Are there any of us who don’t subscribe to a number of subscription services, probably not. Just think about it. Do you have a cell phone plan, do you subscribe to Netflix or Amazon Prime. Many of us do. And the companies love you for doing so. Companies call this annuity-based or recurring revenue. It just means you are paying them regularly (often monthly) without any sales effort on their part. Not a bad deal – for them.
A recent Waterstone Management Group study found that its respondents spent $237/month on average for subscriptions. They also found that 84% of those surveyed underestimated their monthly subscription costs. The first observation is that we spend serious money on subscriptions — $2,844 per year on average. (That’s about $37,000 over ten years assuming a 5% interest rate.) Secondly, most of us do not monitor this expense category and so it’s quite possible that we are paying for things we no longer need or are paying too much for services that we do want.
Now certain monthly expenses may be exactly what you want – cell phones, Wi-Fi, TV and movie services, music streaming and so forth. But even in these cases, do you monitor the charges from time to time? Comcast is famous for increasing your charges without notice once your discounted agreement expires. New cell phone plans are frequently coming on the market and they might save you money.
Other plans might be more discretionary and should be examined from time to time (at least annually) to be sure they’re still worth it. This might include digital magazines, free-shipping services (part of Amazon Prime), dating services, travel site subscriptions and so forth.
Here’s an approach to controlling these expenses that often proves useful. First, be thoughtful in signing up for new services. Anytime you’re asked for credit card information for a free subscription, you can bet it will be extended after the free period and often you won’t be notified that you’re now paying. Also, some companies make it very difficult to cancel subscriptions once they’re initiated.
Second, examine your subscription expenses from time to time (at least annually). There are tools to help you do this such as AskTrim.com, ClarityMoney.com and Truebill.com. One thing to watch if you go this route is that many tools get access to your credit card and/or banking account in order to get the data to analyze things. Perhaps you don’t want to give them such access and would rather review your own statements. During your review, ask yourself questions like do I still get value out of each service; has the cost of the service increased without my knowledge; are there cheaper ways to get a similar service now?
Keeping tabs on your expenses is an important part of managing your finances. If you’d like some help reviewing your subscription or other expenses, or have other financial questions, we’d be pleased to discuss your particular situation in a no-charge, no-obligation initial meeting. Just visit our website or give us a call at 970.419.8212 to learn more.
This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Please consult your tax or investment advisor for specific advice.