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Are Technology Costs Killing Your Budget?

Richard Satran

Cheaper technology is creating better cars, phones, televisions, online services and a ceaseless flow of improved devices, including the new iPads unveiled this week. But too much high-tech can be bad for your financial health.

How much can it add up to? Americans spend the equivalent of 17 percent of their monthly mortgage or rent on technology, according to a study by the American Institute of Certified Public Accountants released last year. Technology experts say that may not even account for all of the gadgets and services you use. The survey data mostly reflects the high-tech spending on discretionary purchases.

"The total keeps creeping higher because people get in the habit of using things like satellite radio in their cars or more add-ons for their cable service, and all kinds of options," says Jordan Amin, a certified public accountant and former head of the National CPA Financial Literacy Commission. "It's easy to spend money."

Much of that spending goes to obvious places: high-speed Internet connections, music downloads and new computers and devices. A rough calculation of AICPA data shows tech is 5.5 percent of total discretionary spending - more than the estimated 4 percent of personal income people save each year. (About one third of people's income goes to housing, on average.)

[See: 10 Digital Utilities You Need Every Day.]

Hidden costs could pad the total spending even more, says Rob Enderle, a computer industry veteran who heads Enderle Group. "It's like a secret tax, all of the money folks spend on technology that they might not be aware of," he says. Technology is sticky, and as with income tax, what you pay never seems to go down. The "flypaper" that catches users often comes in the form of low-cost introductory offers, bundled services and free apps that stay with consumers as costly monthly expenses. Indeed, bargain hunting might be the biggest of all buzzkills for people who want to be thrifty.

"It's hard to keep the costs under control," says Amin, who participated in the AICPA study on tech costs. He says a regular check on what you spend for technology is a worthwhile exercise. He suggests creating a separate budget to track such items and even a special credit card account that pays the expenditures.

Here are seven widely used technologies that can be serious budget busters, plus some simple savings ideas:

High-speed Internet and cable. It's not really hidden. Everyone knows they pay more each year. But it's becoming a big budget item, so it can be a big a cost saver as well. Consumer laws require a breakdown of expenses for all cable and telephone services. But you need to check bills closely. It can be confusing. For example, Comcast, the largest U.S. cable operator recently began offering two versions of plain vanilla, "limited basic" and "expanded basic." The Federal Communications Commission says the law requires "clear, non-misleading, plain language in describing services for which you are being billed."

What is the average cost? According to data consultant Gigaom, basic U.S. broadband Internet service is $528 a year. A cable bundle (including Internet, telephone and television) is more, $128 per month, based on a 2011 report by SNL Kagan, and prices have risen since.

As a result, a growing number of people are cutting the big wire entirely, and cable hookups are declining steadily. Consumers are choosing "a la carte" direct programming subscriptions to their favorite shows or Netflix, using inexpensive devices like Apple TV or Chromecast that connect easily to new high-definition televisions. Subscription video use surged 35 percent in the first quarter of this year, according to NPD's VideoWatch VOD Report. High-speed Internet outside of the bundle starts at about $20 a month, and basic cable is $25 to $50 a month. This approach can be less than half the cost of a full package, although it won't satisfy television "power users" who find value by using the host of choices that broadband packages offer.

Car tech. The average cost of a new car topped $31,000 this year, but car experts point out that if you stripped out the new electronic offerings, like in-car entertainment, car prices would actually be declining. When you buy a new car, consider the cost of the add-ons, and the real value of things like a $1,000 to $2,000 CD player system - especially since CDs are being replaced by cheaper systems that let you plug in your music device, says The Car Connection, which reviews and researches car features. There are other pricey tech options that you might not need that add $1,000 plus each: in-car video systems (just bring an iPad on board for the kids), voice command controls, power assist doors and smartphone systems.

[Read: Will the Data Boom Pay Dividends?]

Device overload. People are hanging onto their landlines when they own mobile phones, and they are snapping up new smartphones and devices that duplicate what they already own. Data shows that young consumers tend to pack more services onto their smartphones and are giving up landlines - but not their parents. Pew Research Center says the number of people who own more than one device went from just 4 percent in 2010 to 20 percent in 2012. Devices do different things, of course. But according to research firm NPD, the number of Internet-connected devices has reached 5.7 per household. Some of that hardware is probably duplicating what others do, and Enderle says older consumers buy more useless devices. They have extra time and consume an awful lot of ads for "bargain" tech products - devices that can be hard for them to use and end up collecting dust on a shelf.

Streaming music. Streaming music services like Spotify and Pandora are great bargains - mostly free until you upgrade. But they use a lot of your data capacity, the bandwidth you pay for, and can lead to higher Internet charges. Spotify concedes the point on its own website, saying, "Spotify uses the Internet in a clever way to deliver music instantly, without buffering. Because of this, Spotify uses up bandwidth."

Apps. The explosion of apps also brings lots of choices and costs as well, even if they are free. Abhinav Pathak, a researcher at Purdue University, says apps were developed in an "energy oblivious manner" and can suck the life out device batteries quickly. His research shows that the advertising component of free apps uses much of that power. They also pack in a lot of personal data tracking, warns the Federal Trade Commission's Bureau of Consumer Protection. Of course, many of those free apps want to become paid apps, so watch for the charges. More hidden from view, and especially important for kids using apps, are "in-app" purchase options that sometimes allow young users to click-purchase more sophisticated software and devices that can cost hundreds of dollars.

Old technology. "There is a ton of stuff we pay for in a PC that we don't actually use or care for," Enderle says. He lists useless former wonders like infrared signals for connecting devices, optical disks, serial and parallel ports and Bluetooth, which has many applications elsewhere but is "rarely used for computers." The cost of such bundling is hard to estimate, but those features suggest the computer may be outmoded and a waste of money.

Security and privacy software. Computer makers are packing security into products more often than in the past, Enderle says, and adding more can just be a waste. "A lot of the security software being sold is just a placebo," he says. Fear of being tracked over the Internet has led to a surge in new privacy software sales. Most have limited value, Enderle says: "There are ways around the privacy software and anonymizers for those who want your data." Privacy expert Bruce Schneier, a fellow at the Berkman Center for Internet and Society at Harvard Law School, says your own browser may be the best way to protect yourself from snoops. "Private browsing means that what you do remains on your own computer drive," he says. Security and privacy software packages can cost up to $100 for a single computer. Even free versions come with a price: Geekwire blogger Frank Catalano writes about using a free network security software application that changed his PC settings, costing him "hours of time, uncertainty and frustration."

[Read: NSA Data Fight Could Signal Privacy War.]

Data costs: There was alarm when major data providers began dropping unlimited usage plans for telephone and Internet. But Consumer Reports, in a study released this year, says metered service could save $10 a month for half of AT&T customers. The solution to saving on technology can be as simple as reading your bills. The FTC says service providers that "cram" costs onto bills are a major problem for consumers. Bills often contain surprises such as Internet "hosting costs," collect calls and memberships. It's often all there in black and white - but it has to be read.

"It's up to you to manage. We've designed technology that makes it a lot easier to spend money than space, and we need to be financially responsible," Amin says. "We need to control the technology or it's going to control us."

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