The smarter way to buy monthly subscriptions

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:

  1. Netflix – $13.99 per month ($167.88 per year)
  2. Stan – $14 per month ($168 per year)
  3. Amazon Prime – $6.99 per month ($83.88 per year)
  4. Disney+ – $8.99 per month ($107.88 per year)
  5. Foxtel now – $25 per month ($300 per year)
  6. Audible – $16.45 per month ($197.4 per year)
  7. Spotify – $11.99 per month ($143.88 per year)
  8. Gym memberships – $77.60 per month ($931.20 per year)
  9. Phone lease plan – $99 per month ($1188 per year)
  10. 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!

Subscription Creep

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.

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