Cancel unused fixed costs

Times are tough: inflation is high and a recession is on the horizon. You want to be financially responsible and ready for the oncoming storms so you need to manage your expenses. But, how do you do that without impacting the quality of your life? Today’s post will give you a simple way to get started: canceling unused fixed costs.

What fixed costs can I cut?

We all have costs that are just part of our ongoing monthly expenses and that we pay without even thinking about.

Some of these are necessary costs where we have no flexibility. For example, rent/mortgage, insurance or student loans. In the short term, these are fixed costs which one cannot impact. However, there are other fixed costs where you do have flexibility. These include subscriptions to streaming services or magazines, delivery service fees or memberships at shopping venues (i.e., Costco or Sam’s Club). With these, you can find meaningful ways to reduce your expenses without impacting the quality of your life.

Each year, as part of managing my household expenses, we go through and pare back those that we don’t need. I’m going to use the example of streaming services as that’s been something that’s recently on my mind.

Over the course of the last year, across my household, we’ve had subscriptions to a number of these services:

• TV: Netflix, Amazon Prime, Paramount+, Disney, Discovery+, Apple TV+, Fubu
• Music: Spotify, Apple Music

We ended up signing up for these services through either trials that we forgot to cancel or because they have that one killer show which we have to watch. Each of these services has its own monthly payment which doesn’t sound like a lot and they have something you really want at the point in time when you sign up — for example Discovery+ was only $6.99 / month and they have shows that my mother, who visited during the Summer, likes watching.

While there were certainly good reasons for us to sign up to each of these services when we did so, if you look at actual usage today, it’s pretty much focused on Netflix and Amazon Prime for TV and my son listens to Apple Music for Music. The rest of the services barely get used, if ever. If you step back and tally the total cost of the unused services, it amounts to multiple hundred dollars a year. These services also have the very pesky habit of increasing their fees periodically — always at what sounds like a small monthly increase, but across services those add up over time.

These are prime opportunities to reduce fixed expenses with minimal (or even zero) impact to our quality of life.

Now, I’m not saying that it’s easy to cancel all the barely used services. If you look at our family, there’s always someone who says that an unused service is absolutely critical because they watched (or listened) to it last month. In the case that you have some household members who are unwilling to agree to cutting them all, give them some choice. For example, let them retain the one unused fixed cost that they feel is the most important. However, if you want to be prudent with and manage your expenses, do you have to make some hard decisions. I actually think that canceling these unused services is not that hard because you and the rest of your household won’t even notice their absence given how infrequently they’re currently used.

Cancelling unused streaming services will save me a few hundred dollars a year. Now, imagine doing the same across other fixed cost categories where there are ongoing expenses for things my family doesn’t really use. By being ruthless in identifying and cutting those items, I get to reduce my expenses by a pretty meaningful amount without really impacting the quality of my family’s life.

This completes today’s post on cancelling unused fixed costs. The practical steps you can start taking from today’s post are:

• Identify unused fixed costs: Go through your ongoing expenses and identify the ongoing, fixed expenses which you don’t really use. I do this every new year as part of my New Year’s financial resolutions
• Cancel these unused fixed costs: Cancel as many of these fixed costs that you are able to. In the case that you have some household members who are unwilling to agree to cutting them all, give them some choice. For example, let them retain the one unused fixed cost that they feel is the most important

Thank you again for joining me on my journey to build financial literacy for young adults and their families. Please share any comments or questions that you have in the comments section. If you are interested in reading more of my posts, please access my author page (https://vocal.media/authors/sudhir-sahay) where you can see all the posts I’ve published. Also, if there are any topics you’re interested in my broaching in future posts, please let me know. In addition to the comments section, I can be reached at [email protected].