You Can Retire Early By Cutting Subscriptions…Seriously.

Alright, let’s talk about something that could literally change your life: cutting your subscriptions and investing that money instead. We’ve all been there—signing up for that irresistible free trial or that “must-have” monthly box, only to forget about it and watch the charges roll in month after month.

But what if I told you that the average $200 a month we waste on these subscriptions could be the ticket to retiring early? Intrigued? You should be.

No, Netflix Isn’t Stopping You Buying A House

There’s been a lot of inane, malicious and fundamentally uninformed chatter about how millennials can’t buy houses because they’re too busy spending on subscriptions like Netflix, Spotify, and meal kits.

Blaming avocado toast and streaming services for the housing crisis is, frankly, ridiculous. The reality is that housing prices have skyrocketed, wages haven’t kept pace, and student loan debt is through the roof. So, no, your Netflix subscription isn’t the reason you’re not buying a house.

However, that doesn’t mean we should ignore the impact of subscriptions on our long-term finances. Cutting out a few unnecessary subscriptions and investing even $100 a month can have a profound impact when you approach retirement. Let’s break it down.

If you were to invest $100 a month into an S&P 500 index fund, with an average annual return of 8%, you’d be looking at some impressive growth over the years. After 20 years, you could have around $57,000. Stretch that to 30 years, and you’re talking about nearly $150,000. Push it to 40 years, and you could be sitting on over $340,000. That’s the power of compound interest working in your favor.

Sure, $100 a month might not seem like a lot, and cutting a few subscriptions isn’t going to buy you a house tomorrow. But over time, those savings add up and can significantly bolster your financial security. It’s about making smarter financial choices and ensuring your money is working for you.

So, no, Netflix isn’t why young people are struggling to buy houses. But yes, cutting Netflix and other non-essential services and investing that money can have a tremendous effect on your finances over the long haul. It’s not about deprivation; it’s about prioritizing your financial future.

The Subscription Trap

Let’s start with the numbers. Americans spend an average of $273 per month on subscription services, with many people underestimating their actual spend. Even if we round it down to $200, that’s a significant chunk of change. Whether it’s streaming services, gym memberships, meal kits, or subscription boxes, these little luxuries add up. But here’s the kicker—nearly 42% of that money is wasted on services we don’t use regularly. That’s a lot of cash disappearing into the void each month.

Investing The Money

Now, imagine taking that $200 a month and putting it into something that actually grows your wealth—like the S&P 500. Historically, the S&P 500 has returned an average of about 7-10% per year after inflation. Let’s go with a conservative 8% return for our calculations. If you invest $200 every month for 30 years at an 8% annual return, guess how much you’ll have? Spoiler alert: it’s a lot.

Using the magic of compound interest, that $200 a month turns into roughly $283,000 over 30 years. Yes, you read that right—almost $300K from just $200 a month. That’s the power of investing, my friends. And if you manage to get closer to the higher end of historical returns, the number could be even higher.

The Steps to Financial Freedom

So what should you do now?

Here are some practical steps to follow to start the process of retiring early:

1. Conduct a Subscription Audit: Start by reviewing your bank and credit card statements for the last few months. Make a list of all your subscriptions and assess which ones you actually use. Be honest with yourself—if you’re not using it, it’s time to cut it.
2. Prioritize: Decide which subscriptions, if any, are essential. Maybe you truly love your Netflix and it brings you joy, but do you need five different streaming services? Probably not.
3. Cancel Unused Subscriptions: This is the hard part, but it’s crucial. Cancel those subscriptions you don’t use. Yes, it might be a hassle to call customer service or navigate tricky cancellation processes, but think of the long-term gains.
4. Redirect Savings to Investments: Set up an automatic transfer of the money you were spending on subscriptions into a brokerage account. Consider low-cost index funds like those tracking the S&P 500. Automation makes it easier to stick to your new habit.
5. Monitor and Adjust: Keep an eye on your investments and review your subscription audit regularly. Your needs and interests may change over time, so stay flexible.

The Benefits of Investing

Cutting subscriptions and investing the savings isn’t just about the money. It’s about taking control of your financial future. Here are some of the benefits:

• Financial Growth: Your money works for you, growing over time thanks to compound interest.
• Peace of Mind: With a growing investment portfolio, you gain financial security and reduce stress about future expenses.
• Early Retirement: The more you invest, the sooner you can achieve financial independence and retire early. Imagine having the freedom to do what you love without worrying about money.
• Better Habits: This practice encourages mindful spending and better financial habits. You learn to value long-term gains over short-term gratifications.

Real-Life Impact

Consider the impact of these changes. Let’s say you’re 30 years old and you start investing $200 a month. By the time you’re 60, you could have a nest egg of nearly $300,000, which can significantly bolster your retirement savings. If you’re already contributing to a 401(k) or IRA, this additional investment can provide a substantial cushion.

Moreover, this isn’t just about retirement. Having a robust investment portfolio gives you options—whether it’s starting a new business, traveling the world, or simply enjoying a comfortable lifestyle. Financial freedom is about choice, and cutting subscriptions to invest gives you more of it.

The Takeaway

Subscriptions can be convenient and fun, but they can also be a sneaky drain on your finances. By conducting a subscription audit, prioritizing essentials, and investing the savings, you can transform wasted money into a powerful tool for your financial future.

Between $100 and $200 a month might not seem like enough to realy change the course of your future financially, but with the power of compound interest, it actually can grow into a life-changing sum.

So, take a hard look at your subscriptions today. Make the tough decisions, cut the excess, and start investing. Your future self will thank you, and you might just find yourself retiring earlier than you ever dreamed possible. After all, who wouldn’t want the freedom to enjoy life without the constant worry of financial strain? Here’s to smarter spending and a brighter financial future!