Pay as you go with the 'a la carte method' of spending
Why not pay for what you actually use?
Would you order a six-course meal if you planned to eat only the salad and dessert? No. You'd order a la carte.
Apply the same concept to the subscriptions you pay for, suggests Ramit Sethi at I Will Teach You To Be Rich. That includes services like cable, TiVo, cell phones and that underused gym membership. Ramit writes: "In fact, in one remarkable study of three health clubs, two researchers from Stanford and Berkeley showed that gym members overestimate how much they'll use their gym membership by over 70%."
You can pay as you go for workout sessions, TV programs and songs (from iTunes), and other services you now buy in bulk. And may we suggest a prepaid cell phone?
What are the benefits? You get what you pay for, and you're more aware of what you spend. Ramit adds, "You will value whatever you're buying if you're actively spending out of your pocket, rather than an invisible subscription."
The downside, of course, is that less of your life will be on autopilot. Of course, that's not necessarily a bad thing.
Ramit explains how you can try his "a la carte method" for two months and see if it makes financial sense for you.
We particularly enjoyed the comment from Rita, who compared a major expenditure she made to a very expensive contract.
She said: "We bought a hot tub when we built our house and I didn't want it because it's very expensive and I thought we'd never use it. Sure enough, in three years we've used it exactly three times. I tease my husband when he uses it that it was a thousand-dollar bath he just took."
Published June 16, 2008
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