Death By Subscription

The great financial plague that is wiping out households across North America in particular is none other than personal or “consumer” debt.  I’m describing it like it’s something to be feared because there’s still enough old-school financial thinking left in me to realize just how nefarious it is.  Once out of hand, it not only destroys one’s financial situation, but it has also destroyed countless marriages and relationships.  People have killed others and even themselves because of it.

However, with governments at every level heavily indebted and all sorts of encouragement for people to get into debt (credit cards, loans, mortgages, student loans), young people these days rarely see an example of anything different.  First, they see adults open up their wallet and whip out a card instead of cold, hard cash.  Second, it doesn’t help that schools nor the media teach any different.  Most honestly think that consumer debt is the only way to buy or do anything.  Very rare indeed is the family who preaches and practices financial prudence to their children, like ‘Save before you buy’ or ‘Don’t buy it if you don’t have the money’ or the best advice of former times, ‘Save for a rainy day.’

Many people laugh at such prudence, calling it old-fashioned, without stopping to think about how it might actually help their financial situation.  Some might think that it’s easier to just declare bankruptcy once the debt mountain decides to bury them or they can’t get any more credit or the creditors finally take action.  However, then they have to start afresh with no credit rating and therefore no access to credit, the only thing they knew how to live on in the first place.  (“Credit” is the new term used by financial institutions for “debt,” by the way.)  Only then are the antiquated truisms mentioned above not so laughable any more, once they’re forced to adopt good financial habits and start again from nothing.

How about you?  Do you want to learn how to stay out of financial trouble or ruin, or are you content with getting into more debt to buy and do everything?  If you’re wise and seeking to avoid disaster, then allow me to get you to think about a particular drain on one’s finances that has appeared on the scene in recent years and growing exponentially:  the subscription.

When I was growing up, the only subscription that most people paid was for cable TV.  Sure, there were utility and insurance bills and other things that needed to be paid for monthly, but we didn’t need cable TV.  However, our society has gotten to the place where most people have turned wants into needs.  Most people think that they “need” their Netflix subscription, or “need” a 4 or 6 or 8GB data plan for their smartphone instead of learning to live with 2 or even 1GB.

It all starts so innocently at first, but left unchecked a person might not realize that a growing cause of their financial trouble is having too many different subscriptions to too many different things.

So what does this have to do with the above discussion about consumer debt?  I see being over-subscribed to too many things as one of the most subtle factors that is eating away at people’s abilities to avoid or get out of debt.  Money spent on a subscription means money not going toward paying off debt and interest payments.  Worse, a person with no money to spare can’t invest it to hopefully beat inflation or at the very least save it for a ‘rainy day.’  A person having to borrow money all the time is literally a slave to the lender, whereas being debt-free plus also having money ‘in your pocket’ or in the bank frees you from the lender.  The lender isn’t charging you interest to borrow their money because you don’t owe them anything.  You’re free!

However, the companies and institutions that lend people money have our society completely duped into thinking that debt is good and right.  It’s as though consumer debt is a cultural norm and they couldn’t be more excited about us not noticing that they’re quietly bleeding us dry with interest payments.  The only way to break free from being under their control is by getting and staying out of debt.  However, doing this is a whole lot harder when things sneak into our lives that suck money from us, and I see each and every thing that we subscribe to as a leech that is sucking a bit of money out of our lives each month.  The (not so) funny thing about leeches is that you often don’t notice them until they’ve been there for a while.  If we aren’t aware of all the “leeches” that are draining our money, then we will eventually be bled dry by these as well – death by subscription, if you will.

Money spent on a subscription means money not going toward paying off debt and interest payments

So allow me to list as many things I can think of that people are subscribing to on a monthly or annual basis.  The purpose is to get you to identify which ones are maybe not necessary or ones that maybe you can dial back in order to spend less money each month (ex. lowering your smartphone data plan):

  • Home internet – Are you getting charged extra for going over your data limit each month?  Would it be cheaper to get an unlimited plan, or can you identify what’s causing you to go over each month and then cut back/eliminate it?
  • TV (cable, satellite, Netflix, etc.) – Is there a way to get a cheaper cable or satellite plan?  Do you even need that many channels?  Can you get some digital channels for free through an antenna?  If you already have Netflix and Hulu and Amazon Video and HBO, could you live with just one or two at the most?
  • Sports packages – Could you watch your favorite teams and leagues on a cable/satellite plan that you already have instead of subscribing to a season package?  If you insist on a package, can you split the cost with some friends and watch the games together?  Is it even important to see all of the games that season?
  • Smartphone – If you buy your phone outright, do you always need the latest phone or could you let your existing one age a bit more before upgrading?  If you have your phone through a plan, could you get a free phone by getting an older model?  Could you get a cheaper plan with another provider for less?  As for data, could you give up thinking that you need Netflix or YouTube or sports on-the-go and downgrade to a smaller data plan, one that’s good for basic things like e-mail, texting, and basic web browsing?
  • Software (Adobe CC, Office 365, etc.) – Is there stand-alone software still available, or even open-source software, that does comparable task(s) that will be cheaper in the long run versus buying a subscription?
  • Cloud storage – Do you have one or several accounts?  Could you consolidate several into one or two?  Could you get a cheaper plan for an account if you’re using way less storage than you pay for?
  • Retail memberships (Costco, Amazon Prime, etc.) – Are you truly saving more per year through your memberships versus shopping elsewhere, especially if you have to travel a distance to get to a Costco, for example?  Is there for sure nothing locally that offers you a better deal on groceries that also doesn’t require a membership fee?
  • Gym/fitness memberships – Would it be cheaper to pay per visit if you’re not going often enough to justify a monthly or annual membership?  Are there exercise programs you can do at home, like ones you can watch on DVD or online?

I hope that I’ve gotten you thinking about some of the things you subscribe to that might be sucking away at your ability to get out of debt or to save and invest your money.

Speaking of investing, one great strategy (once you’re able to afford to start, in order to make a return on your money that will hopefully beat inflation) is to buy stock in companies that make a good share of their revenue from subscribers.  Many of these companies are enjoying great success through offering subscriptions and therefore more and more companies are turning to these, so why not profit along with them and offset your own subscription costs?  Some company names have appeared throughout this post, but let me summarize them here including some of the main ways in which they make money from subscribers:

  • Adobe – Creative Cloud (Adobe CC)
  • Amazon – Amazon Prime/Prime Video, Amazon Web Services
  • Apple – Apple Music, iCloud
  • Costco – annual memberships
  • Google (owned by Alphabet) – Google Cloud Platform
  • Microsoft – Office 365
  • Netflix – monthly subscriptions

One last thing:  be sure to click the Follow button near the top of this page.  Also, if you’re a brand-new stock investor – or still thinking about it – then I highly recommend starting with my 5-part Stock Starter Series.  To new beginnings!

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