Mike and I grew up in an interesting time. While we have had the advantages of modern technology throughout our lives, we also have the reference point of what it was like before the internet and cellphones took root. This gives a unique perspective because it allows us to spirit walk between the generation before and the one after. One new trend is seemingly widening the gap between the older and younger generations and that is subscription services.
Over the past decade as profit margins have decreased companies have needed a way to continue to bring in revenue. Since then we have seen a massive increase in subscription-based services; the most prevalent example of this is really in software. Just a few years ago you could buy Office or Photoshop and use that software for a long as you wanted before you needed to upgrade, but that option is going the way of the dodo. Subscription models aren’t new; magazines have been doing it forever, and let’s not forget Columbia House and their wonderful music club. The difference now is that instead of owning the product you are subscribed to, it’s more like renting. When you’re done paying, you lose access to that service and you have little to show for your investment.
It’s that fact that is really causing the divide. Before you could buy your computer, tv or cellphone and maybe a couple other things to be able to enjoy it, but you knew what you were in for. There wasn’t an additional monthly bill, and you could upgrade when you felt it was worthwhile. Now in the subscription era you’re effectively subsidizing the purchase and use of your device over time. While this may not be inherently bad there are couple things that complicate the matter a little further.
The primary problem with this is that it can put a strain on a person’s budget real quick. Instead of saving for what you want and buying it when you have the money, companies now make it easier than ever to get what you want, and pay for it over time with wonderful slogans like “for the same price as a cup of coffee a day”. With all the subscription services it takes to really be able use one’s device, the cost per month adds up quickly and instead of stashing money when you can to be able to make purchases you’re locked into a monthly contract that you have to pay to use. For younger generations this system is becoming the norm, and it is going to continue to promote bad spending habits. $50 a month for that brand-new phone looks a lot more palatable than $1,300 up front, and what is $10 more for Spotify, and then another $13 for Netflix, but you’re still gonna need that $5 a day for that Starbucks.
Love them or hate them subscription-based services are here to stay, and it is quickly changing how we manage our personal finances. Quickly fleeting are the days of old where you make a purchase and balance your checkbook, now cashflow management is becoming more and more critical. So, make sure that you and your loved ones know what they are getting into and what your actual expenses are, no longer are our bills just our home, car, insurance and utilities.