Monthly subscription services stack up quickly and drain essential cash flow.
Subscription services can be sneaky. Most of these services cost less than $50 per month, with many coming in under $15 or even $10. However, as these services continue to expand, those small charges can add up quickly. Too many subscriptions leave you without any cash flow and unable to achieve your financial goals.
That’s what afound after surveying 600 Millennials (age 18-34). Roughly one in ten of the Millennials that they surveyed reported they spent $200 per month on subscription services.
Little costs add up to a big budget expense
The survey outlines the average cost paid for top subscription services used today:
- Average Gym Membership – $45
- YouTube TV – $35
- StitchFix (or other styling service) – $25
- HBO Now – $15
- Audible Membership – $14.95
- Netflix (4K plan) – $11.99
- Hulu – $11.99
- Birchbox (for women or men) – $10
- Spotify – $9.99
- Apple Music – $9.99
- Starz – $8.99
- iCloud storage (200GB) – $2.99
Most of those services eat up less than $20 of your income each month. However, if you have more than one subscription service running at a time, they add up quickly. The more services you add, the more it drains the funds in your budget. This can leave you just making ends meet, leaving little money for saving that’s crucial for achieving key financial goals.
What are subscription services costing you?
As Instamotor points out, cutting back on subscription services increases cash flow you can use to strategically save or spend. In their case, they break down four dependable brand-name cars that you can buy for $200 per month.
Of course, that’s not the only wise use you can find for that money. The average household now has $49,000 of student loan debt to repay. Millennials typically pay about $350 per month on these loans with interest charges and the term can last up to 30 years. The good news is that student loans rarely have early repayment penalties. Paying an extra $200 every month on your loans can dramatically accelerate your ability to eliminate this burdensome debt.
The average household also has over $16,000 in credit card debt. If you put an extra $200 per month toward your highest account balance, how fast could you eliminate the debt?
There is also savings to consider. Most experts recommend that you should save 5-10% of your take home income each month. However, most of us fall well below that amount or fail to save consistently every month. If you save an extra $200 per month, that would give you an extra $2,400 per year. Even at a modest interest rate, that would go a long way to boost your savings.
Tips for keeping subscription costs under control
The key to budgeting, particularly with recurring costs, is to make sure you leave enough free cash flow in your budget for everything else you need. Credit card debt payments should take up about 10% of your budget and savings is another 5-10%. Housing costs tend to use about 30% of the average budget.
That only leaves about 50% of your take home income to cover everything else, including necessities like food. So, you should start from there to figure out how much money you have available for subscription services.
These tips can help you keep costs minimized:
- Avoid doubling or tripling up on services. Choose only one movie and TV streaming service, one music service, etc. Maintaining multiple monthly subscriptions for the same type of service stacks up too quickly.
- Only keep a service if you use it every month. If you get set up on a subscription and then see you don’t use it regularly, it’s not worth the cost. For instance, gym membership is a value if you go 3 times a week. But if you barely make it in once a month, why pay for it?
- Consider luxury services carefully. Subscriptions for food delivery, styling and personal care pamper you, but they also drain your funds. If you’re on a tight budget, shopping for groceries, clothes and personal products yourself will always be more efficient.
Having trouble balancing your budget on your own? Talk to a certified credit counselor for a free budget analysis!