A 2023 Forbes Advisor survey found that about 70% of respondents either identified as living paycheck to paycheck (40%) or reported that their income doesn’t even cover their standard expenses (29%). As a result of this trend, one of the most common questions I get in personal finance is “how do I make passive income?”
And my first response is always this: focus on decreasing the amount you are giving someone else as passive income first.
Your Debt Is Someone Else’s Passive Income
The truth hurts. But many subscriptions, and in particular, the interest paid on any debt, is making someone else rich by being their passive income stream. Consider the monthly payments that are basically a form of subscription that got you to buy something for more than it’s worth.
A mortgage is a subscription to a home that can cost you hundreds of thousands of dollars more than the home value in the form of interest – the bank just had to complete one set of paperwork to get it from you.
A car payment or lease is a monthly subscription that’s more profitable for the car company than you owning it outright – the car company just had to sell you that one car to get thousands in passive income.
Premium credit cards are a subscription to get perks that cost the company pennies on the dollar to offer you, while charging their customers an average interest rate of 27.90%. These rates are returns you wouldn’t get as a a beginner or average stock investor consistently.
These obviously are among the subscriptions that the average American cannot avoid paying. You must subscribe to electricity, internet and phone bills if you want to basic necessities in a modern society. But less vital subscriptions have taken over many Americans’ finances, and it’s time to consider how to get your budget back on track.
Use The Unsubscribe Button To Free Up Your Cash Flow
Marketing experts figured out that most people are willing to pay big money in smaller amounts for the sake of convenience. But let’s examine this deeper by writing a list of all the subscriptions you currently have. These are the ones that are more obvious:
- Software such as phone apps, productivity services and licenses such as Microsoft Office;
- Delivery services such as meal subscriptions, clothing boxes and recurring bulk orders like Amazon;
- Memberships like fitness memberships, timeshares, social clubs, online learning platforms and digital publications; and
- Streaming services including video content like Netflix, as well as audio content like Spotify.
Now before you hop feel guilty for spending, that’s not the point of this exercise. The habit I encourage you to cultivate is to utilize the unsubscribe button more often than you use the subscribe one. And if you’re going to subscribe, do so with greater intention than you have ever before.
In particular, unsubscribe from any service that you would not be willing to pay the full price if you had the money. For example a streaming service might be $9.99 a month, but for a year that’s $120. Consider f that $120 is more valuable allocated toward maintaining your health or spending toward important relationships.
Also commit to clicking the unsubscribe button to those services that are underutilized or unused. If you cancel it and realize you miss it, you can always rejoin later. For example, if you haven’t made it to the gym in months, cancel your membership until you get your schedule to a more manageable routine and come back when you know you can commit at least three times a week. I have no doubt the gym will welcome you back with an incentive to re-join.
Lately, I’ve also been conscious to hit the unsubscribe button to the services that have dropped significantly in customer service quality. I recently canceled a clothing subscription that I used to love, but found my last shopping experience to be inconvenient and the quality of the clothes to be disappointing. Even if it means spending more money, it’s worth paying a little more if you get quality products and quality customer service.
Unsubscribe from 5 Social Media Accounts And Email Subscriptions That Cue You To Spend Money
In researching my upcoming book for millennials, tangible advice on how to manage social media and its impact on our money management skills did not resonate with me. I grew up in that millennial generation that distinctly remembers childhood before there was social media and after. Specifically, I went to Boston University, one of the first eight schools to have Facebook back when it was a social network rather than social media.
As of 2023, Forbes Advisor estimated 4.9 billion people use social media globally, making healthier social media habits feel like you’re the crazy one for wanting less screen time. Unlike generations past, you don’t have to go very far to measure yourself to the success of the other people around you. It’s readily accessible in your pocket to test your sense of self-worth minute-by-minute, hour by hour.
Even if you think they are free and harmless, social media is costing us more than we think. According to a 2023 Bankrate survey, 48% of social media users reported that platforms such as Instagram and TikTok led them to make an impulse purchase, and 64% of those buyers regretted their decisions.
If you’re not prepared to shut down total access, deciding to mute five social media accounts is a small step that can be a game-changer for your financial well-being. Open your social media app, identify at least five accounts you follow that often trigger impulses to spend money, whether it’s to:
- buy sponsored products;
- promote experiences that are not in your budget; or
- make you feel less satisfied with what you already have.
Previously, you had to purposefully unfollow an account, risking a potentially awkward interaction if you know the person in real life. Now, you can use mute options on social media platforms to still follow those accounts, but not have them show up in your feed.
If you want to see what these people are up to, you’ll have to make a conscious effort to visit their pages. The same goes for those pesky email lists we subscribed to just to get a discount or qualify for special offers.
Consciously using the unsubscribe button and curating the accounts you follow on social media and in your email inbox can not only curb unnecessary spending, but also foster a better sense of control over financial goals and priorities without the consumerist pressure.
Even ore importantly, the fewer distractions you have on your time and money, the more you can re-allocate those resources toward your next passive income source instead.
I Traded Streaming For Real-Life Experiences
I am absolutely obsessed with Korean content from following K-Pop idol groups to watching variety shows and dramas. The possible subscriptions I could have from fan club memberships to streaming services could be hundreds of dollars a month. I don’t have a Netflix account, despite the plethora of content there. Instead, I have only one entertainment subscription that is specifically dedicated to Asian entertainment shows for $9.99/month. Even better, now when I go to live concerts and entertainment shows, they feel even more special than if I had just watched the replays on video.
I took the money I would have spent on the combination of Spotify, YouTube premium, Hulu and Netflix (all of which I’ve had in the past) and decided to allocate those funds toward an $80 membership to my local yoga studio instead. Exercising three to five times a week has not only helped me get stronger, but get better sleep than staying up all night watching television like I used to. I learned that all those nights lying on the couch scrolling social media has made me quite stiff.
The bottom line is this: subscriptions aren’t bad as long as you continue them intentionally and make your time feel more valuable, not less. Making the unsubscribe button one of your core money habits will not only save you money, but save you the time to focus on growing your next passive income stream.
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