Tuesday, January 27, 2015

Recurring Monthly Expenses & The Subscription Model.


People spend hundreds of dollars a month on television, cell phones, and internet services, that often detract from their lives, not add to them.  Moreover, these expenses end up swallowing up a huge portion of discretionary spending.

I was talking with a friend the other day, and they were complaining that the cable company "ripped them off".   They were paying $160+ a month for combined Internet, Cable, and Cable telephone service.   The company raised the rate to a staggering $183 a month, and my friend decided to cancel the service.

However, they had set up the service to charge to their credit card (negative option) so the company kept charging them.   They finally got the company to stop charging (they think) and are trying to get a refund on the service.  Good luck with that.

Why did they charge their cable bill to the credit card?  To get the free miles, of course!   More faux financial acumen at work.  You step into a nasty negative-option trap to get a few pennies back a month.  It ain't worth it.   You can't spend your way to wealth!

I mentioned, offhand that I pay $45 a month for AT&T Uverse internet service, and about $20 a year for NetTalk phone service (which I have renewed until 2019).    With $100 a year each for two GoPhone cell phones, this comes to about $760 a year for telecommunications services.   Fairly cheap.

My friend is paying $80 a month for cell phone service, or a total of $2880 a year for telecommunications services, including the $160 cable bill.   Nearly three grand a year to yak on the phone and watch commercials on television.  That to me is a lot of money.   And my friend is always complaining about being broke all the time.  It comes to about 6.5% of their pre-tax income.  It is an alarming amount of money to spend on telecommunications, in my book.

The amount I spend would be about 1.7% of their pre-tax income - and looking at expenses as a percentage of annual income is another good way to spot excess spending - bearing in mind that of all those 1%'s you have to spend, you only get 100 of them, and frankly, most are spoken for by real needs and expenses like taxes, savings, food, and shelter.

And you know what?  Frankly, I think $760 a year is too much to spend.   I continually look for ways to cut this cost further, if I can.  And my communications costs are largely tax deductible as part of my business, too.

It is sad, but most salary slaves squander away a lifetime of earnings this way - one monthly payment at a time.   They convince themselves that they "need" certain things and that they "have to have" them and moreover are "getting a great deal" by "bundling" services together.   But as you can see, the bundle is still very, very expensive and it is faux financial acumen at its worst to think this is how one gets ahead in life.

"But I have to have my television!" they cry.   Well, actually not.   But you know, if you buy a $50 antenna at Radio Shack you can connect your television to it and find out that, thanks the the FCC caving into broadcasters, you can now get as many as a dozen channels even in a market with only four television networks.   And many of these channels are the same basic cable crap you were formerly paying for.  FREE off the air television, and much of it in HD, too.

But better yet, is to just do without.   You know that whole sacrificing thing - getting ahead in life by deciding that no, you don't need to be treated today for being a special person.   In fact, spoiling yourself is not going to accomplish anything except make you a lazy whiny American, and we have enough of those, thank you.

How do you avoid this subscription trap?   Well, to begin with, look at things in terms of annual cost instead of monthly payment.   The local cable company wanted nearly two grand for cable, phone, and internet - and over three grand with the price increase.  My friend was paying another grand for phone service.   Since when did talking on the phone cost a thousand dollars?   Since people decided that they "had to have" a cell phone and were willing to pay anything to get one.

Another way, as noted above, is to look at the cost in terms of percentage of annual income.  Again, you get only 100 of these percentage points, and if you are paying 5% or more of your income to watch television, that is an staggeringly large amount of money.

What my friends are paying just to watch television and yak on the phone (and worse, text) is enough to make a car payment on a fairly nice used car.   Should television cost as much as a car?   I for one don't think so.

But for many folks, this simply isn't an option.   They believe that life requires texting, and thus they cannot live without constantly being in contact with other people, if only to say the most trivial things.  They have to watch their "sports channels" as they "live for football!"   I really feel sorry for such folks, if that is the highlight of their lives - watching other people actually do things.

Do I lead a deprived life by not having cable TV or a smart phone?   Hardly.   In fact, my quality of life is better as a result of it.  I read more, have real conversations with people, and don't interrupt folks every five minutes to answer texts.

You can live better by living on less.  $2000 a year is a lot of money particularly for people who claim to be broke all the time.

NOTE:  If you go on vacation for more than a month or so, most cable providers and internet service providers will put your service on "vacation hold" while you are gone - at a far reduced rate.   But pulling the plug from the almighty TeeVee is really a better option.

No comments:

Post a Comment

Sorry, Comments have been disabled due to the large amount of SPAM and TROLLING as well as GROOMING comments. Thanks for reading, though.

NOTE: Blogger says below that "only members may comment" - however comments have been disabled and I have no idea how to make someone a "member". Sorry!

Note: Only a member of this blog may post a comment.