The Budget of the Future!

The world is changing, and if we don’t keep up with it we’re going to find ourselves in financial trouble.  As consumers, we’re accustomed to buying and owning products, but with the advent of technology we’re becoming a nation of renters.  More and more products are switching to a service-based model that allows you access for a monthly fee. Instead of owning something, we rent the privilege to access.  We’ve seen this in other markets, such as leases for automobiles, but now this popular pricing model is making its way into new industries.  Is this good or bad? And how will it impact a nation of individuals who are not the best budgeters? We’ll tell you.

One of the new technologies you can rent is a smart phone.  Instead of paying a few hundred dollars for a handset, you can pay $20 a month to rent one.  Some software providers have also switched to this type of model.  Adobe, the creator of digital media solutions and graphic design software, was one of the first software providers to enter the world of subscription service. They offer a variety of pricing packages for students, individuals, and businesses.  Microsoft will follow suit this fall when they unveil their Office subscription service.  You’ll still be able to purchase the product for now, but the company is pushing many of its customers to the subscription model by promising continued access to Word, Excel, and others via the cloud.

Is renting more costly? In the case of software rental, you may actually come out ahead. For example, Adobe has launched a cloud-based subscription for its software.  For a monthly fee, anywhere from $30 to $50 based on your usage, you can access a variety of their products, some of which, on their own, could cost you thousands of dollars.  Better yet, all the updates for these products are included in your subscription.  Microsoft is taking a similar approach, encouraging its customers to access their popular Office software for a monthly fee. The subscription version for consumers, called Office 365 Home Premium, will cost $99.99. As a value added service, the Office 365 Home Premium license includes 20 gigabytes of storage in the SkyDrive online storage service, and 60 minutes of Skype IP telephone service per month.

There are some drawbacks to this type of approach.  As we’ve seen, a rental pricing structure could save you a substantial amount of money, but you have to do the math.  Let’s look at a common example – your cable TV service.  Most of us rent a cable box from our provider.  My cable box costs me $15 a month, which is not all that unreasonable. I could have purchased the box when I contracted for the service, but the $400 price tag seemed high at the time. I’ve had my cable box for 10 years, which means I’ve spent more than $1,800 renting the equipment.  Sure, I saved $400 when I became a customer, but in the long run my cable provider has made a significant amount of money from my choice to rent vs. own.

Another issue we have to consider is how rental payments will affect our budget.  Sure, it may be software today, but what about tomorrow?  Will you be able to rent iPads or tablets, computers, or Smart televisions?  What new services will be offered for subscription?  Netflix and other online content providers are already paving the way for innovative services, but at a cost.  It may not sound like a lot, $8 here or $15 there, but it builds up.  And if you don’t have a budget in place, you can find yourself coming up short on your obligations.

Will the marketplace experience a total shift to subscription-based pricing?  Only time will tell.  But, it’s always a safe bet to get your financial situation under control through budgeting.  If you don’t have a budget, contact one of Cambridge’s financial professionals. They’ll be happy to review your finances with you and design a budget that works for you, for free. Until next time, I’m Thomas Fox for Cambridge Credit Counseling.

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About Cambridge Credit Counseling Corp.

Cambridge Credit Counseling Corp. offers its financial education to consumers throughout the United States. Our experienced staff is dedicated to helping people understand and manage their debts by providing personalized attention and a free, comprehensive review of each consumer’s financial situation. It is our objective that, as consumers become more educated about debt and the impact it can have on their lives, they can apply this knowledge to successfully manage their finances in the future.

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