The True Cost of a $10 Subscription

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It all sounds so simple. For just 10 bucks, you get a little something extra.

$10? That’s like 2 drinks at Starbucks.

What can you get for $10? You can get HuluPremium. You can get Netflix On Demand. You can support your favorite podcast. You can get access to the Wall Street Journal. You can extra credits for iStockPhoto. You can get another gigabyte of data transfer for your phone. You can get a larger package of text messages. You can get XBOX Live or PS3 Plus. Etc. Etc. Etc.

Recently it seems everyone is asking for just $10 a month.

There’s nothing wrong with any of these sites or services in asking to be paid for what they provide. (Please note, I like getting paid for the work I do!) It's just that $10 is a seductive amount. $10 seems so inconsequential.

To spend ‘just $10’ seems like basically spending almost nothing, right? Not so fast though. I want to show you something I have made. It's a little calculator I call The Real Cost of $10/month Calculator. It takes the $10 a month extra fee you’re adding onto your bill (or whatever amount you want to try) and using the magic of compound interest, it shows you how much money you’re really giving up over time for your $10/month subscription fee.

I've got the defaults for the calculator set fairly conservatively. Just one $10 subscription per month, assuming 7% interest, and assuming you'll pay that $10/month for 10 years.

There's a trick though. $10 per month may sound like $120 per year, but it's not.

Compound interest makes this a little trickier. The way I've got my calculator built, it really figures the amount based on a single $120 spent at the beginning of every year instead of $10 per month, but it makes the point.

If you compound the interest monthly and assume 7% interest. One $10 per month subscription costs you $1740.94 in 10 years. Do you have more that one $10/month fee? Do you think you'd make more or less annual interest? It's a calculator. Give it a try and find out what you're really spending for $10/month. (If you want to see something really special, see what several $10 subscriptions really cost you over the course of 30 years.)

When I started this post, I had a title I liked better than the one I ultimately chose. That old title was ‘The $10 Tyranny’, but I changed it. Tyranny, which is defined as “cruel, unreasonable, or arbitrary use of power or control”, didn’t seem to be quite the right word, although I did like how it sounded. The truth is that you have a choice. You don’t have to pay $10 a month for any of these things if you don’t want to. If something is worth it though, you should feel free (or, better yet, obligated) to pay the people that provide that service to you. Now you simply know what you're really paying for them.

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