Death by 1000 Subscriptions

Do you know how much you’re paying each month for subscription services? If you’re like many Americans, it’s a lot more than you think.

The thing is your subscription services might be hindering your financial progress, especially if you’re trying to reach a goal like financial independence.

Lightly edited transcript appears after the show notes.

Topics we explore

• how subscription services relate to financial independence and lifestyle freedom
• the average monthly cost of subscriptions—it’s probably more than you think
• why many companies love the subscription model and
• tips to audit your subscriptions

Resources mentioned

Lifestyle Freedom Starter Guide: https://www.rhothomas.com/start

Wealthyesque, Episode 3: https://www.rhothomas.com/why-every-lawyer-should-be-seeking-financial-independence/

Wealthyesque, Episode 5: https://www.rhothomas.com/how-to-get-started-on-your-financial-independence-journey/

MarketWatch article on 2018 survey on subscription services:  https://www.marketwatch.com/story/youre-spending-more-on-your-subscription-services-than-you-think-2018-07-25

Connect with me

The Wealthyesque Community: https://www.rhothomas.com/community

Social media: @iamrhothomas on Instagram, Facebook, and Twitter

Email: hello@rhothomas.com

Lightly Edited Transcript

Hey friend. Welcome back to another episode of Wealthyesque.

I’m so glad that you’re here, and as always, I’m grateful for you making some time in your busy day to spend with me.

Today I want to talk about subscriptions. These monthly or annual payments for services that we make typically on autopilot without really thinking about it.

I know you’re probably thinking. “Rho, what does this have to do with lifestyle freedom.” The answer, friend, is everything.

A big part of taking control of your time is getting control of your money, which requires knowing where your money is going, and a lot of money is going to subscription services—over $2 billion a month on streaming services alone in America—so as we head into the last quarter of the year, let’s talk about it so we can get our money in order.

We’re going to get into:

• how subscription services relate to financial independence and lifestyle freedom
• the average monthly cost of subscriptions—it’s probably more than you think
• why many companies love the subscription model and
• tips to audit your subscriptions.

How subscription services relate to financial independence and lifestyle freedom

So let’s jump into how subscription services relate to financial independence and lifestyle freedom.

We’ve talked a lot about financial independence as a means to take back control of our time. As a refresher, financial independence is the point at which you are no longer reliant on your income because your investments produce enough money to cover your living expenses.

We won’t dive super deep into financial independence in this episode, so if you need more information and want to learn more about the basics of financial independence, head back to episode 3 and episode 5.

But for the purposes of today’s conversation, the main thing you need to know is that the typical calculation for financial independence is when you have 25 times your annual expenses saved and invested.

Because financial independence is tied to your expenses, it’s important to know what your expenses are.

One of the biggest money leaks many people have is their suite of subscription services.

When you look at this “25 times” calculation for financial independence then every $100 you cut from your monthly expenses is $30,000 less that you need to save to reach financial independence.

So when you think about it that way, you see how big an impact your subscription services can have on your journey to financial independence. I would rather cut subscription services, especially the ones that I’m not using and that I don’t care about to be able to reach financial independence, lifestyle freedom, and control of my time sooner.

And let’s be clear, this isn’t going to be a call to get rid of all your subscriptions or to shame you for having subscriptions or anything like that. My family and I have a lot of subscriptions actually and love them.

But if you’ve been around for a while, you know I’m all about being intentional with your money, so I want to make sure you know what you’re paying for and that it’s things that you actually care about and still want.

The average monthly cost of subscriptions

So let’s talk now about the average monthly cost of subscriptions.

As I mentioned earlier, it’s probably more than you think.

Thinking about the different types of subscription services we could have, and this is by no means an exhaustive list, but looking at stuff for your house, for instance, you might have cable, which is easily over $100 a month. And a lot of people also get special packages, like the sports packages to be able to have certain sports channels that they want. Your internet, which can be $50 to $100 a month. Your cell phone, which for a lot of people is over $100 a month.

And a quick note on cell phone plans because so many people are still paying these outrageous prices for cell phones. My phone currently is paid for through my firm, but I was using prepaid phone services for years before I started at my firm, and I got my husband on it.

He’s still using a prepaid service, and we have his plan through Total Wireless. I’m not sponsored by them or anything like that, but we pay $35 a month for his phone service, and that’s unlimited talk, text, and 5 GB of data.

Like most people, he keeps his phone connected to the Wi-Fi when he’s at home, and he streams music on Spotify anytime that he’s on the road through his phone, and he doesn’t run out of data.

So all that to say, a lot of people are paying three times as much as they need to for the same service.

And it used to be 10 years ago when I was first starting with prepaid plans that you had to buy your phone outright and that was a typical objection I heard to why people didn’t want to get them, but I believe you can now pay for the phone over time like with the major carriers.

Of course, you pay less buying the phone outright, and that’s what I recommend, but I wanted to address that typical objection to prepaid plans.

In case you missed it, we spend one-third the cost of what many people are paying for cell phones. I’ve even seen people pay as little as $5 or $10 a month for cell phone service with plans that don’t have data attached and run purely off of the Wi-Fi.

I wanted to make sure I let you know that you could potentially be saving a lot of money on your cell phone bill if you’re not already using a prepaid plan.

But back to subscription services, you might have a security system or pest control or lawn care.

There are car subscription services. Streaming services like Netflix and Hulu. Music from services like Spotify or Tidal. Audible for audiobooks. Amazon Prime, which is easily my favorite subscription.

Meal kits like Blue Apron or Hello Fresh. Subscription boxes are huge. I’ve seen beauty ones like Birchbox or clothing like Stitchfix and a lot of other items.

A gym membership. Extra data storage for iCloud or something like that.

All of these things are subscription services.

A lot of times we don’t think about them that way, but when you’re paying a monthly or annual or maybe quarterly, like our pest control is a quarterly fee, it’s a subscription.

All of this can add up. And then don’t forget the “free” trials that you have to put your credit card info in for and then you automatically get charged after the free period is over.

Back in 2018, 2,500 people were surveyed about their recurring monthly expenses in connection with subscriptions, including digital subscription services, subscription boxes, and things like that.

On average, people thought they spent about $80 a month on subscription services, but then when they were presented with an exhaustive list of subscription services, they realized that they were actually spending almost $240 a month on average.

They were spending three times as much as thought that they were spending. It’s easy to see how this can happen because subscription services tend to be fairly cheap.

There’s not a lot of pain in spending $5, $10, or even $20 a month, right?

But how about this? At one point, Americans were spending $2.1 billion a month on streaming services. I don’t know how that’s changed since the pandemic, but that was just streaming services. Not to mention all of the different subscription boxes and all those other subscription services that we talked about earlier.

Why many companies love the subscription model

So turning now to why many companies love this subscription model, it’s this whole thing with us not paying attention.

Many people don’t realize how much they’re spending, as that survey showed. We spend three times more on subscription services than we think. It’s pretty eye-opening.

Even when you can purchase something outright, sometimes companies will still try to get you to do a subscription. I bought a new computer earlier this year, and I was trying to buy Microsoft Office for it.

It used to be that you just buy your little Microsoft Office kit or whatever and install it on your computer, but now they have this subscription model, too. You can still buy it outright, but they definitely push the subscription offers first.

In my mind, I’m like, “No, I don’t want to subscribe to your service for $100/year and get every update you put out. I literally just want to be able to type documents on Microsoft Word and make the occasional PowerPoint presentation.”

And then there’s also something that economists call status quo bias. This is the tendency that we have to just maintain things as they are and not want to expend effort to change them.

Once you’re already in this monthly service, you’re much less likely to cancel it. A lot of us are just not doing that.

This is especially true when it’s a fairly low-cost subscription, where we don’t feel a lot of pain associated with it or when there’s some extra step you have to take to cancel, like having to call or fill out a form or something.

And so a lot of times, people will just keep their subscriptions, even for things that they’re no longer using. Some people keep paying for things years after they stop using them just because they don’t feel like making that change or they forget or maybe don’t realize that they’re still paying for the thing.

The ability to put our subscription payments on a credit or debit card probably also contributes to this. You wouldn’t see it if you’re not monitoring your credit card statements or your bank statements, and so you don’t realize the thing is still being charged.

Also, with annual subscriptions where you don’t see that charge every month, it’s easy to forget about it until you get charged again.

It’s very easy to get into subscriptions that don’t cost a lot. If it’s only $10 a month, there’s probably not a whole lot of thought that goes into whether to sign up. It’s a no-brainer, right?

Small charges like that easily go unnoticed or are brushed off, but they can add up quickly. A lot of companies are profiting from us not feeling like canceling subscriptions because it’s such a low cost or not paying attention and not realizing that we’re still paying for something that we don’t use.

I have my own story about not cancelling a subscription. I had a subscription for a service related to my old blog that I think was like $15 a month or something like that. I stopped using the service, but I thought one day I might want to use it again and so I didn’t want to cancel it and it was only $15 a month.

See what I mean? What in the world kind of thought process is that? Like there’s some rule that says I can’t sign up again if I cancel now but decide I want to use it again in the future.

I continued paying for it for a good probably 6 months and didn’t use it not one time. One day I came to my senses and went ahead and canceled it, rather than continuing to pay for something I clearly wasn’t using.

My ultimate point is to encourage you to be intentional with your spending. Be conscious of the subscriptions that you’re spending money on.

It’s really easy to just keep paying for something that you don’t use, especially when it’s not a really large expense or if the renewal time frame is longer, like the annual ones, but as I mentioned before, every $100 that you cut from your monthly expenses is $30,000 less that you need to reach financial independence.

Tips to audit your subscription services

Now I’ve got a few tips to help you audit your subscription services and make sure you’re not paying for things you don’t want or use.

1. Make a list of all your subscriptions.

Look at all your subscriptions, what they’re for, how much they cost, how often you’re charged, etc.

There are actually apps that will help with this. One I heard about is Trim, and it goes through and looks at all the charges in the accounts you link to it and sends you a report of all the recurring charges.

It even takes it a step further and can cancel subscriptions for you if you select the ones you don’t want.

2. Once you have that list, consider whether you actually use each subscription.

If not, cut it. Even if you think you might use it again in the future. Sign up again when you’re ready to use it again. Don’t be like me paying for stuff you know you’re not using.

3. If you have multiple subscriptions that do the same thing, consider whether you can consolidate.

For example, you probably don’t need Blue Apron and Hello Fresh.

The tough one for this is the streaming services, though, right?

We don’t have cable, but we’ve gone from 2 streaming services to 4 now, which all offer different shows. It started with Hulu, which we actually get free through another subscription my husband has, and Prime Video, which is part of our Amazon Prime membership.

Then, we added Disney+ when that came out and most recently Netflix. We had Netflix before and weren’t using it, but we got it back maybe a month ago when they announced they were adding a bunch of shows I used to watch growing up because…nostalgia. If I’m honest, we don’t use them nearly as much as we could, but the kids have a good variety for their TV time, which is nice.

4. Make sure you know all the features that are included in your subscription services.

I just learned like last week that Amazon Prime comes with unlimited photo storage. Legit had no idea, so that is a benefit that I have not been taking advantage of.

I’m on the fence about whether I’ll actually use it because I don’t want all our data just floating around out there. But that’s something I didn’t even know existed before to even make the decision about whether to use it or not.

Let’s recap:

1. Every $100 you cut from your monthly expenses is $30,000 less you need to save for financial independence. Subscription services are one of the biggest money leaks people have in their monthly budget.

2. People spend on average 3 times more for subscription services each month than they think they do.

3. It’s easy for subscription costs to add up because they tend to be relatively cheap, so there’s not a lot of pain or thought involved in signing up.

4. Companies love the subscription model because we often aren’t paying attention or don’t want to go to the trouble to cancel a service and will go on paying for services we’re no longer using.

5. A few tips to audit your subscriptions: first, make a list of your subscriptions; then, consider whether you actually use each one; then, consider whether you can consolidate any of them; and finally, make sure you know all the benefits that are included, so you can take advantage of them.

Okay, that’s it for this week’s episode. Come on over to our private Facebook community, The Wealthyesque Community, and let’s talk about subscription services. Which ones do you use? Have you done an audit to make sure you’re not paying for things you don’t use? Let me know!

If you got value from today’s episode, think of one or two friends who could benefit from this message and go ahead and share it with them, too. If you share on social media, don’t forget to tag me. I’m @iamrhothomas on Instagram, Facebook, and Twitter.

Please subscribe to the show on whatever platform you’re listening on so you’ll be notified when new episodes are released. Please also consider leaving me a written review. This lets the platforms know that this show is valuable, so that they will show it to more people and we can spread this message of lifestyle freedom.

As we close out friend, I pray that you get clarity on the things you don’t care about that you’re prioritizing over your own freedom.

I pray that you take a hard look at your spending and especially your subscriptions so you can identify what truly matters to you and let go of the rest.

And as always, I pray that you continue to take steps to regain control of your time, build wealth, and live the life of freedom and choice you deserve.

Talk to you later.