Keeping an Eye on Your Subscription Services

Most people don’t realize that when they spend money, they also activate the same area of your brain as when they feel physical pain. Subscription services and auto-billing are the leaks in your financial plan that you don’t pay attention to.

Automatic subscription payments take away the “pain of paying.” Less pain is a good thing, right? Well, not always. Pain is a signal from the body to tell the brain that something bad is happening. Can you imagine the damage to your hand if you didn’t know when you were touching a hot stove? When you take the pain of paying away, you may spend more money without thinking much about it.

Sellers of products have been making it less painful to give up your hard-earned dollars for thousands of years. Back in the days of bartering, a trapper would drive a much harder deal for 15 pelts traded for specific supplies than if he was paid in gold coins. Why? Because he remembered the cold, hard hours spent in the woods collecting those pelts. If he traded for gold coins and then went into the local trading post and bought supplies with the coins, that memory of the pain was not as strong.

Fast forward to the credit card era. Here you don’t see the “pelts” and the spending is ten times less painful. Not only do you not hand over the physical gold coins — which even your lizard brain recognizes as real physical stuff — but you never see the money, and you don’t have the pain of paying for it immediately. Sure, in a month or so you have to pay your credit card bill, but you were able to leave your hand on the hot stove for much longer than you should have. Ouch!

Reduce your automatic payments for subscription services and apply all or part of the savings to building your net worth.

Think about the different types of automatic expenses you have. Are they worth keeping? Premium cable channels, satellite radio, insurance policies or even fruit-of-the-month clubs are just a few to review. Each one may be a relatively small monthly amount, but by eliminating or reducing just a few, you can end up bolstering your savings or investments.

The process is very simple:

1) List every bill that is automatically, or even manually, paid.

2) Then start analyzing the most recent statement to see what the components of the bill are. Highlight purchases you can do without or reduce.

3) Call each company and find out if they can change your services or possibly reduce your bill.

4) Commit that you will apply at least half, if not all, of the reduction to your financial goals.

If you don’t have the time or energy to do this, there are companies that will do it for you — but be aware of debt relief and loan modification scams. The FTC is a good place to check first before you agree to work with these companies. Some may charge up to 40% of the first two years of your eventual savings. So if you do look into this option, make sure they are legitimate and research the company’s background and customer satisfaction ratings. There are both good and bad bill negotiation companies out there.

Think about it. I bet you have other bills that could be reviewed that I haven’t even mentioned. This is better than getting a raise. It’s extra money in your bank without having to pay taxes on it. Doesn’t get better than that.

Follow the Department of Defense Office of Financial Readiness, or FINRED, on Facebook, Twitter and Instagram for more financial planning tips. Look for more on YouTube and the FINRED blog.

Written by Dave, an Accredited Financial Counselor® who has been helping families plan their finances for more than 30 years.

Postscript: I enjoy writing blogs on financial topics. This one, Subscription Services, ended up being one of the most lucrative blogs I have ever written. Just before submitting it, while I was doing my final edit, I realized that I had not taken my own advice in a long time. I think my last review of my own monthly bills was over two years ago. So, I took another look and re-examined a $100,000 term life insurance policy with a monthly premium of $148.00. I had taken that policy out several years ago for a specific purpose. Things changed, and I no longer needed the policy. I cancelled it. I guess you could say that I will be getting paid $148.00 a month for the rest of my life just by listening to my own advice. Of course, my wife asked me why I had not done it sooner.