Are you experiencing subscription fatigue? Does the thought of adding yet another recurring charge send shivers down your spin?
Well, you’re not alone.
Subscriptions are just a part of life. Don’t get me wrong, subscriptions can be great. They’re convenient for budgeting and will save you forking out a lump sum of cash upfront.
But, there’s a reason why businesses love subscriptions. And it’s because they want to save your budget.
Common Subscription services in Australia.
Let’s have a look at some common subscriptions in Australia and their price:
- Netflix – $13.99 per month ($167.88 per year)
- Stan – $14 per month ($168 per year)
- Amazon Prime – $6.99 per month ($83.88 per year)
- Disney+ – $8.99 per month ($107.88 per year)
- Foxtel now – $25 per month ($300 per year)
- Audible – $16.45 per month ($197.4 per year)
- Spotify – $11.99 per month ($143.88 per year)
- Gym memberships – $77.60 per month ($931.20 per year)
- Phone lease plan – $99 per month ($1188 per year)
- Meal delivery – $398 per month ($4776 per year)
This is just a small sample of the hundreds of subscription services now available. It’s easy to see how they can add up!
That $10 charge on your credit card each month is dangerous! You may hardly even notice it… Or you might forget it even existed.
Suddenly there’s a new big tech company offering an amazing new service. They have a big marketing budget and they’re job is convincing you that $15 is a small price to pay for what they offer.
Before you know it, you’ve signed up to 4 different tv streaming services….and you still can’t find anything to watch.
Businesses love recurring revenue.
Businesses don’t offer a cheap monthly subscription out of the goodness of their hearts.
The truth is, they love recurring revenue and being able to sell a $120 per year product for $10.
They know you’ll more than likely keep paying a small monthly fee and not think too much about it. But, if you’re faced with a bill of a couple of hundred dollars, you’ll put some thought into the value you get or shop around for a better price.
Monthly subscriptions are also a great way for businesses to raise their prices.
In the same manner that a subscription looks cheaper with a small monthly payment. A 10% price increase looks better when it’s sold as $1 extra per month.
What you can do instead
Here’s my framework when thinking of signing up to a new subscription. It’s pretty basic and won’t take much time at all.
The first thing I do is a little bit of math. I work out how much it’ll cost me per year (see the above table).
I then search the site and see if I’ll get a better price if I pay per year.
Take Amazon Prime as an example. Amazon Prime is $6.99 per year which equals $83.88 per year. Amazon Prime lets pay upfront for $59.00.
If there’s a big difference in the price per year vs per month, I’ll pay per year.
If there isn’t a big difference and it’s a high-cost item I’ll pay per month. I’d prefer the money in my pocket.
Even if you pay upfront, many services will still let you cancel and refund you pro-rata for what you didn’t use.
I now take the time to think about the value I’ll get for the product vs the price I pay (per year not per month).
A perfect example is my phone plan.
My phone plan costs $99 per month or $1188 per year. I use my phone every day for work, my personal life and entertainment.
The value I get far exceeds $1188 per year so I’m happy to pay for it.
Another great trick is sharing your subscription. For example, your Netflix or Stan account may let you have 3 different users. Share your account with a close friend or family member and let them do the same for you.
All in all, subscriptions aren’t bad. Most of the time there a cost-effective way to access a service or enjoy some entertainment.
It’s important that you keep an eye on the number of subscriptions you have and look out for subscription creep. Review your bank/credit card statement each month and see where your hard-earned dollars are going. If you’re paying for something you’re not using. Get rid of it!
What do you think about subscriptions, are they worth it? If you have have a smart way of dealing with subscriptions please share it in the comments below.
Interested in Financial Independence Retire Early? Join the discussion at the Chatting FIRE forum.