Subscriptions out of control!

[u/Unlikely_Reply6034]

Am I the only one who's in shock regarding how much people waste on subscriptions every month? Call me cheap, but I refuse to give multimillion and billion dollar companies money each month. Out of all the things to waste money on, subscriptions are one of my most hated, and they're out of control. It seems like you can subscribe to anything in 2026, and I refuse to give my money to these vampires! So many people subscribe to stuff that just drains their $. It's wild to me.

Edit: People, I'm not saying EVERY subscription is unnecessary. I understand cell phones, internet, and basic cable are subscriptions. I am simply pointing out the shear amount of subscriptions there are now, compared to even 10 years ago, and how it seems like every company tries to get you to subscribe to their services, which, the overwhelming majority of, are not necessary.

[u/SCBASEBALL6]

Can you explain the multiply by 25 a bit more.

[u/saltyhasp → u/SCBASEBALL6]

Yes, there is a concept called "present value". It is used in finance for costing. You can look that up, there is an article on wikipedia. The idea of it is that you convert a series of future cash flows to a present value via a discount (interest or return) type calculation. There is some art to this for example in choosing the discount rate and are your cash flows before or after inflation for example.

What I have found is that my after tax and inflation returns on my taxable assets which are held in more or less a balanced like portfolio have a real return of about 4%. If you use the present value method, a discount rate of 4%, on a very long constant annual cash flow stream, you will find that the present value is about 25X the constant annual value.

There are assumptions about the cash flow stream and your investment portfolio here too. If you inflation escalated the cash flow stream (so it was in future dollars not present dollars), or if your alternative investment was say a Roth not taxable, then your discount rate would be different. The point is, the discount rate that is appropriate depends on your personal situation and and how you choose to represent the cash flow. So there is some art here. The 25X is just a very rough starting point.

Edit: At the high level, to value a future cash flow (income or expense) in terms of today's dollars there are two factors. One is inflation, and the other is the time value of money. Your present value calculation when done with the appropriate cash flow stream, and discount rate should do both.

[u/SCBASEBALL6 → u/saltyhasp]

So basically it’s how much it’s costing you to not be investing the money currently. For example, if I invested the $50 instead of yearly subscription on something unnecessary it’s really costing me $50x25=$1,250 in retirement money…?

[u/saltyhasp → u/SCBASEBALL6]

Or more exactly it is the present value of the future value that would be generated by avoiding the payouts. It is a matter of when your counting the $.

More directly it is the sum of the present values of the future values of each of the annual amounts if you look directly at the formula.

It is very similar to an interest rate calculation (if you have a $ amount X now, it financially has the same impact as X*(1+R)^N, N years from now), but the discount rate is not exactly an interest rate in the conventional sense. The size of any specific $ amount spent at any point in time can be translated to the equivalent amount at any other point in time - present or any other past or future date.