Spending a portion of your money on things that bring you happiness can be a vital part of enjoying life.
Moreover, at times it can also help to keep you motivated while on the path to achieving your financial goals.
However, it’s still important to take the time to periodically track and review your spending. By doing so, you see where excessive or unnecessary spending is occurring—to the detriment of your immediate and ongoing savings, and the subsequent achievement of your financial goals.
Paid subscription services
Over the last few years, paid subscription services have seen increased growth in diversity and uptake. Despite the diverse range available, each paid subscription service often falls under one or more of the following categories:
- Access subscription (eg recurring use of a service).
- Curated box subscription (eg periodic receipt of new goods).
- Auto-ship subscription (eg replenishment of regularly-purchased goods).
Using access subscription as an example, video content streaming paid subscription services (coupled with internet use) is one that most of us would be familiar with and subscribe to. According to a recent study*:
- approximately 89% of Australian internet users watched online video content in the 6 months to June 2020 (up from 83% in 2019). Of those users, 40% had just started or increased their watching of online video content since the COVID-19 restrictions in March 2020 (1% started, 39% increased).
- approximately 77% of Australian internet users had a subscription and/or pay-per-view service in their household in 2020 (up from 70% in 2019). On average, these users had 1.8 subscription services in 2020 (up from 1.5 in 2019), however, 23% had 3 or more subscription services in 2020.
- In 2020, Netflix was the most prevalent subscription service for Australian internet users, followed by Foxtel (including Foxtel Now), Stan, Disney Plus, Amazon Prime, iTunes, Apple TV, Fetch TV (including Fetch on Optus), Telstra TV (including Box Office), Google Play, YouTube Premium, and Kayo.
Interestingly, when looking at paid subscription services more broadly, according to another recent study^, 62% of Australian households pay for subscription services that they don’t use or have forgotten about, and 44% have never cancelled a subscription service that they aren’t using. The study estimates this to be $3.9 billion per year collectively in money spent on avoidable subscription services by Australian households.
More broadly, in our article, Getting ahead financially: Household financial waste, we discussed the collective ‘financial waste’ (potentially avoidable costs) of Australian households, which totals roughly $18.9 billion per year. This amount was based on several key areas. The key areas identified were as follows:
- Food waste ($9.1 billion per year).
- Home loan waste ($4.2 billion per year).
- Credit card waste ($621 million per year).
- Unused gift cards ($332 million per year).
- Standby energy usage ($1 billion per year).
- Exception bank fees ($551 million per year).
- Unused gym memberships ($1.8 billion per year).
- Unused roadside assistance ($400 million per year),
- Unused and unreturned clothing ($930 million per year).
With the above in mind, when tracking and reviewing your spending, it’s key to view your expenses (and their impact) not just in isolation. For example, with paid subscriptions services, one ongoing expense is part of a bigger picture—it combines with other ongoing expenses, and together these can compound over time.
If an Australian household has a content streaming paid subscription service (eg Netflix), in isolation this could be $14 per month, or $168 per year. However, let’s say they also have the following paid subscription services: gym membership, Foxtel, music streaming (eg Spotify Premium), fitness app (eg Strava), and online storage (eg Dropbox Plus). These combined could amount to $235 per month, or $2,820 per year.
Moving forward
It’s possible to check at least some of your existing paid subscription services via your device’s app store such as iTunes or Google Play. You may also be able to gauge your existing paid subscription service usage via some Android devices by navigating to: Settings > Apps > App (eg Netflix) > Usage > Mobile data > Application data usage.
With this information in hand, take time to consider whether any of these existing paid subscription services no longer add value to your life, and if their absence would negatively impact your wellbeing and happiness—you could also apply this same approach to other expenses.
Importantly, as spending decisions can become habitual, if you do decide to end a particular paid subscription service, consider reading our article, Habit formation and change, which may help you with taking action.
For specific advice customised to your individual circumstances, contact Carrick Aland’s multi award-winning Wealth Planning team on 07 4669 9800 or visit carrickaland.com.au/wealth-planning/.
Disclaimer: This report has been prepared by the IOOF Research team for Millennium3 Financial Services Pty Ltd ABN 61 094 529 987, AFSL 244252. Millennium3 Financial Services Pty Ltd is a company within the IOOF group of companies consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. This report is current as at the date of issue but may be superseded by future publications. The information in the report may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of Millennium3 Financial Services Pty Ltd. This report may be used on the express condition that you have obtained a copy of the Millennium3 Financial Services Pty Ltd Financial Services Guide (FSG) from the website. Millennium3 Financial Services Pty Ltd and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this report, or may provide services to the companies referred to in this report. This report is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of Millennium3 Financial Services Pty Ltd. Millennium3 Financial Services Pty Ltd and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. This report has been prepared in good faith and with reasonable care. Neither Millennium3 Financial Services Pty Ltd nor any other person makes any representation or warranty, express or implied, as to the accuracy, reliability, reasonableness or completeness of the contents of this document (including any projections, forecasts, estimates, prospects and returns and any omissions from this document). To the maximum extent permitted by law Millennium3 Financial Services Pty Ltd, its related bodies corporate and their respective officers, employees, representatives and associates disclaim and exclude all liability for any loss or damage (whether foreseeable or not foreseeable) suffered or incurred by any person acting on any information (including any projections, forecasts, estimates, prospects and returns) provided in, or omitted from this report. General Advice Disclaimer: The information in this report is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this report, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before you acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance. For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.
