This blog contains some simple tips and advice from two regular guys. We're not accountants, financial advisors, or brokers, so follow, ignore, or discuss our ideas as you see fit.

Wednesday, October 24, 2007

Beware Of Subscriptions

Posted By Paul

There have been several articles posted that relate to being wary of subscriptions (Paying for Storage, Lower My Cable Bill Please) but I think it's such an important point that it justified its own article.

Here is an example of how I look at spending. Not too long ago I really wanted to buy a DVD of a movie I like. It cost $16. I bought it and watched it, and I might pop it in and watch it again on a lazy Sunday afternoon, but when it comes right down to it I certainly didn't need to buy the DVD and you could certainly make the argument that the $16 was spent frivolously.

However at least it was a one time cost that is over and done with.

Now compare that to something like a gym membership, or yard care service, or a fancy cable package. These are things that you generally have to pay for month after month until you take the initiative to cancel them.

It's not that it's bad to have any of these things (provided you can afford them and the value you derive from them is worth it to you see the article Paying For Convenience), but I think it's important to think hard before you sign up for extraneous things that involve a monthly fee.

It's so easy to just get used to a monthly fee (especially if it's just $10 a month or something like that), but you stack up enough $10 a month costs and they start becoming significant.

So many businesses are switching over to subscription based services because they like the idea of making money off of their customers whether or not you use their service in a particular month.

Again, I'm not saying you are being frivolous if you use one or more of these services (I subscribe to some of them myself), but it's important to take an extra few minutes to weigh the pros and cons of something that involves a repetitive fee.

So take a quick look at your monthly services. Do you really watch those premium cable stations all that much? Do you subscribe to the 4 disk Netflix plan when you could probably get by with 2? Could you get rid of the premium cable channels and just watch the shows via Netflix when they come out on DVD? Maybe you haven't logged into your World of Warcraft account for over a year. Do you subscribe to the newspaper but never seem to find the time to read it?

For example, I used to have extended cable, but decided to try the basic package where I only get channels 2-13 plus a few others. I discovered that many of the shows I watched so faithfully on those extra channels faded from memory quickly, and the few shows that I still REALLY wanted to watch came out on DVD and could either be borrowed from friends, put in my movie queue, or in rare cases purchased. Overall I don't really miss those extra channels and the savings is significant.

It's not that you shouldn't ever pay for services that aren't basic needs but it's good to periodically look them over and make sure that the money you're paying for them is still worth it to you. Maybe it's worth it to try cutting off one service, save the money instead, and then give it six months and see if maybe the service wasn't as important to you as you thought.

1 comment:

Matt said...

This is a great guideline to follow, and one that I have to keep coming back to. We are going to cut back our cable service in the new house and see how much we miss it. We might even just start with an antenna!

Also, we have the 4 disc Netflix plan and we do sometimes consider going to a lower plan, but we usually don't have the discs laying around waiting to be watched for too long, so I think we're getting the value out of it. Also, this is what makes us feel okay about reducing cable service; we still have entertainment, we watch only what we want, no commercials, and the price is less! We even considered going to a higher plan to get the occasional DVD for our son to watch, but have been getting those from the library instead.