As a 22 year old who lives at home, I don’t have as many bills as a retiree would need to cover. However, in today’s world, practically anyone into investing and / or money would have a cell phone bill to take care of.
Cell phones have become a staple of modern day life, and this monthly cost can vary greatly from person-to-person, depending on the phone they’ve picked up (on contract) to the data plan they commit to.
Considering I’m fairly frugal, and live in Canada, the plan I’m stuck with is $39 a month for 600 mb. The Canadian telco’s retain their oligopoly by devouring any smaller telcos which appear on the scene. For example, Wind Mobile was fought over but ultimately sold to Shaw Communications and Manitoba Telecom was purchased by Bell, with the customers being split between Bell and Telus so that they could garner regulatory approval. Considering the average Canadian does not have any choice but to pick one of the Big 3 across the majority of Canada, consumers have been completed gouged.
While it’s no fun being a victim of price gouging, you can ease the pain by participating in the stock market and purchasing some of these companies. The dividends received from owning these stocks can go towards your cell phone bill. Essentially, the money they’re gouging from you and your fellow Canadians, can be put back into your pocket to pay for that exact bill.
In other words, the cash you would receive in dividends from the Canadian telecommunications giants would nullify your cell phone bill. All you have to do is save up enough of a chunk of money to invest enough in order to receive adequate cash flow to cover the bill.
Covering a $40 Phone Bill
With tax included, my phone bill comes out to $45.37 per month, which is $544.44 a year.
Telus, my favourite telecoms investment pays a dividend of $1.84 per year. To cover that $544.44 per year phone bill, I would require 296 shares of Telus. At $42.92 a pop, it would cost me $12,704.32… That’s a lot of money, sure; but the investment value should grow as time goes on too. Therefore, you keep the cash and are rewarded with a paid off monthly phone bill.
If I was to attempt to cover this bill with a different telecom investment, such as Bell, it would cost a total of $12,186.63 to purchase 201 shares which would yield $546.72. Finally, if I were investing in Rogers, it would cost a total of $15,815.96 (much more!) to purchase 284 shares to yield $545.28. The reason it costs so much more to cover your bill by investing in Rogers is due to it’s relatively low dividend yield of 3.45%, while Telus and Bell yield closer to 4.50% (see below).
Now that’s a lot of cash to save up – but the reward – covering your phone bill for the rest of your life, is obviously well worth it. Like all other bills, investing for dividends is one great way to become financially independent – it’s simply a plus if you can achieve such a thing by investing in the same sector as your bill came from, and it seems cool.
While it would personally cost me that much to be able to cover my cell phone bill outright, the number obviously varies depending on the bill. I know people who pay $100 for their phone every month, and I find that absolutely insane – but to each their own.
Covering a $100 Phone Bill
For the sake of completeness, let’s look at how much it would cost to cover a $100 phone bill by receiving dividends from an investment for each of the Big 3 Telecoms.
I definitely don’t want to have to save up $28,000 instead of the $13,000 I’m currently concerned with. This is a great demonstration of how having your bills under control makes it a ton easier to achieve financial independence.
Well, there you have it – you now have the knowledge to calculate for your self exactly how much cash you need to bank to cover your phone bill. The thing about investing to pay off your bills is – all your bills can function exactly like this. We just demonstrated a baseline cost for covering $100 in monthly bills. If your entire portfolio was to pay out the same yields as these telecoms then it’s some very simple math for you to find out right now what you’d need to achieve financial independence.