In today's world we cannot go without cell phones any more. Its become an essential part of life and most people don't even know how to use a "normal phone" any more. When it comes to getting a cell, the 2 main choices you have is prepay or contract. Contracts are the most popular choice, but its often like that for all the wrong reasons.
Contract phones are more expensive but the reason why most people get roped in is because of all the extras they throw in. Free text messages, free ring tones and free "whatever's" often swing us and get us excited about the contract. In reality, you pay for all those things. When you get a prepay phone, you can actually cut all those extras out and save a small fortune. In reality, most people never use all the extras that contract offer.
Prepaid cell phones are great for managing expenses. A contract is like a credit card. You have no real sense of what you are spending. With a pay as you go plan you actually pay before you spend which is a very wise way to manage your money. If you are the type of person that's not great with managing money, then a pay as you go plan can be great for you.
One of the biggest disadvantages of a contract is that is binds you for up to 2 years. This is a big financial commitment and if you get to a point where you have to get out, you will pay a hefty penalty which is as much as 10% of the outstanding payments on your contract. There is almost no flexibility while a prepay has all the flexibility in the world.
When it comes to a phone, contracts often swing people by offering the latest and greatest phones "free" or for a very small monthly payment. Once again, none of it is really free and you will end up paying for it in some way or another. Even though you have to buy your own phone with a prepay, the saving will be passed down to you down the line. Phones are expensive and if you have to buy it outright it can be a bit of an investment, but in the long run you will still save. The good thing is that if you have to you can even buy a used phone or get one from a friend until you can afford a new one.
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