Are your subscriptions overtaking your spending?

Today’s blog post is a quick hit and I want to keep it simple today. 

I listened to a recent Planet Money NPR podcast about ‘Why subscriptions took over the economy’. Like all of their podcasts, they keep it light hearted, funny and insightful. It was a simple enough topic yet listening to it made me wonder how much money is being wasted through subscriptions that are not being used or yielding any value. 

The theme of the podcast episode is straightforward – over time, companies moved from selling you products and services for a one-time acquisition fee to more of a subscription-based service. This led to the boom of the Software as a Service (SaaS) model. Unfortunately, as more and more items became a subscription, people started buying more of them and over time forgot about them and continued getting charged for them. The more concerning situations were ones where companies made it very hard to cancel subscriptions. This recently led to the US FTC (Federal Trade Commission) introducing a new rule called ‘Click to Cancel’ pushing companies to ensure they make it easy for consumers to cancel subscriptions. So this is fairly topical in the US now. 

Why do people get enticed into subscriptions?

The reason is the same reason why anyone wants to buy something. But the subscription model has a couple of reasons that entices people to buy compared to normal one-time purchases. One, a lot of these subscriptions will offer a free trial period and take your credit card details in advance. If you forget to cancel before the end of the trial period, then you simply get charged. A lot of people are goaded into these free trials – except they are not really free if u dont cancel. Two, paying $9.99 a month is a lot more palatable than paying $120 in one shot. People get easily convinced into entering into such a buying arrangement. Honestly, I am not berating companies with subscription models – I am simply pointing out the behavioral aspects of why people buy subscriptions. 

What should I do?

First, do an inventory of all the subscriptions you have. If you are someone who tracks your expenses every single month, then it’s very likely you already do this and are well aware of all your subscriptions. You can use regular budgeting / personal finance websites to track your spending. Or you can use some services that exclusively help you track your subscriptions and even help you cancel it. Beware – these are also subscription based services 🙂 Second, once u do that – decide which ones are you actually using and which ones are worth it. Discarding ones you are not using should be easy unless it’s like a gym membership you are guilting yourself to holding onto or that audible subscription you have where you have convinced yourself you will read at least one book a month (and you actually dont).. 

Finally, once u have decided which ones youu want to keep and which ones you don’t – cancel the ones you don’t. Now, that last part might be easier said than done in some cases. But this is where the rubber meets the road. I recollect how I kept paying for a home security alarm system for a home we had moved out of but realized abut a year later they kept charging me for it!. I could simply not figure out how to cancel the subscription online. I finally called the company and after some difficulty, got a hold of a human – they told me I had a contract and needed to continue paying for a few more months. I won’t go into the gory details of what I ended up doing but I share that example to tell you that this happens to the best of us. However, this is one of the reasons why I am very supportive of the recent FTC rule around ‘click to cancel’. 

My personal inventory results

The above story of me overpaying for a home security alarm system is a few years old. After listening to the podcast yesterday, I decided to do a fresh inventory yesterday. I use Quicken Simplifi to track our expenses. I decided to look back at the last 12 months to get a full year view and categorized my recurring subscriptions into annual and monthly subscriptions. Needless to say, I was satisfied to know that all of my monthly expenses are ones I am well aware of and am using them – so I get value from them.. So I felt good about that. When I looked at my annual subscriptions / charges, I realized that my wife and I had talked about canceling this premium credit card for which we were paying annual fees of $650, but totally forgot about it. So here you go – this still happened to us!!. And before I forget, I know I signed up for a two week free trial of Duolingo that expires in 2 days – I need to cancel that too! 🙂

Concluding thoughts

So what are you waiting for? This is a simple, quick hit. Go do that inventory and reduce your expenses! Remember, reducing your expenses is the fastest and easiest way to increase your savings. While the savings may not amount to humongous numbers, these can add up over time. If you end up saving $100 a month, that’s $1200 a year – that can be some flight tickets and even hotel stays for a vacation that can be funded with that money. 

Thank you for reading and I wish you all the best in your personal finance journey!