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A FRIEND ONCE explained to me his theory of lifestyle creep—and how there’s a ratchet effect. Let’s say you move to a better neighborhood. A bigger house means larger utility bills. Property taxes will be higher, the lawns bigger and the landscaping more extensive. The neighbor’s cars are nicer, and the shopping and restaurants are more upscale.
Like a socket wrench, once the one-way ratchet of lifestyle creep clicks in, it’s nearly impossible to go back.
Two years ago, I moved to a metro area from a small town. My expenses are definitely up. Besides substantially higher property taxes, there are several vendors who now have their hands in my pocket. I continue to pay for the services that I’ve always had: trash collection, internet, lawn treatments, cell phone and a security system. Yet the urban prices are much higher than the small-town prices I was accustomed to paying.
To reduce outlays, I’ve converted other expenses from pay-as-you-go to annual prepayment. There’s a convenience factor, plus vendors always provide a discount. This includes the pest control company, as well as the folks who service my furnace, air-conditioning and sprinkler systems.
We even subscribe annually for dental care. We pay the dentist in advance to get two cleanings and routine X-rays, along with a discount on needed treatments.
On the other side of the ledger, I’ve increased my spending with new monthly subscriptions. I’ve replaced our magazine and newspaper subscriptions with online equivalents. I did drop cable TV, but now I pay for several streaming services. Then there’s the satellite radio. We continued the service after a free trial when we bought a new car.
Technology has added several new “necessities.” I have taken on software subscriptions that I never had before. I resisted them for as long as I could, but now I have subscriptions for cloud storage, Dashlane password manager, Quicken and Evernote task-management software.
Occasionally, new technology will reduce my costs as well. I’m no longer paying the phone company per minute for long-distance calls or to rent a wall phone.
Vendors know that, with a subscription, I’m less likely to overcome the inertia to switch or cancel. Marketers would describe my accounts as “sticky.” These subscriptions effectively ratchet up my base expenses.
All of this is my own fault because I agreed to each and every cost. An interesting exercise is to think about how many of these subscriptions existed 20 years ago, let alone when I was growing up in the 1960s. No question, we all did more ourselves. Or the service didn’t exist. Or we did without.
Vendors love prepayment because they have my credit card number on file and can schedule my payments at their convenience. If I miss the email announcing a price increase, it takes effect automatically.
With some effort, you may be able to protest. I recently got the security company to roll back a proposed rate increase with a phone call to customer service. I didn’t even have to threaten to quit.
I periodically check my credit card bills to verify that I still use all the services that I’m billed for. I also monitor for price hikes, knowing which month I would need to call to protest an increase. Seeking bids from competitors would be smart, but I rarely do that. The vendors count on a large percentage of customers like me not bothering.
I hear the ratchet clicking.
Most ratchets have a little knob or lever, which allows you to ratchet in the reverse direction. The life style ratchet lever is often hidden from users until they have a life-changing experience. But once you flip that lever, it’s pretty amazing how you can gradually ratchet down your expenses. In addition to a life-changing experience, one key is having a goal or learning what’s really important in your life. A lot of conversations with your partner can help clarify this. And subscriptions are a great place to start! Take a look at newspapers, magazines, the cable bill or season tickets to Fenway Park, and click by click you can cut those out and see what effect it has, not just on your expenses, but also on your lifestyle. We accumulate so much that quite a few things end up not really being so important, and when you start ratcheting down, it really makes that clear although it can take years if you’re slow like us.
Thanks for an excellent article Howard. I resonate with this. I keep a list of subscriptions we have, and occasionally check to see if there have been any increases. The abundance of streaming services astounds me. Keeping on top of them is a full time job!
The most egregious example of this is when a major auto maker required buyers to maintain a subscription to be able to utilize features they had paid extra to have on their new cars. Features like adaptive cruise control would simply stop working on their car if they failed to maintain a subscription after the initial period expired. That’s just ridiculous!
Makes me think of the Vax Boosters campaign…
This is all so, so true.
Yep. The December 9th WSJ included an article about the billions of dollars of additional corporate value gained by the soaring number of subscriptions to everything people began during the pandemic and have not yet cancelled.