RWA Series – Subscriptions

Vector subscription business model concept in flat style – pricing plan for app or website service

A few weeks ago I started an adulting series called RWA (Reading, Writing, Arithmetic). The first post focused on Writing using a technique called Bullet Journaling. Today’s post is the second in that series, focused on Arithmetic and Subscriptions.

Subscriptions are those things you sign up and are automatically billed for each month. You don’t even have to think about renewing the service because the company automatically does it for you (by way of an invoice or more frequently an automatic payment from your bank account or credit card). Items that fit this category are: Spotify (music), Netflix (movies), Audible (books), iCloud Storage and the recently popular subscription boxes (wine clubs, book of the month, beauty products). Just about every company has a Subscription model these days and why not, it’s easy cash for them!

The subscription model is a booming field. In recent years, this market has grown by more than 100% a year, increasing from $57 million in sales in 2011 to $2.6 billion in 2016. This is from a recent article in Stanford Business Journal that also predicts that, “Everything you purchase — from transportation to entertainment to groceries — will soon come with a monthly plan.”

Sure, the costs are nominal; but, this discussion is not about being able to afford the service or not. I’m sure most people reading this could sign up for 10 or more of these monthly services and still be ok financially. I say JustSayNo because once you get sucked in, it’s hard to get out. Gym membership anyone? 🏋🏽‍♀️🏋🏽‍♀️🏋🏽‍♀️

Do you remember that infomercial from back in the day about a popular cooking device that had the popular slogan, “Set it and Forget It.” That’s EXACTLY how I think about subscriptions. Often times we sign up for products/services and either use it VERY SPARINGLY or completely forget about it altogether!

When it comes to expenses, they can of course be need vs want; but, the actual payments themselves can also be PUSH vs PULL. When expenses are PUSHED, you consciously send your money somewhere for something you decide you want. For example, I saw Michelle Obama on the Today Show and decided I would like to read her new book, Becoming. As are result of that conscious decision, I purchased her book. Under this scenario, I have just given my money to someone for a product I chose.  Conversely, when expenses are PULLED you unconsciously send money to someone for something you may or may not want to experience/enjoy or chose. Sure, the monthly charge appears small (i.e. $9.99/month for Spotify); but, the real question is are you using the service and getting value from it or do you keep it around as a nice-to-have or because of a “just-in-case” philosophy.  As in, just in case there’s a new movie, book or album I want to partake in this month…

For needs (rent/mortgage, long term disability insurance, student loans, car insurance), I’m completely ok with the PULL technique – it saves me time and energy on things I know I have to pay anyway; however, when it comes to wants (entertainment, luxuries) I prefer to PUSH at intervals I consciously choose.

Didn’t there used to be a time when people wanted to decide where their money went and for what? Now, we’re ok letting complete strangers decide for us?? 🤔 Are they smarter or more in tune with our actual needs, wants and desires than we are? A popular finance blog, MoneyCrashers lists the cons of popular product-based subscription boxes this way:

  • Overbuying – While a subscription box usually costs less than buying all the items in it separately, there’s a good chance you wouldn’t buy all those items if they didn’t come in your box.
  • Unclear value – You get a different assortment of products every month, and you don’t even know what they’re going to be.
  • Problems With Returns – Sometimes companies won’t return/exchange items you don’t use. Most often people just don’t bother.
  • Difficulty of Quitting – As long as the fee is low enough to make it seem like a good deal, it won’t seem worthwhile to cancel the service.

There is a such thing as a subscription hoarder. According to GQ magazine, people spend more than twice as much on subscriptions as they think they do. The average initial estimate was $79.74 per month. The actual average was a whopping $237.33 per month. When companies uncouple your payment from your enjoyment of their product, it’s easy to forget you ever paid.

I currently have one monthly subscription- Netflix – and that’s because we actually use it. On everything else, I consciously choose to pass. Don’t get me wrong, all subscriptions are not bad; however, the adulting tip of the day in this RWA series is that when it comes to subscriptions, choose wisely!!!

What are you paying for every month?

Google now shows campaign financing in search results

Google is making it easier to access the 2016 presidential candidates financial information. Announced today, you can now find results for the following directly in the search results: how their campaigns are funded (aka who owns them).

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If you’re wondering where this financial data comes from (you always should), Google shared it’s partner in the announcement itself, the Center for Responsive Politics. The upfront information provided is great!

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But what if you want more details? If you click on More Information (directly below the charts), you can get a breakdown of every dollar by industry, like the graphic below for Hillary Clinton.

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Financial Independence

a2a309f00cd0c7da07c33145e2aa7d79I love this post from The Simple Dollar finance blog, Financial Independence Through Self-Sufficiency. The author defines this as “a state in which I no longer have to actively work for money and my savings and investments cover all of my needs and reasonable wants for the long-term future.” I consistently read these type of blogs/posts from a variety of sources because they serve as constant reminders (a good thing) to keep you on track.

The article list 13 tips but I grouped 4 of my favorites into 2 category. I also included a very simple evaluation on how I think I measure up:

  • LivingLive in a Strategic Location and Live in a Smaller Space. The simple act of owning an automobile is an incredible money sink. The cost of fuel, maintenance, parking, insurance, registration, tolls, and tickets adds up incredibly quickly. With respect to your home size: First, the direct financial cost of maintenance, insurance, and taxes are substantially lower than a larger home. Second, a smaller home means that you have to be more selective with your possessions. This makes it easier to move and much more likely to focus on experiences and less on the accumulation of stuff. Third, including small homes in your search for a place to live opens up many more options for living. check and check

  • Health: Establish a Daily Exercise Routine and Eat a Healthier Diet. There are a lot of studies out there that demonstrate a major reduction in health care costs for people who exercise daily or get in 10,000 steps per day. You don’t have to go out there and kill yourself – just get your blood flowing a little bit. Similarly, you can reduce your long-term health care expenses by eating a better diet. sometimes a check, most times not. problem = consistency

The article concludes: Find what works for you. Throw out the steps that don’t work and commit to the ones that make sense. At the end of the day, we’re all finding our own path toward financial independence.

The good news? When you make your own money, you get to make your own rules! You are the leader of your own financial journey!

Run Your Personal Finances Like a Business

An article from The College Investor, How To Run Your Personal Finances Like a Business, was referenced in one of the blogs I read daily. I absolutely LOVE the concept because one of the things I learned early while in the MBA program at Case Western Reserve University is that what you learn is not just for business; it can and SHOULD be applied to your personal life as well (Finance, Economics, Accounting, etc.). On a daily basis we do the same types of things corporations do: we find ways to earn income and analyze our expenses (operating costs). We also plan for “life events” like saving for a house or buying a car (long-term, strategic planning).

UnknownBusinesses have full-time people dedicated to analyzing their financial position. On a monthly/quarterly/yearly basis they generate financial documents, like income statements (explained below) and have formal review sessions to gain insight/understanding into how they performed against the plan and how it positions them for the future. How often do you review your financial position? Not just what you spend last week but also your 401K, insurance policies, stock growth, rate of return on your savings account? There is SO much to learn (which I also love) and I’m diving in head first with resources like Early Retirement Extreme and Smart Women Finish Rich.

3700bc66e0a8a53960de7873cb1c0937You MUST use Mint. It automates a lot of mundane tasks for you – the same types of tasks businesses pay software engineers to develop for them so they can focus on value-added tasks like analyzing trends, comparing year over year expenses/revenue, etc.  Mint calculates your monthly net income (income – expenses) automatically on a monthly basis. Access-anywhere (mobile, desktop) templates like Google Docs work well also. (I happen to use both, for different purposes).

The article details 5 steps to running your personal finances like a business:

  1. Create Income Streams

  2. Slash Your Operating Costs

  3. Pay Your Employees First (i.e. yourself)

  4. Insure Your Risks

  5. Make Your Money Grow

  6. Fine Tune Your Systems

  7. Think Long Term

If you come across unknown terms or phrases as you read through this material, you can use resources like Investopedia, iTunesU and even Google Search to gain a better understanding. Take it slow and don’t give up!

Happy Financial Planning!