Recurring Monthly Costs: Which Are Worth It? Which Are Not?
Published on - October 17th, 2007 (by J.D. Roth) I met some friends at a local restaurant Monday night. While chatting, we found ourselves bopping to the music playing on the radio. For more than hour, great song followed great song: U2, Eurythmics, The Police, Elvis Costello, The Clash, New Order. But the ambient noise made it impossible to know what station we were hearing. “I have to know what this is,” I said at last. “This could be my new favorite radio station.”
I tracked down the manager. He told me we were listening to Fred on 44, a channel on XM Satellite Radio. I’d heard of satellite radio, but didn’t know much about it. When I got home, I did some research.
As expected, there’s an upfront cost to obtain a receiver that can de-scramble the satellite signal. Unfortunately, that’s not the only cost. There’s also a subscription fee of around $10/month.
Alas — a subscription fee. They’re not deal-breakers for me, but they turn otherwise sure things into financial dilemmas. I don’t mind one-time costs, but subscriptions make me wary.
I would love to purchase an iPhone, for example. The initial hardware cost is fine. I can justify that. But I can’t justify a $60/month, two-year contract. That’s nearly $1500 for a device I don’t actually need. I stopped playing World of Warcraft because of the subscription fee. I loved the game, but in order to get my money’s worth, I felt like I needed to play more than is healthy.
I view recurring expenses as potential money sinks. Too often I don’t get value for what I spend. For three years I carried an $70/month deluxe digital cable package so that I could watch high-definition television. But at most, I was watching an hour or two of television per month! Besides, who needs to see Antiques Roadshow in high-def?
Over the past year, I’ve cut the number of magazines to which I subscribe, dropped to basic cable, and cancelled my Audible account. These moves have freed over $100/month. Eliminating recurring expenses has made a significant difference to my cash flow. Most of the time, I don’t even miss the things I’ve eliminated!
Of course, we each probably have a few recurring expenses that are easy to justify due to the pleasure or utility they bring us. I’m willing to shell out for The New Yorker because even though I only read about one issue per month, when I do read it, I love it. And if I find the time to listen to audiobooks again, I’ll re-subscribe to Audible — it’s a good deal when I actually use it.
I can’t decide whether paying for satellite radio would be smart or not. I’ve signed up for the free three-day trial of XM’s web service. So far, I like it. I’d probably subscribe:
- If NPR were available,
- If there were some sort of device that allowed me to receive XM on my iPod, or
- If it cost less.
As it stands, am I willing to spend $10/month for XM, and then pay for a receiver? How about $8/month for the streaming web version? I don’t know. For now, I’m just going to dig through my iTunes library to create some new playlists. I can probably duplicate the sound of Fred on 44. Maybe that will be enough…
SEARCH FOR RECENT ARTICLES
First of all, XM Radio is very good… I love the music stations, and the fact that there is CNN and Air America is fantastic. Here’s what I did. I got 3 months free from buying a car with XM installed, and then I called to cancel stating that I didn’t listen enough. They said that they would give me another 3 months to decide if i want to keep it at a 50% discount. At that point it was around $6.50 per month. I accepted it for 3 months, and then did the same a short while later.
I can’t figure out how to get rid of Comcast, however… I have an HDTV and I have become addicted to the DVR services. I am gone during the week for business, so recording the shows in HD is great. I don’t know if I can do away with the service, as much as I hate paying their fees. Why oh why does HDTV have to be so fantastic and expensive?
loading....
I try to keep fixed costs to a min each month. They tend to be:
Mortgage
Strata Fees
Rrsp – retirement plan
Cash – Fixed amount of spending money
Telephone
Property tax
Auto Insurance + Fuel
Thats it, the smaller the list the easier life is.
loading....
My recurring costs are constantly being reviewed for ways to cut down. I have ONE magazine subscription, and one financial newsletter subscription that I’m going to let lapse because it doesn’t give me anything I can’t get from the online PF community.
I have the minimum possible cable TV, solely because Comcast charges more for internet only. I keep that to a minimum by calling in every time the latest promotion expires and quoting them the last rate quote I got from AT&T. I have a hard limit on the cost of internet service, the day I can’t drop Comcast below that limit is the day I go with whoever else I can find.
My cell phone service is a time block somewhat more than I use in a month, the next block down is less than that, so it is the best balance I can manage.
My home phone is a VoIP service, $25/month for effectively unlimited calling to anywhere I’m likely to call. This is handy for talking to friends in places like Canada or Germany.
Then there are things that are worth the money. I have an on-line storage service that I use to keep encrypted copies of my various electronic records in case of problems at the house.
I am taking an on-line course in Japanese, this is self-paced, no grades or such. This is a course that you take because you want to learn, and even though my usage is uneven, it is there when I have time and I have access to teaching staff for questions. It is worth the $19.95/month for the flexibility. Convenience does have value. Also, this particular expense qualifies both as education and entertainment.
loading....
I have recently started a personal battle against subscription fees. It’s just too easy to rack up a bunch of them that really drain your budget.
I agree that we need some, but I find for myself that I get excited about some new thing, subscribe, and then hardly pay attention to it a few months down the road. It is very true that you can cut out a lot of these services and not even miss them.
loading....
Star Money Articles for the Week of October 15…
Here are some recent interesting posts from the MoneyBlogNetwork and beyond: Five Cent Nickel is a deadbeat.
Blueprint for Financial Prosperity reviews Negotiation Genius. No Credit Needed lost his wallet. Get Rich Slowly wonders which recurring mo…
loading....
I am another person who loves XM, when I got my new car it came with 3 free months, I did not plan on subscribing afterwards. At the time I was making a long commute each day (64miles each way) and had to switch radio stations 3 times. I was listening to NPR quite a bit, but then switched to XM.
They offer XMPR which features some NPR programs but not your local. I do not drive as much now but XM is great and find it hard to go back to regular radio which I never listened to very much.
loading....
I try to run my finances like I would a business and one of the cardinal rules of business ownership is to attempt to reduce variable expenses.
I would go out of my way to pay for monthly expenses like gym membership and insurance up front if I was getting a discount so that I wouldn’t have the monthly obligation. It’s much harder to budget with a bunch of monthly bills, not to mention the hassle of paying them or keeping track when the charges are applied to accounts.
Great post.
loading....
Recurring monthly costs are for the financially illiterate. One can’t do without them entirely, but one must make absolutely sure they are worth the cost and review them periodically to make sure they still are.
I capitalize the cost to compare with other products I might buy. Using a 5% cap rate, 12*$10/5% is $2400, a true lifetime cost for a lifetime benefit. Is it worth it to me? Only a very few are. Would love to have an Tivo HD, but it isn’t offered with a lifetime subscription and it will never be worth what it costs to me.
loading....
It was bad enough before the internet with things like gym memberships you never made full use of and subscriptions to magazines you hardly ever read, but now every time you go online you’re constantly finding membership sites and service providers persuading you to part with your money every month.
Also the annoying thing about online memberships if that you often forget about them and end up paying the fees for several months before you get round to cancelling them.
loading....
[...] Get Rich Slowly is thinking about XM Radio and recurring monthly expenses. [...]
loading....
I called XM on Saturday and received 12 months of service for $77. That comes out to about $6.41 a month as opposed to $12.99. I am very pleased!!
loading....
[...] you want to save money, one of the easiest ways is to cut out monthly subscriptions to stuff you don’t use that much. It doesn’t have to feel like deprivation. My top suggestions [...]
loading....
My local library sells magazines for 1/4 the cost or less of the reg. price and they always have stacks of New Yorkers. At the other local library, you can check out as many magazines as you want to – no limit. Have you tried your library to see if they carry New Yorker magazine? Worth a phone call.
loading....
[...] Recurring expenses can be especially insidious. Long-term contracts and installment plans often contribute heavily to negative cash flow. If you truly need to make a major purchase, save the money to pay in full. Don’t buy things you cannot afford. [...]
loading....
I don’t know if you are still interested in mmos or not but Perfect World is a great mmo that’s absolutely free. It has great graphics, good missions, etc. The only downside is the English is not as great as it could be.
loading....
I also called XM today and said I would need to cancel unless I could get the $77/year plan again. They said fine.
loading....
I’ve been making resolutions about cutting costs for quite a while, and then about a year ago started reading personal finance books and blogs. JD, I just had to report that yesterday I cancelled monthly costs of more than $80/month – that’s almost $1,000 per year! I spent a few hours cancelling things (funny how easy it is to subscribe to things, and how long it takes to UN-subscribe), and I felt SO GREAT after!
Thanks as ever for all your wise advice!
loading....
I don’t have a lot of money available to me; when I moved, and found that all the cable programs I like were in the most expensive tier, so that I had to pay for everything else, TOO, that was it. It was easy; I could watch TV, or pay my electric bill. No more TV for me! I do have two recurring subscriptions – I guess they’re subscriptions: one is for my Transpass, which I need to get to work, so I’m not cancelling that any time soon; the other is for my gym membership. Every once in a while, something comes up and I don’t go for a month or two, but I’m normally there five days a week, and have been for years, so I don’t consider that a money sink at all, for me.
loading....
[...] To verify eligibility, these websites will ask you to enter your e-mail address. If your employer (or school, in some cases) qualifies, you may receive discounted plans or equipment. It’s a quick and easy way to reduce recurring montly costs! [...]
loading....
I think about entertainment costs a different way – even if they are recurring. It helps me to think in terms of entertainment value by cost/hour.
Take World of Warcraft, for example. $15/month isn’t really a bad deal if you compare it to other forms of entertainment. Going to see a movie at the theater would cost you $7 (or more) for 2 hours of entertainment.
If you’re playing even just 6 hours/month of WoW, that’s only $2.50 per hour. Cheaper than renting DVDs, really. If you spend your time playing it instead of watching TV, you could even cut out your cable TV and just play WoW instead.
I don’t actually play WoW. Just using it as an example. I am an avid game player and give myself a monthly budget, whether that is for buying new games or paying subscriptions.
loading....