Subscriptions: taking the hidden spending under control

I guess you, as I wonder where the money went. When such a question pops up we naturally start budgeting and recall big categories: dining out, groceries, gas, rent/mortgage…

But there are also a lot of small expenses we usually don’t pay attention to subscriptions. And these small payments are the main reason why direct budgeting doesn’t work: they sum up too quickly ruining any planning.

Why do we subscribe to anything in the first turn? There are 2 main reasons: we either believe we could save with the subscription (for me it was about ready meal service and monthly car wash) or think we can get some perks for unnoticeable monthly sum (software subscriptions). The problems with the reasons are the following:

1. Are you sure you are saving with this subscription?
2. Are you sure you still need these perks?
3. Are you sure you pay an “insignificant” amount for your subscriptions?

Below are my tips on how I took the subscriptions under control.

What do you pay for?

Th e obvious first step is to figure out what subscriptions you have. If you are like me, the question is not so trivial. There are reasons for this:

• I use different means of payment for all subscriptions: credit cards, debit cards, direct payments from checking account, PayPal…
• Periodicity of subscriptions is different: though for most of the things you pay monthly, some of them are weekly, bi-weekly, quarterly, semi-annual, or situational (when the amount falls below minimal).
• From time to time vendors change sums. Of course, usually to greater amount direction (with some rare happy exceptions :))

I tried 2 methods which worked for me (well, to some extend):

1. Manual: you simply open all your accounts at least weekly and sign down all spending on subscriptions… It is time-consuming and requires discipline. But it’s totally free.
2. Using application: there are a lot of budgeting applications on the market. All of them have tracking features. But the best applications are available…[surprise!] on subscription.

Minimal information you need from the tracking is: what you pay for, when it happened (they usually tend to charge the same day of the month with minimal adjustments for holidays) and with what periodicity. While after the first month you’ll get most of the subscriptions, be ready for surprises. It usually takes about 6 months to catch all of them.

Optimize payments

Now you’ve got the list of your expenses associated with subscriptions. It’s time to optimize them. I don’t know about you, but I hate to go into extremes, I prefer to keep my lifestyle and don’t sacrifice my comfort. So I will not suggest canceling all subscriptions all together (by the end of the day some of them do save your money).

The algorithm I use:

1. Cancel subscriptions you don’t need. Be honest. Even if it’s $10 per month and you simply don’t need it, it’s worth to go to the site or pick up the phone and cancel!
2. Combine subscriptions. For example, I used to pay for storage to Dropbox, Microsoft OneDrive and Google. I just took the time to move all my files to one cloud, and simply cancel others.
3. Look for cheaper options. One example is the Internet: it’s worth shopping around for a better deal (and repeat it at least once per year).
4. Validate if you really save. There are subscriptions where it seems you are saving. But do you? $50 per month for an unlimited car wash (with $20 per single wash) can be an attractive deal. But what is the alternative: how many time do you usually wash your car per month? When I started to track the usage, it turned out I use it once or twice per month. In fact, I spend $50 instead of $30 (yes, I know, it’s only $20 difference, but remember, they sum up quickly).
5. Don’t go to extremes. It’s OK to have some subscriptions if you occasionally enjoy something. For example, I could replace my SiriusXM subscription with Spotify, but there is a difference between online music and satellite music: under certain circumstances, you don’t have the Internet, while still can accept satellite signal.

Keep under control

Now after you optimized your subscriptions, you know exactly:

• What you pay for
• When (day, periodicity) it happens
• How much you pay
• You really need it (or really enjoy it)

The trick with the subscriptions is they will automatically happen, no matter if you plan for them or not. So it’s better to be proactive and budget all these “hidden payments”.

From time to time it’s better to make an audit of your subscriptions. As I mentioned before, vendors sometimes change amount, or better option appeared on the market, or even if you enjoyed something before, it can become obsolete within time. I return to my subscriptions once per quarter to review and adjust.

And of course, from time to time we add new subscriptions. Though we can treat them the way I described above, it’s better to avoid automatic behavior here. My recipe is the following:

1. Put time buffer before any purchase (including subscription). Write it down in your Wish List and let it age for a while. You lived without the subscription for the whole of your life, you can live for a couple more days. If you sure you need it in a week or so, go for it.
2. Explore options. It’s especially valid if you try to save with the subscription: try to do the same thing without subscription and track your respective expenses. You will always have the chance to add the subscription later.

But if you occasionally subscribe for something unnecessary, don’t worry: you’ll catch it during your next audit cycle.

Now you can be sure that you keep your subscriptions under control, and you can more precisely budget for larger (and sometimes more pleasant) categories: dining out, clothes or jewelry 😉

Additional note: I treat my payment by installment as a subscription in my budget as well. But it’s a broader topic, and I’ll cover it in a different post.