Save Money by Reducing Subscriptions and Avoiding Long-Term Contracts

In continuing celebration of Financial Literacy Month, my GRS contributions throughout April are covering basic techniques to raise your financial awareness. We've previously touched on the topics of debt and income. Today we'll tackle two of my favorite tips for ensuring conscious spending.

Purge your subscriptions
Subscriptions, even small ones, can sneak up on you. Every time you sign up for another recurring payment, you're locking in a portion of your income. You're tying up a specific segment of your budget.

Of course, some subscriptions are beneficial or desired. I'm not claiming all subscriptions should be avoided; however, it's important that we understand the nature of subscriptions. By nature, subscriptions make you less aware of the recurring purchase. Rather than reevaluate a purchase every month, a subscription ensures that you're charged regularly and obtain access to a benefit. Whether or not you're actually getting a benefit is another story.

In the first couple of months of a subscription, we may still find ourselves using and enjoying the benefit. But 60, 90, or 365 days down the road the situation may be different. After the puppy love phase wears off, we may not be receiving the same benefit from our recurring purchase.

Many of us forget to reevaluate our subscriptions, so we end up paying for several months (or longer) of extra payment with very little benefit. We stop reading the magazine, stop watching the extra channels, or stop renting the bonus movies. The appeal of subscription-based services are high, but in many cases we'd benefit from a more conscious, a la carte approach.

Here are some tips for evaluating your subscriptions:

  1. Create a list of any opt-in subscriptions. Many forms of media operate in this manner: magazines, newspapers, movies, television, blogs, and insider information outlets. Look for items in your budget where you pay $X/month in order to have access to X items for free. The banking industry has many subscription-based services, as well. Check your rewards programs, “protection” offerings, and credit monitoring services.
  2. Eliminate any subscriptions you no longer benefit from. If you aren't using the subscription, cancel it immediately. Who cares if you have another free month left? You aren't using it, remember? If it's no longer returning value, stop subscribing to it. Purge!
  3. Free isn't really free. Even free subscriptions can have a cost. In addition to money, there will be some services that may tax your time and energy. These can be even more costly! Also, be especially wary of those subscriptions that bring clutter into your life. No benefit, no subscription.
  4. Check the a la carte options. For any remaining options, check for alternatives to your subscription. Compare your real usage and run the numbers. For example, many people are shifting away from cable to new options like Netflix and iTunes, where you can buy specific shows, movies, or events individually. Others are using blogs and online media to replace traditional newspapers. Don't assume the subscribing to a special plan yields better savings. Compare your options.

Stop blindly signing contracts
Our society loves contracts. They've become a routine part of our financial lives. In some situations, contracts are not only necessary, but beneficial. But, like subscriptions, we can easily go overboard and trap ourselves in some sticky situations.

Once again, the problem with contracts comes with our assumptions. We assume that cell phones require a two-year commitment, that renting requires a minimum of a year-long lease, or that any gym membership will be accompanied by a lengthy contract.

In reality, there are many alternatives. You can often negotiate the terms of the contract, save money and avoid contracts by paying in advance, or consider alternatives to the idea altogether.

Here are a couple recent examples from my own life:

  • Upon returning to the U.S., Courtney and I wanted to rent, but didn't want to make a year-long commitment (we still want to be relatively mobile). Upon finding a decent house, we applied some basic negotiation tips and discovered the landlord was willing to take $50 less than the advertised rent. Instead, we offered (while pointing out our strengths) to pay the full amount of rent, but asked for no deposit and a 6-month lease that would then go month-to-month. The landlord happily agreed. While we still entered into a lease, this was far better for our specific situation and was a small price in order to gain substantial flexibility.
  • After looking at several gym options, we couldn't find a decent one that didn't require a contract. This pushed us to purchase a set of resistance bands and dumbbells, and led us to research body-weight exercises that we could do at home. In the past, it would have been easy to cave in and sign; however, we're much happier and more flexible with this alternative to an expensive gym contract.
  • Over the past 18 months, both Courtney and I have had pay-as-you-go cell phone plans. They've worked completely fine with no problems. Upon returning to the U.S. we caught cell phone fever. Knowing better, we signed contracts on our new iPhones. While I love my iPhone (and it allows me to run my business on the go), this was a recent example of a completely unnecessary contract that we're now tied into. The last two months, we've had billing issues, which required time and stress to get cleared up. 🙁

Once again, let me point out that there are many instances where signing a contract can be beneficial to the consumer. For example, signing a long-term lease means that you won't have to go through any rent increases that may exist in shorter-term leases. Just ensure you only sign contracts on the most essential needs in your life.

Chances are you won't be ditching all your subscriptions and you'll still have plenty of contracts in your life. But the key is to review your subscriptions on a regular basis and constantly search for alternatives to lengthy, restrictive contracts.

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Craig Ford
Craig Ford
10 years ago

Adam,
I’ve found that this is one of the most dangerous uses for credit cards – setting up subscriptions to automatically renew. While is really convenient it is also very costly.
When reviewing the cc bill I notice a charge that I didn’t know was recurring and then have to decide it I have the energy to get it created.
Cancelling subscriptions is a great way to save some ‘lost’ money.

Nancy L.
Nancy L.
10 years ago

Great point about “free” subscriptions. At one point I worked for a division of a magazine publisher, and a benefit we received was getting 3 free subscriptions per month. None of the magazines were anything I’d have bought myself, but–hey, they were free! Every single month I kept getting these stupid magazines, and then I’d feel guilty that I was killing trees, so I’d have to gather them up and find places to donate them so that *someone* would get some use out of them. I was so glad (3 years after I’d left the company) when they finally got… Read more »

JB
JB
10 years ago

Nice article! I feel obliged to point out that Netflix is a subscription-only service, though (Amazon offers VOD a la carte, but I don’t know if they do TV shows, and of course there’s Hulu for free).

Sara A.
Sara A.
10 years ago

I’ve had tons of billing issues with AT&T! I wanted to cancel my contract because they could never bill me correctly, but they said they would still charge me the ETF even though I would be canceling because I was tired of spending an hour on the phone with them every month when my bill came in.

Brian C.
Brian C.
10 years ago

I can identify with this article so much through 2 things. 1) Gym memberships. I let one gym membership take money out of my pocket for 8 months without ever going before I finally cancelled it. What a waste. 2) E-mail subscriptions. I know they don’t necessarily take money away from you, they do take up your time and thoughts, even if you just delete them. Having 50 e-mails in your inbox that you need to go through is daunting, but if 25 of those are offers and subscriptions, if you can get rid of them altogether, you’ll be better… Read more »

Peter
Peter
10 years ago

How is the iPhone contract unnecessary if you love it and it helps you run your business on the go? I feel this particular example hurts the strength of your article.

Beth
Beth
10 years ago

Peter, I would assume that you could buy an iPhone outright and not be locked into a contract. That’s what I do with T-Mobile. Buy the phone and keep a simple no contract agreement with the company. It’s more expensive in the moment, but it pays for itself usually within a year or sometimes less.

Josh
Josh
10 years ago

@Beth From what little I know about cell phone contracts, I haven’t found that to be the case. A smart phone may cost $600 off contract, versus $200 on contract. Whether you buy the phone on or off contract, the cost of the plan usually does not change. Thus, if you know you’re going to keep the phone for two years anyway, you might as well buy it on contract, put the extra $400 in the bank, and even if you have to cancel and pay a $300 early termination fee, your ETF has been making interest in the bank… Read more »

Chris at yardsalequeen.com
Chris at yardsalequeen.com
10 years ago

For things that I enjoy and want to continue (like certain magazine or newspaper subscriptions) one thing I do to save $$$ is to let them expire – don’t automatically renew them. Let them expire. The majority of the time, they will be sending you better offers and deals “we want you back” type promotions. Even works for things like memberships to BJs Warehouse etc.

JB
JB
10 years ago

@Peter — An iPhone contract is about $100/mo (unless you can live with only 900 minutes, which would be $90). Over a two-year contract, that’s $2400. That’s a pretty stiff bill, especially if you’re normally in wifi-heavy areas where the 3G doesn’t matter.

JB
JB
10 years ago

@Josh — the difference being that you might have flexibility on plans with an unlocked phone that you might not have with a contract phone. Most carriers won’t sell you a smart phone without a data plan, whereas you can pick up, say, a Nexus 1 unlocked and just use the wifi, leaving you with probably $50 or $60/mo savings (depending on your minutes needs and luck in carrier-shopping).

KK
KK
10 years ago

@ Beth You are locked into a contract with the iPhone – that is the only option they give you. @ Josh Beth is accurate about T-Mobile – their plans are MUCH cheaper if you pay more for the phone upfront with no contracts. The second option is you can get a cheaper phone now and be locked into a two-year contract with a higher monthly rate. The salesman told me almost everyone chooses the latter option because they want the phone for less money now. When I calculated the two options for the phone & plan I wanted it… Read more »

Maharani
Maharani
10 years ago

I have as few subscriptions as I can-none actually except utilities and landline-why make someone else rich? And please please stop telling me to get Netflix and an iPhone. I would rather buy DVDs occasionally and I dont need another fancy gadget that does not actually make my life better and just costs money every month. I think 50% of the problem with money/subscriptions is peer pressure to buy this rubbish. The Apple guy -I forget his name-is rich enough already. My life is busy enough without trying to figure out apps for functions I didnt need until i got… Read more »

RJ Weiss
RJ Weiss
10 years ago

A La Carte method saves me a lot of money.

I have only basic cable, about 15 channels for about $15 a month, and then I go to hulu for the rest. The only thing I really watch is Lost and big sporting events, so this works great for me.

The only place where it doesn’t work is my gym membership. It costs about $10 at my gym if you want to pay by the day. Since I go there a few times every week, it’s cheaper to pay by the month.

elisabeth
elisabeth
10 years ago

Chris @9 is so right — the last magazine I let lapse asked me back at $8.00 less. But even that didn’t work — I do love magazines, but recently I decided that I don’t need to subscribe personally to all of the ones I used to support. Many of them I can see/borrow at the public library, many have at least some articles on line for free, and so on. Sometimes I feel a little guilty that I’m not supporting a medium I do like, but we haven’t ended all of our subscriptions, and I am saving more than… Read more »

KarenJ
KarenJ
10 years ago

And let’s not forget those subscriptions where you sign up for a trial period of let’s say 30 days because they give you a FREE GIFT, you give them a credit card, and if you forget to cancel, you get charged. Having fallen for this FREE OFFER before, I also know that even if you remember to call and cancel, you will speak to a live representative who will pitch you very hard on why you shouldn’t. Learned my lesson! There is nothing worse that hassle.

Erica Douglass
Erica Douglass
10 years ago

It amazes me how many people are willing to pay for unnecessary subscriptions. I wrote a blog post about how to survey your customers for free using Google Docs (so folks could get away from paying $19.95/month for SurveyMonkey): http://www.erica.biz/2010/how-to-survey-free-online-survey-tool/ I included a step-by-step video that shows how to get your own survey up and running in 15 minutes or less even if you’ve never used Google Docs. And I sent it to several popular bloggers, all of whom I’d previously seen using SurveyMonkey, saying, hey, this takes 15 minutes to set up and will save you $19.95/month forever! The… Read more »

Jackie
Jackie
10 years ago

I don’t subscribe to very many things, but when I do I set a reminder in Google Calendar of the date I’ll need to cancel by to avoid automatic renewals or fees.

@Erica Maybe the bloggers using SurveyMonkey are just using the basic free service.

Shara
Shara
10 years ago

Most gyms push membership, but are happy to take a daily fee instead. If you only go once or twice per month, or if you only go occasionally to use a specific facility (like handball court or pool), this can be a real long term money saver. Regarding pay as you go cell phones, I looked at the rates and were really jazzed, and then I looked at their maps. Every service I looked at had a severely restricted map for their pay per service. The same thing that makes me use my cell phone rarely is the same reason… Read more »

DreamChaser57
DreamChaser57
10 years ago

I have only one magazine subscription; it’s actually a personal finance magazine. I always pay by check, because I just loathe the idea of reoccurring charges on my credit card. The magazines have started to pile up and I end up just forgetting about them. So I decided that I would read all of them before buying any more personal finance books-I can simply go broke buying those. Don’t even mention the gym – both DH and I had membership. I came to the realization that I am not a health club person for a myriad of reasons. I cancelled… Read more »

Adam
Adam
10 years ago

@DreamChaser:
“I always pay by check, because I just loathe the idea of reoccurring charges on my credit card.”

Did you know a check has all the information they need to do recurring charges against your checking account? It’s all the convenience of using your credit card, but with none of the consumer protections.

HollyP
HollyP
10 years ago

I am able to still access the magazines I enjoy via my local library. If there is a magazine I *must* have, I try first to see if I can donate a subscription to the library. It lets me help others, and I get a tax write-off.

While I was researching appliances for my new kitchen I discovered that I can subscribe to Consumer Reports online for just $6 a month. Much more on a monthly basis than an annual subscription, but I don’t anticipate needing it once the kitchen is complete.

Suzanne
Suzanne
10 years ago

@ Adam: I agree with DreamChaser. I pay for subscriptions by check now because if you pay by credit card they will automatically renew your subscription every year. I have never had a magazine try to take money out of my checking account without my permission to renew a subscription.

sarah
sarah
10 years ago

I actually kind of like the subsriptions where you pay for a year at a time (like for a magazine) just because you see how much it’s really costing over time. Of course as someone who never has time to read magazines, I don’t subscribe to them anymore since they just piled up, making me feel guilty.

Karen
Karen
10 years ago

House Beautiful sent me my annual renewal (I always renew by check only), but I noticed it had small print on it that said “by renewing this magazine, I am agreeing to autorenew every single year into the future”.

I sent them an angry note and immediately dropped my subscrip.

Note to publishers: when your business model only works when you have to “trick people into buying your product”, just do us all a favor and go out of business already, mmmK?

Treat your subscribers with respect and maybe you’ll stay in business–just sayin’.

Josh
Josh
10 years ago

@Beth, JB, KK
Your comments were the nudge I needed to check out T-Mobile again. Last time I checked, they didn’t cover my area, but they do now, and the prices are quite competitive. My unlocked Palm Treo Pro may soon leave AT&T for a new home. Thanks for saving me some money!

brooklyn money
brooklyn money
10 years ago

I locked in a two-year cable TV contract at a lower rate than the going rate and my two-year sub to The New Yorker is a significant discount off the single-issue purchase price. Sometimes contracts can be the key to savings. But you have to make sure its for something that you already know that you like and will use.

chacha1
chacha1
10 years ago

I used to have soooo many magazine subscriptions … individually not that costly, but all together came to about $100/yr and – more importantly – countless hours pretty much wasted. Bought myself a lot of time to read actual books and do actual projects by cancelling almost all of them. Aside from cost: Don’t know if anyone else has had this experience, but over at Unclutterer many of us have struggled with the magazine archive issue. Not only back issues, but articles and clippings … hard to let go but once you start, so much more space in your life!… Read more »

Claire
Claire
10 years ago

Yes, free magazine subscriptions DO have a cost…precious space in my home! I got a free Forbes subscription (thinking it would be interesting to read) & didn’t realize it was a bi-weekly publication. I couldn’t keep up with the magazines they sent & called to cancel the free subscription. So glad I did!

steven@hundredgoals.com
10 years ago

Baker: How is the resistence/body weight training going? I tried Yoga a while back and found it to be much more challenging than I thought it would be, however, the gym is the right place for me. I like to lift and finding the space or money for equipment wasn’t feasible and I decided on a gym membership. This is one contract I feel pretty good about having since its use directly benefits my overall wellness. I actually wrote an article which might counter your point to some degree: http://hundredgoals.com/2010/03/13/is-a-gym-membership-worth-the-money/ At the end of the day, what it really seems… Read more »

ebyt
ebyt
10 years ago

Good post. You mention important things to keep in mind. When I got serious about debt repayment over a year ago, reevaluating contracts was one of the first things I did. Like you say, not all contracts are bad, but I found it also goes the other way. I did get rid of a couple of unneccessary subscriptions, but I also entered into a couple of subscriptions. I realized that I bought my favorite magazine each month without fail. To subscribe would be MUCH cheaper, and so I did. I only like to subscribe for 12 months, however, even though… Read more »

Becky
Becky
10 years ago

I used to pay to subscribe to magazines in the past but recently, have been subscribing using miles which were about to expire. Especially towards the end of the year, the big airlines- United, Continental, allow you to use some of your miles to subscribe to a wide number of magazines. This comes in useful if you are not saving those miles for a big trip.

Bananen
Bananen
10 years ago

I bought my Nokia N95 phone back in 2007 when it was the newest and best on the market. I loved it but it ended up costing a fortune in subscriptions, partly because of constant billing issues and the company’s unwillingness to cancel the subscription after the 6 months commitment period (which is legal maximum period here). Finally I was able to cancel the subscription thorough another, much cheaper, provider and I decided never again to buy a phone with committed subscription. Recently I started feeling like a new phone. The screen was scratched and the cover was boring, but… Read more »

Budgeting in the Fun Stuff
Budgeting in the Fun Stuff
10 years ago

I review all our consistent monthly fees regularly (every month or two) to make sure we aren’t paying for something that isn’t being used. Those monthly fees can really kill our budget if we’re not careful.

Right now, we are happy with all the regular fees we pay, but regular reviews have kept us from wasting extra months on things we won’t use.

Stephan
Stephan
10 years ago

Great post. I work with people in debt and it really is mindblowing how much money is automatically tied up each month without ever even going into the bank account. Rent, car, insurance, taxes, and then all the subscriptions to anything really take up too much of your income. Look into simplifying your life and going short term when possible.
\Preferred Financial Services

Cely
Cely
10 years ago

I would also say that, for the subscriptions you DO use, it’s worth negotiating lower fees. I do this for the gym. Gyms often have drop-in, punch card (10 visits in X months), and monthly unlimited options. If you use the gym enough to merit monthly unlimited, ask for a discount if you pay for three months upfront. I got a 10% discount just by asking. You can often get an even larger discount if you pay for six or twelve months, or pay cash (be sure you are confident the gym will be around for the long term). Family… Read more »

Jason Beck
Jason Beck
10 years ago

I love paying more up front to save money later. I paid a little under $2k to refinance my house and after 15 months, the $2k was paid for and I started saving huge chunks each month. I paid $70 up front to drop $10 off my monthly gym fee. And I paid $35 to switch to the T-Mobile no contract plan. Now I only pay $40/mo (plus tax/fees) – being off contract let me drop data (go Wifi!). And I went with a big down payment and a 3 year loan on my brand new car. Large payments… but… Read more »

Erica Douglass
Erica Douglass
10 years ago

@#18 Jackie: The free version of SurveyMonkey only allows for 100 responses. These bloggers all have bigger blogs than I do, and my last survey garnered over 300 responses. So they’re paying for it. :-/

-Erica

Misty
Misty
10 years ago

@Peter @Beth @Josh @JB @KK It is possible to have an iPhone with AT&T and not have a contract. I bought my iPhone at full retail price from the Apple Store, and walked into an AT&T store and said that I wanted service, but I did not want a contract. After some discussion amongst the store employees, the manager said that they could set me up with a COM (customer owned and maintained) phone to get basic service, then go in after and add the data plan and show that I have an iPhone. Primary reason for doing so: when… Read more »

Stephen
Stephen
10 years ago

I am glad i took the $400 discount and the 2 yr commitment with at&t when i purchased my iPhone – i can cancel anytime, and i still won’t pay any where near full retail for the iPhone.

Contracts help protect both companies and consumers. Choose contrats wisely, i.e., car leases are not the best bang for the buck.

Maharani
Maharani
10 years ago

Amazing stories. A couple of years ago a friend gave me a subscription to Bon Appetit for my birthday-it was for 1 year. I love to cook but do not like this magazine-there are others I prefer. Still. After I year I keep getting free issues. I havent been charged for it-but it is pretty pathetic if that is their business model. It will NOT encourage me to pay for it or any other magazine. Ive been trying to find time to call to stop it but it is pretty low on the list at the present time. Another pointless… Read more »

Jennifer Lissette
Jennifer Lissette
10 years ago

I just wanted to say thank you for this post. It reminded me that I needed to call and reduce the plan for my cell phone. I cut it down to the smallest minute plan offered, negotiated my way into keeping 5000 of my rollover minutes and didn’t even have to sign a new contract. I’m still month to month, allowing me to leave when Apple stops updating the software on my so-called “old” iphone.

Your article was the kick in the pants I needed to save myself an extra $30/month. Thanks!

David/yourfinances101
David/yourfinances101
10 years ago

To me, this goes a long with eliminating everything unnecessary in your life.

But the long term contract thing is importnat too. All the companies like cell phone, internet and cable are all pushing for these now because they all know that much cheaper options are the horizon.

Don’t sign up for them and if you’re still in one, wait till you can do it for free and get out of it.

rdzins
rdzins
10 years ago

I find it kind of ironic that when you log in to xm radios sight, local paper ect… there is nothing there to cancel there service just to upgrade it, they make it very inconvenient to cancel services, you have to call them and argue with someone trying to sell you a plan to keep you on, I always tell them that I have made my mind up and I am looking at cutting costs and there service was not a necessity. I just wish they would allow an option on line to cancel but none of them do!

Tammy
Tammy
10 years ago

We really liked our pay as you go cell phones until my husband started his own business, and the Virgin Mobile coverage in our area just wasn’t as reliable as Verizon. So we had to sell our souls to the Verizon contract…which to be fair is working really well for the business, I just don’t like being locked in! I went temporarily crazy and did a satellite TV contract…only 8 more months til that one is over! Never again. As far as the gym, we had planned to never, ever join our local YMCA because the cost of a family… Read more »

Katie
Katie
10 years ago

Not to sound like a shill, but I’ve coupled getting a prepaid cell phone with getting an Ooma for home use. Ooma is you pay ~$220-$250 once and then ~$14 dollars a year after the 1st year for local phone taxes. Unlimited free local and long distance in the US. It’s just a standalone voip so you do have to pay for a good internet connection, but I’d be doing that anyway. It’s worked out great for me and I’ve been really happy with the call quality. On average I pay $18 a month for phones since I come home… Read more »

Karen
Karen
10 years ago

I agree with #44—XM radio is a real problem to cancel! I got a year free when I bought my Honda CRV last year, but then I decided to cancel because paying >$100/year for radio that I hardly listen to was not something I really wanted to do. I had to call XM radio and wait around on hold for a long time to cancel, and then they tried to upsell me and etc, and they also asked me why and wanted me to take an entire long survey about canceling. And THEN, they plagued me with phone calls! I… Read more »

Ian
Ian
10 years ago

I ditched my old contract phone about four months ago and have already saved about $50 a month with my Net10 phone. I know $50 doesn’t seem like a lot, but over a year it’s more saving then switching car insurance.

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