When we are having money woes, it’s common to think of ways to cut back on spending. The cause of our financial issues can vary, from dining out too often or impulse shopping, but sometimes, despite our best efforts to troubleshoot our finances, there still may not be enough money left to make ends meet.
After reviewing your spending habits and your financial obligations, the next step involves reviewing your monthly subscriptions and deciding whether those are contributing to an empty bank account.
So, how big is the problem of paying for monthly subscriptions? According to a McKinsey study, approximately 70 percent of people reported that they have at least two services that they are subscribed to, while close to 35 percent are paying for three or more monthly services. With so many apps and other services that offer monthly automatic deductions, it’s no surprise that subscription services quickly add up. Here, we’ll take a look at how subscriptions can impact your bottom line and how to determine if your subscriptions are standing between you and your money goals.
It’s More Than Just a Few Dollars a Month
When signing up for a subscription service, it feels less expensive when the price is minimal. Subscriptions themselves aren’t bad, and keeping up with how many there are and how much they will cost each month can aid in your financial health.
If you convince yourself that $8 a month for Netflix isn’t too bad, it’s easy to view other subscriptions the same way. In fact, multiple recurring subscriptions can add up fast and, before you know it, that $8 subscription is multiplied by 10 and you may end up paying for services you do not even use.
Not paying attention to how many subscriptions are drafted from your account contributes to bad spending habits as well, and for someone who is looking to improve their finances, it’s the wrong mindset to have. Forgetting that these services add up, especially when there’s more than one, is the quickest way to cash flow problems.
There are many ways to effectively budget, and one of the most common is to cut back on expenses. If you decrease or remove a habit such as online shopping, the money you would use to shop is allocated differently—to a savings account, for example. However, when it comes to subscriptions, their perceived affordability makes them easier to ignore.
Compare Your Subscriptions to Your Financial Goals, Then Decide
Once you determine that there may be some unnecessary subscriptions, there are several solutions to decreasing your subscription usage. A good way to start is to analyze the importance of the subscription before you purchase. When you consider what extra services can cost you, thinking in the long term is the best way to go.
Instead of considering the monthly payment by itself, consider adding up the cost over an entire year. This can help you visualize exactly how much money is going to these services that you might not even need. Again, using a basic $8 per month subscription as an example, over a period of 12 months, you’re spending $96. If you rarely even use the app, this is nearly $100 that could go into savings or toward paying down your debt.
Tech Tools to Help You Manage Subscriptions
For those who struggle with money management, as well as those who just want to be more proactive about their money, there are several technological tools that can help with budgeting. Many of the top financial management apps are low or no cost, which makes it even easier to save.
Additionally, Android and Apple operating systems have made it easy to keep track of your subscriptions. By going to your smartphone settings, you can access your subscription data, which can help you decide which ones are worth keeping.
Another way you can manage your subscription is through your bank statements. Reviewing bank statements is a more tedious process, but by combing through them, you could find an expense that you may have forgotten about as well as how much your subscriptions have cost you over time.
Don’t Totally Deprive Yourself
There are some subscriptions that you know you will use, and these subscriptions are usually not where the problem lies. Subscriptions only become an issue when there are too many that have a detrimental effect on your finances. When trying to cut back on the number of subscription services you have, always weigh the importance and necessity level of each and remove any that are not essential. Cutting back does not mean you have to be deprived of everything that brings you pleasure. Even downgrading from a premium version of an entertainment app to the basic option is a step in the right direction. As long as you are aware of your finances, you can decide what works best for you and supports your long-term money goals.