The amount you spend on your internet every month is tied directly to how much bandwidth your plan has. A 5 megabit-per-second plan is going to cost less than a 150 megabit-per-second plan. You probably already knew that, but what you might not realize is that you’re paying for a larger plan than you actually need.

Part of the problem is that when internet service providers promote internet plans, they talk about speed and buying a “faster” plan. Naturally, when you’re thinking of speed it makes sense that the plan with the higher number is faster. However, that’s not actually how the internet works.

When you see the number on your internet plan, such as 10Mbps, that’s actually referring to your plan’s bandwidth, not speed. Just because that number is higher doesn’t automatically mean you’re going to get faster service.

Let’s use Netflix as an example. If you’re streaming a movie in full 1080p HD, Netflix is sending you 5 megabits of data per second. If you have a 5Mbps internet connection, you can stream your video and it shouldn’t have a hiccup. Having a 100Mbps connection doesn’t matter because Netflix isn’t going to send you data any faster than it needs to.

As a side note on Netflix, it will match the video quality to whatever your speed is. So, you could technically have a 3Mbps connection and watch SD quality video, or even 1.5Mbps and still get an acceptable viewing experience, as long as you’re willing to wait a bit for it to load.

This same principle goes for other websites. Often, a website’s server is going to send you data at a lower bandwidth than what your connection can technically handle. You might have a 40Mbps connection and connect to a site sending data at 2Mbps. That’s 38Mbps of bandwidth you’re paying for and not using.

There are exceptions, such as dedicated file downloading sites or internet “speed” tests that will use most of the bandwidth you have available. However, most people aren’t going to be using these that often.

So, why would you ever buy a high-bandwidth connection? In the previous examples, we were assuming that one person was using the internet and only doing one thing at a time. However, if you have two people in the house watching HD Netflix movies at 5Mbps a stream, then you’ll need a 10Mbps connection to handle both.

Throw in someone browsing the internet while streaming audio, a computer backing up files and some mobile gadgets updating apps, and you need more bandwidth to handle everything going on. If you run out of bandwidth, your internet activities will slow down because data has to wait its turn to travel through your connection.

Think of your internet connection like a funnel. If one person is pouring a cup of water in the funnel, it can be skinny. However, if 10 people are pouring a cup of water into the funnel at once, you need to have a wide funnel or it overflows.

So, the internet plan you choose is going to depend on how many people are using the internet, what they’re doing and how much patience you have. If your internet needs are limited, say one or two people who just browse the internet, post on Facebook and watch the occasional YouTube video, you can probably drop your internet plan to your provider’s lowest tier without worry.

You probably noticed above we mentioned that switching providers will tack on a one-time fee or monthly lease for modem hardware. What you might not know is that whether or not you switch providers you’re paying a monthly fee for your equipment. You can even end up paying this fee long after you’ve paid the cost of the hardware itself.

That’s why we often recommend you buy your own hardware. It will usually end up paying for itself within two years, and modems typically last four or more. Your internet provider will have a list of compatible gear on its site.

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