I’ve used the technique below for the past couple of years, and it has been working out really well.
It will not only save you money, but it will also begin to ingrain a nice basic awareness of what is going on with your finances, which can help pave the way for future personal finance training, a gateway savings technique, so to speak 🙂
One of the most awesome payment structures ever conceived by businesses (for businesses) was the monthly subscription. It works amazingly well because consumers (you) rarely feel full psychological pain of their cost. Subscriptions are normally billed each month, so while the amount you spend on a monthly basis may not seem like a whole lot, the actual annual spending usually ends up being a pretty large chunk of your income.
Think about it. How many services do you pay for each month? Five, six, more? Now how many of those do you actually use enough to justify their cost? Here are some examples.
- Cable / Satellite + Premium Channels
- High Speed Internet
- Netflix / Hulu Plus (other forms of online streaming)
- Tanning Beds / Salons
- Health Club / Personal Training
- Satellite Radio
- Music Websites (Spotify, etc)
- Banking Fees
- Interest Fees
- Mobile Phone Services (Apps Included)
- Club Memberships (Golf, Swimming, Tennis)
- Niche Websites
- Software Services
- Web Hosting
- Video Game Services
- Vehicle Services
There are more than 15 right there that a lot of people have at least 5 of. Some quite a few more. Now factor in that some of those are pretty damn expensive (Cable, Salons, Club Memberships), and you can easily rack up hundreds of dollars of expenses each month that you don’t even use.
To take it a step further – Now think about how different you might feel about those subscriptions if you got a bill each month, then had to actively pay that bill. Odds are a lot of them are auto-deducted from your bank account or put on a credit card.
This means you never even get the chance to feel the psychological pain of what you’re actually spending on these services, which makes this a lot worse for your finances. This right here, coupled with the small incremental costs of monthly subscriptions is the behavioral element that gets most people, and is most likely getting you too. You fall victim to the convenience, and the “it’s not that much” mentality. You forget about the long-term.
Think of all of the seemingly small subscriptions you have that are on an auto-pay type of system. Do you even know what they are? Odds are, with the way people manage money these days (especially the younger generation) you have a few monthly subscriptions you have completely forgotten about that you still pay for and are really adding up in terms of long-term annual expenses.
Three Steps to Saving You Hundreds on Subscription Costs
1. Identify Your Subscriptions – Take a moment to take an inventory of all of the subscriptions you have. Write them down, and how much they cost you each month. Use the list above if you need help identifying them (and please let me know if I left any out).
2. Which Ones Are Auto-Paid? – Now identify the ones that are auto-paid in some form. These are the ones that are the low-hanging fruit for a lot of people, but are sometimes on the low end of cost and tend to chip away at your wallet rather than take big chunks. However, it does depend on the person. Some people auto-pay EVERYTHING.
Even if you can locate just a few of these, you can most likely save yourself $50-$75 a month, which is nearly a grand in your pocket each year.
3. Examine Your Subscriptions’ Value – You can tell if you need something based on how much you actually use it, and its relative cost to that frequency of use. For example:
- Do I really need that Salon membership that I only used 9 times last year and paid $50 a month for?
- Do I really need Cable TV that I can only watch 45 minutes a day, but pay $100 a month for?
- Do I really need that online website membership that I rarely take advantage of, but pay $20 a month for?
To explain further – Say you have a $50 a month gym membership, but you only go to the gym 3 times a month (most don’t even go this much). That gym membership is costing you about $17 each time you go. Is that really worth it? Would you pull out a $20 each time you went into that gym to use it? Probably not. Either use it more, get a cheaper rate or kiss it goodbye.
4. Valuable Bonus – Lower Your Subscriptions’ Rates – After making your examinations, you’ll most likely find some that you just can’t live without. Often times, you can get a cheaper rate if you call and tell your provider you are thinking about switching to a different provider.
I recently did this with my Satellite TV subscription, and got my bill lowered by over 60% (no B.S). It will save me about $600 this year, and it only took me about 10 minutes. The biggest thing to remember here is that there are almost always other options out there. Don’t feel bad about asking for a lower rate if you think you are being unfairly charged. You have rights as a consumer. Use them.
Ok – I’ve gone on long enough. Crunch some numbers, get down to it, and find where your money is going. Be honest with yourself. If you use something frequently and get value out of it keep it – and do everything you can to get the cost lowered. If you can no longer justify the value using the method described in step 3 above, ditch it.
Good luck. To Your Success!