One, Two, Many Subscriptions Pulling us; how to take control, be safe, and save?
Subscriptions are everywhere these days, from waking up in the morning to going to bed and even during your sleep. Attractive pricing, connected credit cards, and easy to sign up on a single click, but do we know what we're getting into? How can we make sure we're not spending more than we should? Let's take a closer look at the world of subscriptions, and I'll share some tips on how to choose wisely and avoid getting trapped. Again, based on my personal experience.
The realization hit me hard: I had fallen into the subscription trap. A wake up call
The Subscription Trap: Netflix for entertainment, Amazon Prime for shopping, Kindle and Audible for reading, a gym membership for health, Spotify for music, Cloud storage space, Adobe Photoshop, and Lightroom for photo editing, and the list went on. I started subscribing to services because of need, convenience, and the exclusive services they offered. A free trial here, a discounted plan there, and soon, I was juggling multiple subscriptions. Back from vacation, I started planning my budget for the next vacation. I felt a pinch when I reviewed my yearly expenses; the seemingly small monthly fees charged to my account and credit cards were adding up, and I realized I was paying for rarely used subscriptions. The realization hit me hard: I had fallen into the subscription trap.
I began to analyze the accumulated costs of my subscriptions, comparing them to the actual value I was receiving based on my utility, gain, and usage. I realized that some of the subscriptions, like the streaming services and reading, were worth it; I use them almost every day, while others, like a yearly magazine subscription I rarely read that, was on an auto-renewal, were draining on my finances.
Maths of subscriptions
In our digitally driven world, subscriptions have become a norm. They are designed to look attractive and often appear to be affordable, charging a small fee on a monthly or yearly basis. However, these fees can quickly add up.
Accumulative cost: A €4,99 monthly subscription might seem negligible; a €10 monthly can be affordable, but it translates to €60 and €120 annually for these respective plans. If you're subscribed to several services, the costs can be hundreds or thousands of dollars yearly. And it's for a lifetime until you discontinue.
Sunk cost: A €6 annual subscription can be considered meager; if not used and if it is left on auto-renewal, it becomes an expensive sunk cost. People in the EU can understand how much cash balance they need to have to get this €6 paid as interest in a savings bank account.
Opportunity cost: The money spent on subscriptions could be invested elsewhere, potentially earning interest.
These hidden long-term costs can easily destabilize a budget if not managed carefully.
Marketing gimmicks behind the subscriptions
These subscription models use various marketing strategies to lure consumers; as I began to read and think more and more about it, I was able to identify a few of them that were a setting of a trap.
Free Trials: This is obvious; many subscriptions offer a free or discounted trial period. Once the trial ends, we are often charged automatically, catching us off guard.
Feel the taste: Some of them allow you to experience the full service and enjoy the taste, and hook you to continue the service.
Bundling services or subscription packages: Offering multiple services in one premium package can make subscriptions appear more valuable, a very basic package alluring to choose for a premium subscription
FOMO (Fear of Missing Out): Advertising exclusive content, package or limited-time offers, and promo codes can make subscriptions seem indispensable. In addition to that, the whole next level of social media promotion by influencers
These tactics align with the principles you can read in most books, such as "Influence: The Psychology of Persuasion" by Robert B. Cialdini, where the author discusses how commitments and social proof can be powerful motivators.
Subscription models also tap into human psychology,
Convenience: Subscriptions offer uninterrupted access to services, which appeals to our desire for ease and simplicity
Perceived Value: Small recurring payments often feel less burden affordable than large one-time expenses, even if the total cost is high over time.
Addictive Nature: Services like streaming platforms engage us with binge-worthy content, making unsubscribing hard.
Tips and Guidelines for a smart subscription choice
As illustrated by Daniel Kahneman's "Thinking, Fast and Slow," our brain's intuitive and deliberate systems play a key role in these decisions, often leading to impulsive subscriptions.
To avoid falling into subscription trap, consider these guidelines,
Evaluate you needs: Only subscribe to services that aligns with your interests and needs, that are essential and must have
Understand the full costs: Calculate the yearly expense of each subscription and assess its impact on your budget
Utilize reminders effectively: Set reminders for free trial end dates to avoid unwanted charges
Regularly review subscriptions: Access your subscriptions periodically to determine if they're still valuable, aligned, and must have
Read reviews and recommendations: Research others experiences and ask for feedback before signing up and make it a commitment.
Tips are easier said than done, I am going to elaborate it into clear steps for choosing or selecting the right subscription plan, these guidelines can help you navigate the decision-making process,
Identify your needs and preferences: Determine what you're looking for in a subscription service, classify if its entertainment, educational, or a shopping etc. Be specific about your needs and sort it as must have and nice to have
Set a budget: Decide how much you're willing to spend on these subscriptions each month. Stick to the budget to prevent overspending.
Compare different plans: Many services have different package and solutions. Compare these options to find the best match for your needs and budget
Understand the terms and conditions: We never have patients to read through, but always click "agree" in the end. Yet, its always good to understand what you're committing to, especially focus on cancallation policy and renewal methods and structure.
Consider the long-term value: Think about how often, and how long you'll need the service. Something interesting today, might become boring or unused over time. Assess the long-term before committing
Check for alternatives: Sometimes, free and/or cheaper alternatives may fulfil your needs without the need for subscription. This might be good idea to test the commitment level before moving on to a paid subscription commitment.
Utilise free trials wisely: When free trials are available, use it fully to explore the service before committing. Make sure to cancel before the expiration date to avoid charges.
Monitor and follow-up usage: Once you're subscribed, review how much you're using the service. If the frequency or the need has come down, and you're not using as much as you thought, consider a downgrade or canceling the subscription.
Reflect on emotional triggers: Todays social media ad campaigns are so attractive, so be aware of marketing tactics that might trigger impulsive decisions. Take time to reflect on all above points before you click on the "pay now"
Conclusion:
The allure of subscription models lies in their convenience and apparent low cost. But understanding the maths, marketing strategies, and psychology behind them is essential for making a wise financial decision. By implementing and following the guidelines anyone can enjoy the benefits of subscriptions without negatively affecting their personal finance. Therefore, the decision to subscribe to a service should be carefully considered and align with individual needs, preferences and financial situation.
Remember, a wise subscription decision is not just about the immediate satisfaction of gaining access to a service, its about long-term financial well-being and alignment with your objective to achieve something, with your lifestyle and goal.
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How are you managing your subscriptions?