This is Tip #8 of the Save $1,000 in 30 Days Challenge.
People spend an enormous amount on subscriptions without ever realizing it. Not only are the payments automatically sent, but it takes active effort — and acknowledging that you’ve been paying for something you don’t need — to cancel a subscription…which means it’s easier to do nothing than to cancel the subscription. Here’s a very conservative estimate of someone spending $1,824/year on subscriptions.
I’ll tell you guys about a subscription I had to a marketing service. I signed up for it about 4 months ago to get the free trial and see if it was worthwhile, and it was pretty decent — but it cost $100/month. After about a month, I knew I wasn’t getting the value I needed out of it — but I couldn’t bring myself to cancel it. I put it in my calendar to cancel, but the day would come and go and I just didn’t do it. Then I would see a new email pop up in my inbox about some new stuff they had added, so I filed it under “Toread,” thinking I “really should” check this out. You know how you feel when you know you should do something, but just can’t bring yourself to do it? That’s exactly how I felt — until 3 months later, when I finally canceled it. Even though it cost me $300 more than it should have, it was a lesson well learned.
Today’s tip, the A La Carte Method, is a way to avoid just that:
The A La Carte Method takes advantage of psychology to cut our own spending….cancel all the discretionary subscriptions you can: your magazines, annual Rhapsody plan, cable — even your gym.
* Instead of paying for a ton of channels you never watch on cable, buy only the episodes you watch for $1.99 each off iTunes
* Buy a day pass for the gym each time you go (around $5-$10)
* Buy songs as you want them for $0.99 each from Amazon or iTunes
Here’s what to do: Today, cancel enough subscriptions to equal $50. If you can do more, great. Here are links to common subscription items to target:
Netflix: http://www.netflix.com: $9/month for basic unlimited. Downgrade to $5/month. Savings: $5-9/month.
Tivo: http://www.tivo.com: $13/month.
Cellphone: http://www.att.com/wireless or http://www.verizonwireless.com or http://www.tmobile.com or http://www.sprintpcs.com. Most people probably won’t cancel their phone, but as an example of optimizing your existing spending, you can save $20/month by going from Verizon’s second-lowest plan ($60) to their lowest plan ($40). We already talked about how to do this earlier in the challenge.
Cable: http://www.comcast.net or http://www.timewarnercable.com or http://www.dishnetwork.com or http://www.rcn.com (Don’t want to cancel everything? At the very least, cancel the Premium channels and get basic cable.). Savings: $50/month for Time Warner Digital Cable.
Amazon Prime: http://www.amazon.com (cancel Amazon Prime – plus, it will make you buy fewer books) – $79 annually or $7/month
Magazines: Look in them and cancel them. Buy them off eBay or get them at the library.
Other online services: http://www.audible.com or any other online services. Can you live without them?
“But Ramit…!”: Common arguments against the A La Carte Method
1. “I already paid to buy a satellite dish! It will be a total waste of money if I cancel now.” That’s a sunk cost, so ignore it as much as possible. Cancel it for this month only. If you decide you really want it back, you can always re-initiate service in December. (Yes, you may have to pay an initiation fee if you actually restart the service. But I’m willing to bet that after you hit your financial goal this month, you’ll be extremely careful in adding expenses back to your life. Plus, you can probably get the fee waived.)
2. “I don’t have any subscriptions like this!” First off, I bet you do — just check your credit card statements. But if you really don’t, well, then this tip may not be right for you. But think how you can apply it elsewhere: Are there areas where you pay automatically, without thinking how much it costs you? This is a huge area to save money since monthly subscriptions add up quickly: One of my readers canceled one $30/month subscription and saved $360/year.
3. Any other concerns? Please read the full A La Carte Method first.
Leave a comment on this post describing how much you’re saving with this tip and any unusual techniques you use to make this tip work.
If you found this post helpful you’ll probably like my new Ultimate Guide to Personal Finance. This is an excellent place to learn more simple ways to improve your personal finance and money management.