I love Netflix, like the next guy. But, I think it’s helped change our personal finance habits – for the worse.
But Netflix isn’t the only culprit. Many software companies have turned to a Software as a Service (SaaS) model, where customers are required to pay a monthly subscription to “rent” their programs.
In the old days (yes, I just uttered those words), a person could walk into the neighborhood electronics store and purchase a copy of their favorite word processing program – put down a set amount of money and walk out the door.
And that version of the software could be good for years.
Today, that one-time cost has turned into recurring revenue for the makers.
There are some benefits to having SaaS software and streaming services like Netflix:
- Versions always get the latest update
- Cloud access – open the program from anywhere
- Low start-up costs
But, like our friends at Money Under 30 state, after just a year or two of using the program (“service”), you are paying more.
Now, it seems that every software or cloud service is in on the subscription game. And, like it or not, this is here to stay.
How the subscription model fosters poor financial habits
“The greatest trick the devil ever pulled was convincing the world he didn't exist,” Kevin Spacey in The Usual Suspects
I think the same could be said about today’s marketing and debt. Manufacturers are on a mission to eliminate barriers to the purchase.
And the easiest way to knock down that wall is to make things so “outwardly” affordable, you can’t say no.
“For zero down and $350 per month, you can walk out that door with this brand new truck!” explains the salesman.
And we think, “that’s manageable”.
So we sign the papers and fail to take into account what this is going to cost us over the life of the payment (or, subscription if you’d like).
Oh, I’ve been there.
“New-car buyers agreed to pay an average of $551 per month for 69 months in January, according to car-buying advice site Edmunds,” reports USA Today.
That’s nearly 10 percent more per month than three years earlier.
Add to that, 7 million are delinquent on these loans.
Why? I think people are falling to the easy payment, “subscription” model.
What to do?
I'm not sure there is an easy answer to this.
Though it's getting harder and harder to do today, I'm more apt to opt-out of anything that is subscription-based. Or, at least, I'm more leary of it.
But with everything seemingly going to a software-as-service model, it will be harder to do.
What do you think? Do you have a lot more “subscriptions”?