Anyone who runs a business dreams of having a guaranteed monthly income, but unfortunately that is unrealistic for many businesses. But, the almighty monthly rolling subscription is as close as you can get. It works well for us all, we can set up a Monthly Direct Debit and forget about paying the bills, and your service provider is getting paid regularly and we all live happy ever after. But monthly expenses are a noose around your neck and their damage can easily go unnoticed.
First things first, what services am I talking about here? Primarily the non essentials and the services that people frequently overspend on such as;
- Mobile phone contracts
- TV service
- Gym membership
- Online streaming site subscriptions
Or, any other service you pay for monthly that you could survive without or survive with a downgraded plan if you really had to (I am not talking about gas,electricity or any common utilities here). I am not trying to convince everyone that they should go without Gym Memberships, Internet or anything else which brings you joy in life but to outline what these services may be costing you and to ask you if you really need to pay the extra cost for another add-on to your services each month?
We have allot of Recurring expenses, and we like them. But in the long run we tend to overspend, over run and under use what we are paying for. There are many reasons they are so popular with service providers and service users alike such as;
- No large outgoing expense upfront.
- They are a very easy sell and an even easier buy.
I must admit that I actually like recurring monthly expenses. They are easy to manage, very low maintenance and the costs seem small when broken down into a monthly number. But we can be sure that who we are paying loves them as well. It makes their cash flow situation predictable and people are more likely to stay on a subscription that rolls on and on than the alternative of paying each year a one off fee. The result is, business is increased and we spend money we don’t need to be spending. So it is easy to be lured into increasing your packages on recurring expenses and service providers try everything to get you to do so.
“Well, it is just an extra £3.99 per month! And you get all these additional extras and it is just £2 for the first month, you can cancel at that point if you wish”
So it is an easy sell for someone to say, well it is just 3.99 extra per month and you get ALL these extra benefits. That method of price delivery somehow flies over our brains as a very small expense, but is it really? What if the service was a 3 year contract and the price was communicated to you like so;
“Well, you could get these extra benefits for just £144 over the next 3 years.”
That sounds a little harder to swallow that way right? Of course it does, and this is why companies love monthly subscriptions. They are the ultimate, “dip your toe in and see how it feels” method of selling.
Cutting back on your monthly expenses, downgrading your packages or negotiating a better price can save you hundreds each year and this is something I have been practicing in order to keep a savings rate above 50%. So ask yourself;
- Do I really need to pay the extra £12 per month for unlimited data on my phone contract?
- Do I really need to pay an extra £25 per month to be able to watch 1000+ channels and record 5 things at once?
- Do I really need broadband so fast that you can download lifetimes of content in a flash?
- How many times have you been to the gym this year? Would it have cost you less to “Pay as you go” and squeeze in some outdoor training or training at home once a week?
To help outline what these services are actually costing you I have provided a simple calculator below. This Calculator works out the effective pay cut on your salary that you are taking when the cost of all your subscriptions are submitted. Enter in the values you are paying today, and have a play around to see what areas you may be able to cut back on and improve your take home pay as a result.
If you are interested here are my numbers:
- TV Package: £0 – Don’t have one.
- Mobile Phone Plan: £23 – I could get cheaper but I got a new phone in the contract which I have another 8 months of contract on. Once completed this cost will decrease to £10 – £15 per month.
- Internet: £32
- Gym Membership: £0 – I cancelled my gym membership this year. To keep fitness up I bought some outdoor equipment. See how to survive without gym membership here (coming soon)
- Misc Expense: £0 – No other recurring costs outside of utilities.
I reviewed my Monthly recurring costs this year and decided I could live without a gym membership (at least for all the summer months) what has the result been of getting rid of my £45/month gym memberships?
- It has given me an approx 2% effective pay rise!
- It is saving me £540 per year (of my take home pay)
- It has effectively increased my salary by approx £675 (the £540 above but with tax accounted for)
Work out your own figures below and try give yourself a pay rise this year!