Subscriptions: Death By A Thousand Cuts

By: Brewing FIRE When I was 11 years old, I signed up for the BMG Music Club. If you don’t remember the 90s, BMG and their rival, Columbia House, would offer deals such as “10 CDs for the price of 1” if you signed up for their monthly music subscriptions. So I signed up for BMG and got 5 CDs of my choosing for free. Here’s what I picked:

  • Pearl Jam – Ten (legendary)
  • Green Day – Dookie (classic)
  • Stone Temple Pilots – Core (also classic)
  • Blues Traveler – Four (eh…)
  • Alanis Morissette – Jagged Little Pill (f*ck yeah!!)

[caption id="attachment_1120" align="aligncenter" width="449"] Isn’t it ironic?[/caption]

Back in 1995, CDs often cost $20 a piece. So getting 5 albums for free was like a $100 windfall, and it really helped me kickstart my collection. I was so stoked about blasting tunes on my boombox, I completely forgot about the BMG subscription details. In order to not receive a CD every month, you would have to mail in a postcard to opt out of that month’s selection. Obviously, the 11-year-old me neglected to do this. Within a couple months, I was $50 in the hole, and I owned the Batman Forever Soundtrack. (Side note- Seal’s Kiss From a Rose was the highlight of this album). I finally canceled my music club subscription and cut my losses, but the damage was done.

Subscriptions And The Status Quo Bias

I fell victim to something economists call the Status Quo Bias. Once I was locked into a monthly service, it was hard to disrupt the ‘status quo’ and go out of my way to terminate the subscription. This is especially dangerous if the pain is minimal (say, $5 a month) or there is some difficulty in changing the situation (call to cancel). Some people can go on paying for things they don’t use for years, just because they are too lazy (or forgetful) to make a change. If you’ve ever seen a stack of magazines in someone’s office, this is probably why. The first step in controlling one’s spending is to be aware of it.  When I set out on my path to financial independence, one of the first things I did was review all of my expenses in detail. I created a list of the various things I was paying for, and singled out the items that I was either paying too much or not getting any value from. I systematically canceled these expenses, or called and negotiated better deals.

An Incomplete List Of Subscriptions

Back in the day, there were only a few things people paid a subscription for. This might have included milk delivery, the daily newspaper, or the occasional “Jelly of the Month Club”. Nowadays, it seems like you can subscribe to nearly anything. This, of course, can be dangerous for our spending habits.

[caption id="attachment_1142" align="aligncenter" width="491"] You Serious, Clark?[/caption]

The following is a sampling of the many different services that people subscribe to today, broken down into categories. I was actually surprised by how quickly this list grew as I was compiling it. It’s no surprise that people can put themselves into debt so easily! Note: there are certain ‘subscriptions’ that I would consider necessities, such as high-speed internet, a basic cell phone plan, and insurance. I will not include these in the following lists.

Entertainment

Consumption of entertainment is one of the hallmarks of middle-class America. I’m not going to argue whether peoples’ free time is better spent indoors or outdoors. I also won’t fault people for watching a little bit of TV on nights and weekends. I guess it depends on the value that each service provides.

  • Cable television – $100+ per month
  • Streaming (Netflix, Hulu) – $8-12/month
  • Sports packages – $100-200 per season
  • Music services (Spotify, Apple Music, Tidal) – $10-15/month
  • Sirius XM (satellite) radio – $10-20/month
  • Reading/Audiobook services (Kindle unlimited, Audible) – $10/month
  • Newspapers, Magazines – cost varies

Shopping / Household

We Americans are also prodigious consumers of goods. Some fall into the category of ‘necessities,’ such as food, clothing, toiletries and other consumables. But often we are paying for things we don’t really need, or paying for convenience. Wholesale club memberships and Amazon Prime are an interesting comparison. A wholesale club like Costco can actually save you a lot of money by purchasing in bulk, and thus the membership can pay for itself. Amazon Prime, on the other hand, is just paying for convenience. There’s no real reason you need Double-Stuffed Oreos delivered to your door in 48 hours. Similarly, meal plan services such as Blue Apron are really just offering convenience, since you can source the same ingredients from your grocery store for much less.

  • Amazon Prime – $119/year
  • Wholesale clubs (Costco, BJs) – $50-100/year
  • Food services (Blue Apron, Plated) $60+/week
  • Mail-order clothing (Trunk Club) $25/month plus clothing cost
  • Beer and Wine subscriptions – $10-20/month

Wellness

Fitness is essential to living happy, healthy lives. Spending shit-tons of money to stay fit, however, is not necessary. I could not believe that Crossfit costs something like $150 per month. Are you kidding? $150 a month so I can go somewhere to do burpees and swing from pipes? WTF? I’m not saying that fitness club memberships are a waste. If you enjoy swimming laps, then belonging to a gym with a pool (or the YMCA) is probably more economical than owning a pool, and can be used year round. Again, it really depends on the value gained from the service. Check out this post on staying in shape without a fancy gym membership.

  • Gym Membership – $10-20+ per month
  • Crossfit – $150-200/month (!!!)
  • Classes (yoga, spinning) – $10-25 per class
  • Pet wellness plans – $25-50/month

Other Subscriptions

I’ve grouped together various other subscriptions and services with recurring costs. I’ve included credit card membership fees, since these auto-renew and are often forgotten. There are also online services like cloud storage, cybersecurity, and ID theft protection that charge monthly or annual fees.

  • Credit cards annual fees – $100-450/year
  • Websites (hobbies, financial, other) – cost varies
  • Computer services (backup/storage) – $50-100/year
  • Clubs (country club, professional associations) – varies

Brewing FIRE Household Subscriptions

Now, the moment you’ve been waiting for. After chiding people for subscribing to useless things, I bet you think we don’t have any subscriptions. Of course that’s not true. Here is a list of recurring expenses we pay for every year, followed by some commentary on our spending choices.

[caption id="attachment_1158" align="aligncenter" width="343"] 2018 Brewing FIRE Household Subscriptions[/caption]

We spend approximately $75/month on recurring expenses that auto-renew on a periodic basis- yikes! Well, I guess it could definitely be worse. We don’t watch TV too much, but Netflix is essential. I tend toward the documentaries and Mrs. BF toward ‘trash shows’ such as Vampire Diaries. I think we definitely get our value out of this service. Sirius XM is another story. I used to drive ~20,000 miles in my car every year, and so my satellite radio subscription at least got a lot of use. However, my commute is now 2 miles. I still enjoy listening to bits of business radio while driving, but I really can’t justify it anymore. When the bill comes due in May, I will probably cancel (rather than negotiating a cheaper rate, which I do every year). Yes, we pay $15 for the Spotify Premium family plan. Do you want to know why? Two words: Baby Shark. With Spotify Premium, I can play this awful, awful song on demand anywhere in the house. It’s a life saver.

As I mentioned above, there’s no great reason for having Amazon Prime in my opinion. It adds convenience, but I would argue that it doesn’t really save anyone money. For some, being able to order stuff so easily is dangerous. We will think hard about this expense when it comes due next year. I pay $150 per year for the privilege of carrying a Chase Sapphire Reserve card. Actually, the yearly fee is $450, but there is a $300 yearly travel credit. Here’s why I keep this card: it earns 3X points on travel and dining, and the Ultimate Rewards points get a 1.5X multiplier when redeemed on travel. In other words, these expenses yield 4.5% when used for booking travel. Also, I typically travel 2-3 times per year for work, which racks up at least $5000 of reimbursed travel expenses. This in itself pays for the card, not even mentioning other benefits such as PreCheck/Global Entry credit.

Subscriptions – The Take-Away

Okay, I’ve spent most of this post listing various subscriptions and generally denigrating them. It sounds like I’m pretty negative on spending money. Let me be clear: I am not saying subscription services are inherently evil. Without subscriptions, we would have to call and request a newspaper every morning or remember to write a check for our cable bill once a month. Life would be a serious pain in the ass. Here’s my point: be conscious of what you spend money on. It’s really easy to continue paying for something that you don’t use, especially if it’s not a large bill and it renews once a year. “Oops, forgot to cancel that. Maybe next year.” To put things in Mustachian terms: every $25 monthly expense you eliminate and instead invest will return you more than $4,000 in ten years (7% annual return). If you skip the Crossfit membership, you can buy a new body in ten years! So before you get hit with another frivolous bill, review your subscriptions. Decide whether you are getting a value from the service that is commensurate with cost. Do yourself a favor and make this part of your continual improvement plan. What do you think? What subscriptions are essential to your daily life? Do you pay for services that you rarely use?  Republished with the permission of BrewingFire.com.