My $132,683 Comcast Bill

$132,683 — That's how much I'm paying for cable. Now, I do have HBO, Showtime, and 386 other channels of digital bliss, but $132,683!? Please. Is this a billing error? Not exactly.

I recently came across Jon Hanson's Foolish book Good Debt, Bad Debt. In it, he notes:

If you are forty years of age, every $100 a month you continuously burn costs you over $132,000 at age sixty-five. Said differently, invest $100 a month for twenty-five years (ages forty to sixty-five for example) in a mutual fund or other investment at only 10% and you will have $132,683…Is it worth $132,683 for cable TV with all the premium channels?

Now for the record, I really like The Walking Dead, Boardwalk Empire, and (I can't believe I am gonna cop to this) The Real Housewives of Orange County, New York, or any other municipality that celebrates elective surgery and afternoon cocktail parties. But do I like them $132,683 worth? I think not.

J.D.'s note: Good Debt, Bad Debt (and thus Hendley's article) assumes a 10% investment return. That's the long-term historical average for the U.S. stock market as a whole. I know (and so does Hendley) that average is not normal. Please don't get hung up on that 10%. The point is still the same, even if you assume 8% or 7% or 6%.

 

Paradebt
My monthly Comcast bill is just one example of what Hanson labels “paradebt”. This is debt that's outside of the traditional “borrow now and pay back later” variety such as a Visa bill, car payment, or student loan. Hanson writes, “paradebt or ‘almost debt' is the cumulative effect of all your nonessential monthly spending.” Sure, these are services you can cancel, and yes, these paradebts don't come with an interest rate, but they do come at a cost. Debt is debt.

But what about the Housewives? And my health?
I'm not saying I plan to do away with all of the items that make up my paradebt. I pay $33 a month to go to the gym. Yes, this is paradebt, and yes, I could get the same benefits with a pair of Nikes and a chin-up bar. Nevertheless, I want to stay healthy and maybe live a few years longer. (Plus I'm single and drive a 1995 Civic with 170,000 miles and a broken door — I need all the help I can get.) So, I choose to allocate my money towards the folks at Fitness First.

The key is that I'm consciously deploying that capital. I know that my $33 a month membership will cost me around $40,000 at retirement if I can achieve a 10% return on my investments. That's okay. I'm willing to spend $40,000 to feel better and maybe live longer. Watching housewives go shopping for $130,000? That's a different matter entirely.

Under the knife
Now, I'm no doctor but I am reasonably certain that the Real Housewives are no strangers to the scalpel. (For those of you unfamiliar with the show, this isn't a reference to their abilities as physicians.) And while I'll let others judge the results of their time under the knife, I will note that we could learn something from their efforts in trimming the fat.

With the New Year just a few days away, I'm in the process of setting my financial goals for 2011. Just like the Housewives, I too plan to make some cuts. This need not be major surgery. I'm just looking to better deploy a few dollars here and there. Since I don't owe anything on my credit cards and my car is paid off (it's a 1995 Honda Civic with a busted door, remember), I'm tackling my paradebt, starting with that $130,000 Comcast bill. Not only is $130K a lot of money to me, it turns out I can get it without doing anything other than calling my cable company.

Even if Jon Hanson is wrong and I don't make 10% on my money, it's still a great proposition. If I only make a 5% return on my cable savings, I'd still net $60,000 at retirement. Not as much as $132,000, to be sure, but that's still enough to make me give up a few dozen channels of Law & Order reruns.

Next on the list is my AT&T bill. Yes, unlimited text messages are great, but methinks I could do with fewer LOLs in my life.

Finally, I plan to look at all of those subscriptions that automatically renew every year. The stack of Economists, New York Times, and New Yorkers that show up at my door every week may make me feel smarter (even as they go largely unread), but the costs add up.

And the trade off? I figure that switching out cable for Netflix, dropping unlimited text messages, and doing my reading online will free up about $100 a month — or as Jon Hanson would put it, $132,683 for my retirement.

What say you? How might you trim your own paradebt in 2011? More importantly, any suggestions for coping with my upcoming TV withdrawal?

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LifeAndMyFinances
LifeAndMyFinances
9 years ago

My wife and I are currently digging our way out of debt and have cut many things from our budget. Television was one of them. The first month was difficult. I missed my Sunday afternoon golf and she missed her “programs”, but after a little while, we learned to fill the void quite easily. We began to read more and found ourselves exercising more as well! When we needed a T.V. “fix” we either went to the local sports bar or we just rented a movie from the library (free of charge 🙂 ) Life without T.V. is actually pretty… Read more »

Arnoud
Arnoud
9 years ago

Coping with TV withdrawal is easy: rent or borrow dvd’s from your favorite series! You get to watch all -and nothing but- the best, without the commercials. I like good TV -and movies- too much to sit around wasting time on reality shows and infomercials.
And the critics are right, the book is always better.

YS
YS
9 years ago

Thanks for that note JD.

For folks that are hung up on designing their retirement portfolios based on average returns, I highly highly recommend Jim Otar’s “The Retirement Myth” It’s math heavy, but you can skip all of that and still get the main point – don’t design a financial retirement plan based on averages!

Raghu Bilhana
Raghu Bilhana
9 years ago

I dont think you can count Gym membership fees as paradebt.

Each 1$ paid in any reasonable gym membership costs would save you $5 in future health care costs.

There is research to prove this.

Coley
Coley
9 years ago

I’m thinking about picking up an Apple TV. Between that and a Netflix subscription, I’m wondering if it’s really worth it to keep the Comcast cable. The conclusion of this upcoming, final season of Friday Night Lights might be a good chance to re-evaluate.

Eric
Eric
9 years ago

“Paradebt?” What a ridiculous concept. By that logic, anything that’s not living like a caveman is unnecessary and should be eliminated. Debt may be debt, but cost is not necessarily debt.

I can appreciate wanting to save more for retirement, and eliminating things that you’re not getting your money’s worth out of, and cutting things you can do without in order to fund your financial goals. But getting rid of things you enjoy now so that you can do/use/etc. them when you’re retired is stupid.

Rick
Rick
9 years ago

You are right on the money with this post. I got rid of cable several years ago. Until this year I didn’t use a cell phone. In 2011 I will go back to not using one. It is surprising what you can do without and barely notice. No newspaper or magazine subscriptions either. And no debt. It’s true, it’s not what you earn, it’s what you spend that counts.

I do indulge in a decent Internet connection but hey, no-one is perfect.

Wesley
Wesley
9 years ago

I agree with the paradebt concept. Some things I would single out are items that are under contract terms (ie, cell phone 2-year contract). To be rid of such an arrangement, you do have to pay your way out. In my book that’s no different than debt.
–Wesley

Erin
Erin
9 years ago

Thanks for the great post! I especially like that you don’t just tell people to do away with extras, rather you point out what those extras actually cost in the long term.

This kind of thinking allows us to think broadly about the actual costs of our choices, and whether they’re really worth it.

(And I must admit that “Housewives” is also a guilty pleasure of mine. 🙂 )

Chickybeth
Chickybeth
9 years ago

My question would be, what is your plan for that extra $60-130k in retirement? If tv brings you pleasure now and you have no plan for that “extra” money later, why get rid of tv? Sure, tv is a non-essential, but so is your phone altogether and chocolate and a car, etc. If you break everything down to debt v. non-debt life can get pretty boring pretty quickly. It is a great thing to re-evaluate your subscriptions yearly to make sure they still bring you enjoyment, but I think it’s a bit foolish to decide something isn’t worth enjoying now… Read more »

Edward - If You Can Read, You Can Cook
Edward - If You Can Read, You Can Cook
9 years ago

If it weren’t for HBO, I would ditch cable. I watch non-netowrk, non-HBO tv about 2 hours per month. If I could get HBO online without cable service, I would. The big waste on my AT&T bill isn’t the unlimited texts, but the wasted minutes. My wife sends/receives about 5000 texts per month (I’m about 400) but the two of us only use about 200 minutes per month and the smallest family plan AT&T offers is 550 minutes per month. @Raghu, gym membership certainly counts as paradebt if you don’t use it. Right now, I probably wouldn’t use a gym… Read more »

jg
jg
9 years ago

“More importantly, any suggestions for coping with my upcoming TV withdrawal?”

Hulu. I haven’t owned a TV in years, and yet watch far more television programs than I should. 🙂 Many network websites will let you watch full episodes, as well, but I like Hulu’s player, as well as its nature as an aggregate site. You can even “subscribe” to shows so that they show up on your queue when they become available!

J.D. Roth
J.D. Roth
9 years ago

While I think the term “paradebt” is kind of lame, I understand the concept, and I agree with it. For a long time, I’ve been on a crusade to get people to reduce their recurring monthly expenses. That’s exactly what paradebt is. It’s easy to let your budget get swallowed by recurring expenses: cell phone contracts, cable television, subscriptions, gym memberships, and so on. And while Eric (#6) has a valid point that it doesn’t make sense sacrificing the things you enjoy now so you can enjoy them later, I think it’s important to be able to look at your… Read more »

Jimmy
Jimmy
9 years ago

This is something of an obsession for me, so there’s a bunch of things I can give tips about. Home phone: Ooma. At least until a few months ago, you could pay a one-time fee of $199 and get lifetime home phone service with free US calling. I believe it’s $5/month after the initial $150 fee now. And yes, it’s good for the rest of your life. Requires internet connection. If you’re a tech geek, you can get free home phone service through a combination of google voice, sipgate and an asterisk box (very involved and no guarantee it’ll last)… Read more »

Ron
Ron
9 years ago

10% for 20 years, The last investment adviser to make that kind of return was Bernie Madoff.

Maybe I’m missing the golden investment but can someone show me an investment that has consistently made 10% or more over the last 20 years? Not on Average, but 10% per year, year after year for the last 20 years.

To do this would require that the investment outperform the stock market and I know of no mutual fund that consistently out performs the market.

Lets be reasonable when it comes to stating what a mutual fund or other investment will actually return.

Nicole
Nicole
9 years ago

What Chickybeth says. This is an interesting exercise, but unless you know how much money you’re going to have in this mythical future, how much 60K is worth to you is meaningless. If you’re a billionaire, 60K later vs. $100 now might make you wish you’d kept that $100. It’s all about the marginal benefit. And thanks for the note, JD. One of my pet peeves is when people assume 10 or 12% interest (even ignoring whether that’s nominal or real and inflationary expectations) and then say, “even if I’m half wrong,” leaving a reader to assume that they just… Read more »

David Hunter
David Hunter
9 years ago

I figure $41 a month for cable with 10 movie channels is worth it for us.

Now-a-days, you can kill 2 birds with 1 stone. Pay for internet and hook up your computer to your TV through a HDMI cable. You can now watch your favorite TV shows and get internet access!

Scott
Scott
9 years ago

This is a great idea, my wife and I get the tv series dvd’s at the library which has all the dvd movies you could watch, and most of the tv series shows, literally walls of them and they are all free for the asking.

Chris
Chris
9 years ago

I’m glad J.D. put in the note about the assumed 10% return. Reading that definitely made me go “PFF! Who diz guy think he iz?” I ditched the cable and land line when I moved out to my own (non-roommate) apartment. It saved me about $75 per month, or $900 per year. Now if I had only saved that… But seriously, I think 90%+ of your cable needs can be fulfilled with a netflix/hulu combo. Plus, you can wait till the season is over and watch it all in one shot on DVD/BluRay at home. I know I always hated… Read more »

Bev
Bev
9 years ago

Don’t forget Hulu….free TV shows online – just have to wait till the next day to watch them.

Kevin M
Kevin M
9 years ago

We cut satellite last April and the landline in November. About $100/month. We never used our landline, only had it because supposedly you needed it for satellite TV. Before dropping, I tracked our viewing habits for a week or 2 – turns out most of our “must watch” shows were on free network TV anyway. Not only did it save money, but I know it also helped me reach my 2010 goal to read more.

Wade @ RecurTrack
Wade @ RecurTrack
9 years ago

I have to say that I never thought about how much cable is costing me in the long-run. I can’t believe that it is that much!

Anyway, a combination of Hulu, television network websites and Netflix should allow you to watch practically anything you want. I know how you feel about HBO (I have the same issue), but it is access to all of the sports that I would miss most.

Rosa
Rosa
9 years ago

Congratulations!

When I didn’t have TV or internet, I scheduled my gym time around my favorite TV show – but I only had one. Exercising through all those shows might be too much on top of your regular schedule.

Our library gets a lot of shows on DVD to lend out – my friend with cable hooked me on Hoarders, and the library had it.

Buddy
Buddy
9 years ago

You might want to read the series of articles David Katzmaier did at CNET on his 2-week cable-less experience. http://news.cnet.com/8301-17938_105-20022909-1.html?tag=mncol;txt. For me, I like my pro and college sports too much. $100/mo for cable is way cheaper than season tickets. If you still have a landline, you may want to think about looking into a VOIP device like the Ooma Telo. I switched to it this summer and cut my home phone bill from $60/mo to $5.

Brett | Investing Part Time
Brett | Investing Part Time
9 years ago

This article is interesting. Monthly payments on anything, including cable, are one of the hidden costs that we really don’t think about. I like the idea of considering it debt but agree with you, JD, that paradebt wouldn’t be my term of choice.

Adam
Adam
9 years ago

Huge pet peeve in this post with the “Latte Factor” which is what this post is actually about. Who is to say that the $100 in cable isn’t providing more happniess to a person than saving that $100 for retirement (providing they are toxic debt free)? Even assuming the person will live to enjoy a healthy active retirement way past 65, how about the 25 years of enjoyment and being caught up on things they find interesting? Is that worthless? Or worth less than playing shuffleboard with other geezers in your 70s? And as Nicole says, you don’t just divide… Read more »

Danielle
Danielle
9 years ago

I’m a housewives Junkie too. New Jersey and New York are awesome, and the new Beverly Hills one is pretty entertaining too. THIS POST IS HILLARIOUS!!!! Take and example from the housewives and trim the fat?! LOVE IT!

matt
matt
9 years ago

Ron, are you saying you shouldn’t invest at all since it’s not a guaranteed investment? Put your money in an IRA and you will make 10% a year over time if you leave your money in there. Can you explain how you are saving money for retirement? A savings account with a guaranteed .25% rate is losing you money every year.

matt
matt
9 years ago

JD – the point is not the same if you are only getting 6, 7 or 8% instead of 10%. A 6% return would mean you’re only going to have 1/3-1/2 of that $132,000.

Chett Daniel
Chett Daniel
9 years ago

I teach a class once a month to h.s. seniors. The topic of this coming month is budgeting, savings, and the cost of “stuff.” I posted some spreadsheets on the site (feel free to download them. There are also spreadsheets for would be career changers) so they could see what monthly payments will cost them each month and year. Finally we use an investment calculation to see what that money invested will look like at retirement. They are always shocked to see they could be millionaires on modest returns.

Brenton
Brenton
9 years ago

I cut cable out about a year and a half ago. Its been the best decision I have ever made. I dont miss it all. Over time I have become better and better at finding all the sources of content online. Combine all the online content with over the air programming and there is very little content I cannot get legally for free. The best part is that I no longer just veg out in front of the TV. Unless there is something specific I want to watch, the TV stays off. My original goal was health related and not… Read more »

Dwight
Dwight
9 years ago

Yes, getting rid or reducing fixed expenses can really make a difference to your finances. Especially when coupled with an investment plan where your new found ‘money’ instead gets filtered into a monthly investment vehicle instead. Good article.

Dwight Anthony
Financially Elite Blog dot Com

tannerherriott
tannerherriott
9 years ago

My wife and I cut our cable TV service a few months ago opting instead to boost our internet speed. That cut about $50 off our monthly bill. We still watch quite a bit of TV thanks to Hulu and Netflix, but we could care less about the 200+ channels we never used.

Scott
Scott
9 years ago

For less than half your monthly bill, you could give over-the-air TV a shot. You won’t get the shows you mentioned (well, maybe Law and Order reruns) but you should have sitcoms and dramas a-plenty. You can see which stations you might be able to view by entering your address into tvfool.com. Echoing David Hunter, having a computer hooked up to a TV is great. If you have a large TV though, I’d look into getting a media box (Roku and Apple TV are the cheapest I believe) because your computer’s interface isn’t designed to be operated from >5 feet… Read more »

Andrew
Andrew
9 years ago

There should be a mathematical formula that calculates the ratio of cost-cutting to smug self-congratulation.

Andrew
Andrew
9 years ago

While I understand that not everyone needs cable, this is a pretty dangerous concept. If you follow the line of reasoning that you ought to cut out everything that’s not “necessary” until retirement, you will quickly find yourself living in a studio apartment eating popcorn for every meal while you stare out at the sky for entertainment. But your retirement account sure will be full!

Mike B.
Mike B.
9 years ago

The idea of “paradebt” is a corollary to something that I’ve found useful in trimming the fat: A one-time expenditure, even a large one, is almost always better than a monthly expense. Buy a good UHF/VHF antenna — you can get an indoor one for ~$60, or a roof-mount for probably a couple hundred. Now you’ve got the major networks, and no monthly bill. You’ll make up that investment in only a month or two. If DVR is important to you, look into Windows Media Center or other stand-alone DVR products that don’t involve a monthly fee to your cable… Read more »

Karen
Karen
9 years ago

I really examined my recurring monthly expenses two years ago when my place of employment went through its first round of budget cuts. Instead of looking at how much the $50/month cable bill would provide in 25 years if I invested it now, however, I looked at the yearly cost of it. Did I really want to be paying $600 a year for TV?!?! I decided I didn’t. Where I live I don’t get reception for the local channels without cable, so I cut back to the most basic package at $20/month. That was only one of many cuts and… Read more »

Rachel
Rachel
9 years ago

I don’t want to miserly scrimp now for every penny in hopes I enjoy my life long enough to make it to retirement. Life is for living; now as well as during retirement. Paradebt!?! What a ridiculous concept. (well said Eric)

Jerichohill
Jerichohill
9 years ago

I don’t see an adjustment to make the returns real, rather than nominal returns, which when we’re talking about a 30 year time horizon is kind of a big deal. Need to adjust for inflation here, as well as the time value of money, and that we tend to value things in the present more than the future.

Sort of like, 15,000 today is worth 130,000 in 30 years, to me. An example.

If you’re living a life where you are saving enough, and you still have money left over, spend then remainder on yourself. Don’t be a scrooge.

J.D. Roth
J.D. Roth
9 years ago

I think some folks are getting hung up on the details (10%, cable television) and missing the larger point. Yes, if you assume a smaller return, the long-term benefits are much less, but they’re still there. And it’s true that many people draw value from cable television. That’s fine. This article isn’t saying “everyone should give up cable TV” — it’s saying that Carl doesn’t draw much value from it, and maybe he should give it up in order to save money in the future. The concepts discussed here are very sound, and very important. Recurring expenses are insidious. They… Read more »

J.D. Roth
J.D. Roth
9 years ago

And JerichoHill has a good point: While this sort of analysis is good for everyone, it’s even more important if you’re trying to get out of debt or achieve savings goals. As he says: “If you’re living a life where you are saving enough, and you still have money left over, spend then remainder on yourself.” But make conscious choices about how you’re spending your money. Know where your dollars are going, especially on recurring expenses.

Tracey Brown
Tracey Brown
9 years ago

Hey Jimmy, are you able to only get calls via the prepaid, or data? I don’t use my calling much, but I use a lot of data. What company are you using?

AndrewL
AndrewL
9 years ago

I also do not subscribe to cable because I don’t find a lot of value in it. But I’ve found that makes me kind of a boring person. I feel a little embarrassed to invite people over to hang out because I have nothing to entertain them with. It’s not like we could just sit back, enjoy snacks and drinks and watch the game or show or just hang out.

I’ve considered getting cable just so I can invite people over and they wont think I’m a cave man. =/

chacha1
chacha1
9 years ago

Anytime there is an article that mentions pay TV, J.D. ends up having to remind people that the OP is not demanding everyone give up their precious TV. LOL I think Karen’s comment at #38 was the best here so far. She’s done it, she’s analyzed it, and arrived at a solution that works *for her.* We watch too much TV. Our dish/internet package is $100/mo. We rationalize it as relatively-low-cost (compared to going out) entertainment that helps us deal with our high-stress working lives. But we are well aware that we are rationalizing – justifying our choice. There is… Read more »

Tom
Tom
9 years ago

I pretty much stopped watching TV years ago and didn’t feel any withdrawal at all. Haven’t the programs just gotten worse and worse? I feel like it’s just noise screaming at me or trying to make me laugh with recycled jokes.

I hadn’t thought of putting the money I was saving (without television) toward any particular investment, though. Interesting idea.

aggressive saver
aggressive saver
9 years ago

i’ve been thinking about cutting the cord for some time now. i’ve got two little ones, and out of necessity or habit, nick jr. is something we’ve come to rely on to get certain things done. we’ve recently signed back up with netflix, and with streaming available through our dvd players, it makes it a whole lot easier to do. i’m a man of extremes, so a word of caution . . . it’s really easy to take this to the conclusion that you shouldn’t spend any money on anything that is not a need and not be able to… Read more »

Nicole
Nicole
9 years ago

@47 aggressive saver

Netflix is AWESOME. They stream multiple seasons of Dora and Diego and Thomas… there’s several episodes of Dinosaur train… and a ton of PBS kids stuff. Definitely our baby sitter of choice. Our preschooler is better at setting up the Wii to stream Netflix than I am.

Tyler Karaszewski
Tyler Karaszewski
9 years ago

I’m tired of these ridiculously over-the-top numbers like this. Someone else did a similar one a while back where they claimed an iPhone actually costs you a quarter million dollars or something. They’re pretty much preposterous sensationalism. I would *love* to see even a single anecdote where someone contributed $100/month to a savings account for 25 years and had a $132,000 balance at the end. Even one. Surely someone who reads personal finance websites must have done it by now, if it’s so obvious that we just assume that we can 100% count on it happening in article after article… Read more »

Jimmy
Jimmy
9 years ago

I use t-mobile. And I only get data where there’s free wifi. But that actually ends up being quite a lot of places, including home and work, so it works for me.

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