mobile phone services. Perhaps you have noticed that you are paying much more for your cellular service now than you were 10 years ago. Rest assured, you are not alone. Here's a look at how cell phones have evolved into an increasingly indispensable component of most people's budgets.

Cell Phone Bills Have Grown
Consumer spending on mobile phone service has grown quite significantly since the early part of this century. In fact, according to the Bureau of Labor Statistics, Americans only spent an average of $210 per year on cellular service back in 2001. That's less than $20 per month. This figure may strike you as unbelievably low. The average cell phone bill is now more than $63 per month or $760 per year as of 2010. Does this seem like a big increase in cell phone spending? Well, on an annualized basis, these figures reflect an increase of more than 15% per year from 2001-2010. This is quite a meaningful gain in money spent on cell phones, particularly when one considers that annual household expenditures only grew around 2% during that same time frame.

Cell Phones Vs. Landlines
Not surprisingly, alongside increased spending on cell phones has come decreased spending on landlines. Why pay for a home phone when a mobile phone meets all of your communication needs and then some? Here's an example to illustrate just how differently the dollars in most people's wallets are being spent now versus 10 years ago.

First, let's assume that you spend $100 per month for all of your telecommunications needs. This includes your mobile phone bill as well as your landline. Using this assumption, back in 2001 you would have spent $23 per month for your cell phone services. Your landline bill would be somewhere round $75. Clearly, landlines were much more important components of people's budgets at the outset of the 21st century. In 2010, your mobile phone bill would take a much larger share of your wallet and your landline a much smaller share. In 2010, you would have spent around $65 per month on your cellular plan but only $34 on your landline. This example helps demonstrate just how essential mobile phones have become in most people's minds.

Cell Phone Bills and Household Budgets
Spending on mobile phones is becoming a more meaningful component of total household expenditures. In recent years, many people have cut back on discretionary expenses such as dining out and clothing purchases. However, spending on mobile phone services has grown at a steady pace. As a result, mobile phone expenditures have increased as a percentage of household expenditures.

The Bottom Line
Evolution and advancements are to be expected, particularly when it comes to fast-changing technology such as mobile phones. Given the improved capabilities of cell phones since the beginning of the century, it is no wonder that cell phone bills have averaged a healthy annual growth rate in excess of 15%. Alongside the rise of mobile devices has come the fall of landlines, which see far fewer dollars devoted to them today versus 2001. Mobile phone costs are becoming an increasingly more relevant component of consumers' budgets. It makes you wonder just how much you will spend on your mobile phone service 10 years from now.

Related Articles
  1. Lifestyle inflation occurs when 'you earn more, you spend more', and your spending ends up matching your earnings. Thus, no savings remain.
    Budgeting

    Failing To Build Wealth Despite Making ...

  2. Is your idea of a budget simply spending till your checking account is nearly empty? Or worse, till your credit limit is exhausted?
    Budgeting

    What's Your Idea Of Budgeting?

  3. And is even the least costly burial insurance a good buy? Be sure to compare it against term life or permanent life before you sign up.
    Insurance

    Finding The Cheapest Burial Insurance ...

  4. Savings

    Holiday Savings: A Tip a Day Till Christmas

  5. Mutual Funds & ETFs

    Consumer Staples Defend against Volatility

Trading Center