Are You Spending Too Much on Subscription Services?
Subscription services are changing the way people buy. Almost everything is available through a subscription service today. TV shows, movies, goodie boxes, music, food, fitness, even video games are trending towards subscription-based services.
While there are plenty of pros to these services – everything is On-Demand and easy to access – there is a dark side as well. At first glance, these services appear to be affordable on their own, but more and more consumers are discovering the true cost of monthly and annual subscriptions services.
So what are the negatives? And how can you avoid having these subscription services burn a hole in your wallet?
The problem is, most people don’t know the total amount being spent on monthly subscriptions. A common mistake people make is not adding up the combined costs of these services in order to properly budget.
We’ve somehow trained ourselves to avoid doing the math. We fall victim to effective marketing and instant gratification. Many of these services look great when we first sign up – it’s only a few bucks per month, right? – or come with attractive free trials or promotions. Because of the apparent low cost, free trials, and automatic payments, we hardly notice the real effect these subscriptions have on our finances.
Consumers need to know how these expenses stack up on top of their existing bills and expenses. By taking the time to do the math, adding up how much these subscriptions are costing them, it’s easier to cut the fat and dedicate money elsewhere.
Consider the breakdown of these subscriptions: a consumer subscribed to two streaming services like Netflix ($14.99) and CraveTV ($9.99) , one music streaming service like Spotify ($14.99) , a fitness service like Peloton ($49.99) , and a meal-kit service such as Hello Fresh for 2 meals per week ($40.00) , they’re paying upwards of $250+ per month before tax!
Individually, these appear affordable. Together they form a big monthly expense.
Ask Yourself: Is there a better opportunity for this money?
If these subscriptions are eating at your finances, or worse, putting you into debt, there should be no debate on cancelling them. But even if you can afford the extra costs, think about what this money could be used for. What other financial goals can you dedicate this to? Is this money better suited for an emergency fund?
If these services do one thing well, it’s their ability to market themselves well enough to make people at least want a taste. The problem here is the majority of these services require you to sign up and provide payment details for that free sample.
Free Trials like those offered by Disney+ ($90/Year) provide a free trial of their service at no charge in exchange for your credit card information. If you’re not on the ball, that free trial turns into a paid annual subscription. Everyone starts free trials with the best intentions to cancel before it’s too late, but people get busy and usually, there is little to no notice that the trial is over.
Then there are the discounted first tries. Meal service companies like Hello Fresh will offer heavy discounts to get people to try their service. After seeing how great and simple the process is, people are easier to convince to pay full price, even though it might not be economical.
Then there are perceived savings. Subscription services like Amazon Prime ($80/Year) will offer free shipping for subscribers. These savings look great for months like December when you could be having a lot of items shipped, but do the savings offset the remainder of the year?
Ask Yourself: Are there better options?
Would that Amazon order have had free shipping anyway? Can you find recipes online and have your groceries delivered, or even pick up ingredients? Is your subscription offering you things you can’t find elsewhere for less money? If you needed a ‘deal’ to bait you into the service, chances are it isn’t that essential to you.
One huge issue with subscription services is that consumers are never motivated to cancel subscriptions that they’ve become disenchanted with. Subscribers then begin paying for things that they’re no longer using.
Netflix may ask you if you’re still watching, but will never ask if you’re positive you want to pay for another month.
Subscription payments easily fly under the radar, appearing on your credit card without notice. This makes it easy for consumers to “wait until next time” or disillusion themselves with the idea that they’ll return to it eventually. Because payments aren’t realized until it’s too late, expenses continue to pile up. This can be especially problematic with annual expenses, as they tend to come at a higher cost.
Ask Yourself: Am I getting value out of this?
Consider which subscriptions you’re getting your monies worth (and actually need), then immediately cancel others. If you’re on a yearly subscription, try finding ways to make use of them, but set multiple reminders for yourself to cancel before the renewal. Losing out on a few days, weeks, or even months of something you paid for but don’t use is much better than paying again.
As subscription services become more common, consumers will be presented with more and more options. It becomes just as important to monitor the use of these services as it is to budget for them. Setting reminders for yourself, or even taking advantage of helpful apps to manage your subscriptions and keep a record of everything you’re spending.
If you find your monthly payments are getting out of hand, or you need advice managing your finances, you can always speak to one of our representatives!