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To add to this excellent point, a better way to compare and understand costs in our subscription-addicted world is to annualize them. So with ChatGPT we know we

To add to this excellent point, a better way to compare and understand costs in our subscription-addicted world is to annualize them. So with ChatGPT we know we'll be on the hook for $240/year for this new thing and can compare that number to all manner of things to decide whether it's worth it. (This also gets you thinking about annual discounts and what you can negotiate in the long term, so it can unlock free money.) An EVEN better way, albeit more complex, is to amortize costs for comparison. This basically means figuring out what the entire cost of the thing is from beginning to end and then using that as a comparison to other stuff. This is where subscriptions get us - 15 years in, the amount of money I've paid to Netflix (even as the quality of the programming seems to have eroded) feels a little crazy. Thinking about amortized costs when you have a little bit of cash in the bank or access to cheap credit is when finance starts to get interesting. Let's say you know you're going to need something for the next 10 years. Instead of paying the regular monthly price, what kind of discount can you get if you offer to pay cash up front for 1 year or 10 years? You'd be surprised how much people can be willing to lower the price of something for a large enough chunk of cash up front. For example if you live in a weak property market this can be a good way to rent for very cheap. At the very least, the end of the year is a great time to look back at what you spent and ask, am I happy with spending $XXX or $XXXX on that again in 2024?

ndriscoll 3y ago
I just model subscriptions as a perpetuity at 3% interest (i.e. treat it as a permanent expense pretending I'm doing retirement planning). Then for a monthly expense $x, it costs 400 * $x in capital to "buy" it. "Multiply all monthly subscriptions by 400" is an easy enough rule of thumb to remember. Is Netflix worth $20/mo becomes equivalent to is Netflix worth $8000, and you can just examine the alternative ways you could use that capital (e.g. buying a few thousand used movies and building your own collection which you can share with friends and family instead). Naturally I have very few "subscriptions". I do back up data to glacier for now, but plan to switch that to off-site back ups at my mom's/MIL's.
- tempestn 3y ago
  Do you account for the fact that you can "sell" the depreciated asset by canceling the subscription?
tempestn 3y ago
+1 on the rent point. I've gotten significant discounts on rent in the past by paying a full year in advance. This makes sense from the landlord's perspective too, as they're not only gaining the time value of money, but also eliminating the possibility of missed payments.

ndriscoll 3y ago

I just model subscriptions as a perpetuity at 3% interest (i.e. treat it as a permanent expense pretending I'm doing retirement planning). Then for a monthly expense $x, it costs 400 * $x in capital to "buy" it. "Multiply all monthly subscriptions by 400" is an easy enough rule of thumb to remember. Is Netflix worth $20/mo becomes equivalent to is Netflix worth $8000, and you can just examine the alternative ways you could use that capital (e.g. buying a few thousand used movies and building your own collection which you can share with friends and family instead). Naturally I have very few "subscriptions". I do back up data to glacier for now, but plan to switch that to off-site back ups at my mom's/MIL's.

tempestn 3y ago
Do you account for the fact that you can "sell" the depreciated asset by canceling the subscription?

tempestn 3y ago

+1 on the rent point. I've gotten significant discounts on rent in the past by paying a full year in advance. This makes sense from the landlord's perspective too, as they're not only gaining the time value of money, but also eliminating the possibility of missed payments.