Attacking Subscriptions -- A High Level Plan to Cut Expenses
There are all sorts of techniques to spending less - buy used or generic, clipping coupons, dine in instead of eating out, etc. However for the average family I believe the biggest best value comes from focusing your time and energy on eliminating or reducing subscriptions to the extreme from your monthly expenses.
Why Focus on Reoccurring Monthly Expenses?
This type of expense are the Achilles' heel to any family's household budget. Each expense no matter how insignificant accumulates into a bigger and bigger expense each month eventually over longer periods becoming significant costs. That means every dollar you reduce a subscription you could be saving $12/yr forever. If you shave $10 off 1 subscription that is equal to $1,200 in savings over the next ten years.
Not Getting The Maximum Value
Because it is a subscription, it likely means you aren't getting the maximum benefit from it each month because its always there. Lets take a typical example - a premium movie subscription like HBO or Netflix.
Its easy to financially justify the subscription when you enrolled -- it would pay for itself and then some because you could replace your typical renting of say 10movies/month at a cost of $40/month with a cost of $20/month with this subscription. Sounds good at least initially -- you can watch unlimited movies and say $20/month vs renting 10movies/month.
However, after the 1st couple of months you quit reserving every evening to watch a movie on your premium movie subscription. Obviously other things are going on in your life besides your movie watching hobby. You have seen all the popular movies on it and while you still use the service, you stop maximizing the value of it. Then there could be a new movie that the premium service doesn't offer so you end up having to go out to rent the movie anyway.
Sooner or later you are at the point of maximum profitability for the subscription -- that is the point where the service provider is getting the maximum profit from this service -- you are paying for the service and not even using it enough to justify paying for it.
What are Some Typical Subscription Expenses?
- Magazine Subscriptions
- Cell phones
- Home Telephone Line
- Home Security System
- Satellite Radio
- Movie Subscriptions (Netflix)
- Yard Maintenance (eg. TruGreen Lawn Service)
- Insurance (Car, Home, etc)
Cancel The Subscriptions You Don't Need
You need to do a self-assessment of each of your subscriptions and determine if the true cost you are paying is worth the service you are receiving. Your likely deriving some benefit from the subscription, but is it really worth the price you are paying?
For example, my wife signed up for a home security system when she bought her town home. The benefit was is made her feel safe since she was living alone. However shortly thereafter she got a roommate and eventually yours truly came into the picture. Did she feel more safe with a security system? You bet. Was it worth the $400+/yr to maintain the security system? It took a little convincing on my part, but in the end she canceled the security system.
Look for Ways to Reduce Remaining Subscriptions
My wife and I are on an overseas assignment. While we opted not to cancel our telephone subscriptions we were able to sign up a reduced rate suspend cell phone plan by AT&T and suspend our telephone service with Bellsouth. This cut our subscription costs down by over 60% during a time when we weren't getting the maximum benefit of the expense.
Downsize to Less Expensive Subscriptions
Another option is to look identify what benefit is really important and find a less expensive subscription that gives it to you.
My wife's telephone bill was running her $35+/mo. Canceling her telephone wasn't an option for her, but by studying the bill, I found the subscription also included a home maintenance plan. Since it was only the telephone service that she cared about we were able to drop this part of the subscription and reduce her monthly fee.
Another example is considering changing the movie subscription plan you are on. If you are paying $60/mo for premium cable, maybe you could consider dropping to $40/mo basic cable and $5/mo Netflix to reduce your monthly costs, but still get the same usage benefit.
More Ideas to Consider for Reducing Subscription Costs
- Reduce insurance to what is really needed- Consider dropping comprehensive and/or collision coverage or raising your deductibles
- Consider canceling cable and taking the money saved to upgrade to HDTV
- Reduce phone service plans if you have both cellphones and landlines
- Use free Internet offerings (eg. public library, Starbucks, or neighbors) and cancel your Internet service
- Cancel newspaper and magazine subscriptions and consume the free content on Internet
Due to the repetitive nature of subscriptions, reducing even small amounts eventually take out big chunks from your total expenses.
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