As featured in The Wall Street Journal, Money Magazine, and more!

Search: kindle


Most financial experts agree that if you need a car, buying is almost always a better financial decision than leasing. Even if you have to borrow money for the purchase, traditional financing is a better option than making payments for a couple of years and having nothing to show for it unless you’re willing to pay even more. The same attitude leaves home renters with the feeling that they’re throwing money away when compared to homeowners, but the analogy isn’t completely accurate.

Subscription payments — recurring monthly or annual payments — have a place. Consumers pay for certain services on a subscription basis. Newspapers, magazines, and television are all traditional media-based services that operate their businesses using subscriptions. In return for a monthly fee, consumers receive new media content, on-demand or on a regular schedule. Media companies are increasingly using subscription programs as a replacement for selling individual items, and it’s great for them. Rather than one-time income, companies are setting up systems that generate a stable income stream. In theory, these companies can then put the guaranteed revenue into the development of more content.

But for more and more companies, the subscription model is just a big cash cow. Organizations claim that their customers prefer the model over one-time purchases of content, and that might be true. People like when the things they consume cost less money up-front, despite a long-term draining of financial resources. Companies are coming up with clever ways to turn products into services, services consumers will pay for on a recurring basis instead of products consumers will own.

When I would find a musical artist I like, I used to buy his or her albums. The music would then be mine, to listen to whenever I like, without advertising interference, forever. I could do whatever I like with recording, including sharing it with friends, as long as I didn’t cross a legal line in terms of copyright infringement. This arrangement worked well for me and millions of other consumers.

Maybe due to the development of digital media and increased unauthorized duplication and distribution, the music industry needed to find a way to change its model. They tried digital rights management, and that was a complete failure. The music industry has its solution: subscription service. With a subscription to a streaming music service, consumers never own the music they buy (though that option is still available).

Music streaming and movie streaming doesn’t seem to be a bad value compared to what you might spend on buying media you’d like to enjoy on a repeat basis, but you leave control in the hands of the media supplier. If they want to remove your access or increase your monthly subscription fee, you lose everything you “bought.” If I start relying on Netflix streaming rather than buying personal copies of films I enjoy, if I decide to cancel my Netflix subscription, I end up with nothing to show for my hundreds or thousands of dollars spent on the subscription except memories of sitting in front of a television screen.

Leaving control of personal media in the hands of the companies that provide it has already caused problems. Customers of the Kindle book-reader have seen Amazon change or erase purchased digital copies of books. You don’t own anything when you buy books with a Kindle account or a similar service. The financial model is a little different for consumers, and in this case you do pay a price for each piece of media which is then supposed to be “yours,” but you’re severely limited in your own control of that piece of media.

A few months ago, Adobe Software, the maker of PhotoShop and other important software for media professionals, decided to stop its long-time process of selling software updates each year. The company now offers its most popular software in a subscription model only. “Software as a service” is the now industry-standard model of requiring users to pay an ongoing fee — effectively renting software rather than buying it. It’s quite profitable, primarily because most consumers of software are actually businesses, and it’s much easier for businesses to justify an expense than it is for hobbyists or people who do not make money from their use of the software.

The end result of this is that consumers decreasingly own what they consume. There is no asset received in return for spending. With a subscription service for music, I’m no longer building a collection of CDs that I could at some point in the future sell (at a great loss) if I were desperate for cash. Maybe decreasing clutter, eliminating “stuff,” is a good thing, but even in this subscription culture my clutter doesn’t actually seem to be decreasing. (Maybe that’s because I still prefer to own my own media.)

You can see the changes. Quicken may be the financial software of a previous generation, but it’s still what I use. At one point, I could buy one version of Quicken for $20 and I could theoretically use it forever. Then Intuit introduced features that expire after a few years, and perhaps rightly so, stopped supporting versions older than a few years. When Mint.com was introduced, it followed the software as a service model. Today it’s free, and it doesn’t offer nearly the same feature set as Quicken, but it sets the company up to eventually replace the buy-and-upgrade Quicken model with a subscribe-indefinitely model. The company is on that path with QuickBooks, accounting software for businesses, so it wouldn’t surprise me if Quicken followed that model within a few years.

In the case of software as a service, the cost for me as a consumer, and probably you, will increase greatly. It won’t feel bad because each payment is lower than the traditional one-time payment. And as any late-night infomercial marketer knows, it’s that advertised initial price point that drives sales, not contemplation of the total cost.

Are you fine with the gradual transition to subscriptions for everything you use? Is this just an inevitable progression of business economy? Is there enough dissatisfaction with this type of payment plan for the market to generate alternatives or will consumers just smile as they pay out more money for less substance over time?

{ 13 comments }

The Consumerism Commentary Podcast is no longer on a regular schedule, but I plan to produce new episodes throughout the year as the opportunities arise.

Today’s guest on the podcast is Helaine Olen, author of Pound Foolish: Exposing the Dark Side of the Personal Finance Industry. Helaine is a New York-based journalist, contributing to Forbes, and notably wrote and edited the “Money Makeover” feature for the Los Angeles Times.

You can find Pound Foolish, available in book form as well as for the Kindle, where ever books are sold. The book takes a critical eye at the media-driven personal finance industry, from self-help gurus like Suze Orman, Robert Kiyosaki, David Bach, and Dave Ramsey, to commission-based salespeople and lesser-known money coaches who host free-lunch seminars with the intent of selling low-quality products.

In addition to the state of personal finance today, in the podcast, we talk about how personal finance journalism has changed since its emergence during the Great Depression.

[00:00] Introduction from Luke Landes
[00:30] Interview with Helaine Olen
[00:42] Roots of personal finance journalism, Sylvia Porter
[04:00] Changes in personal finance since the Great Depression
[05:50] Complexity of personal finance products
[06:52] Marketing driving personal financial advice, Suze Orman
[11:28] Robert Kiyosaki, wealth guru
[14:33] Corporate sponsorship of financial literacy programs
[15:50] Does financial literacy even work?
[17:50] Modeling financial behavior for children
[19:30] Solutions other than financial literacy
[21:25] Consumer Financial Protection Bureau and regulators
[22:07] What can individuals do to eliminate “gotcha products?”
[25:59] End

Here are all episodes of the Consumerism Commentary Podcast. You can also subscribe using iTunes or RSS.

Episode 169 credits:
Produced and hosted by Luke Landes
Guest: Helaine Olen
Edited and mixed by Jay Frosting
Music by Mindcube

{ 2 comments }

Some feedback over the nine years of writing about money on Consumerism Commentary indicates that there are some readers — not necessarily daily readers and fans of a website, but those who are searching online about some finance-related topic and are at best passing by any particular website — are looking for quick answers. People want to be told what to do instead of making a choice on their own, or they want to confirm or affirm that a particular financial decision was a good one.

I’ve never been a fan of flatly telling people what to do, particularly when it comes to financial advice. Financial advice is personal, and it’s difficult to prescribe specific actions to a mass audience. Groups are composed of individuals, and every person has his or her own situation that might differ from the average. Some generalized financial advice fits all sizes and situations, but when you get to the more interesting aspects of personal finance or begin examining the details, that’s not always true.

Motivational speakers who focus on finances succeed — and their success is often defined by their profit from seminars, books, and other products sold to consumers who should probably be saving their money — because there is a great audience of people just waiting for permission to take action. At some level, they know it’s good to focus on their personal finances, but need someone to inspire the first step with a push.

Depending on the motivator, that push might take the form of a big “DENIED” graphic flashing on the television screen or some actionable information about investing in real estate. Regardless of the form, it has the capacity to inspire thinking about personal finance, if it doesn’t permanently damage the listener’s psyche or portfolio. But the more popular the guru, less of the action is a result of thinking and more of the action is a result of blindly following.

I’ve tried to focus on the thinker, and that approach has done well to shape the Consumerism Commentary audience over the years. I certainly have my opinions, but — and perhaps this prevents me from generating a rabid fan base (and I have no problem with that) — I prefer to keep myself out of the advice except occasionally sharing my tempered opinion or stories from my own related experience. I can offer two sides of an argument when there are valid points on both sides, and I try to present them in a way that helps readers consider their own situations and make their own decisions.

Once in a while, I receive a comment in response to a contemplative article like, “I wish you would just tell me what to do.” I want to respond, “I’m not your dad.” Not to bring a cliché into the discussion, but isn’t it better to teach a man to fish than it is to give him a fish? To me, that seems to be the point of education. Provide people with the tools they need to make their own best decisions rather than telling them what to do.

When talking one-on-one, it’s much easier to analyze a situation and provide individualized advice, but when discussing a general issue online, that’s more difficult.

A good way to address the problem of finding answers that are applicable to everyone is to address one specific situation at a time. Given enough situations, readers can often relate to at least one. This is the approach Liz Weston has taken in her latest book, There Are No Dumb Questions About Money, available on the Kindle and from iTunes. The book features many of the questions — describing specific financial situations — Liz has received over the years. Readers of the book are sure to find situations described within that match their own. I’d be happy to take specific financial questions as well. Those I can answer, I will, and for those that require someone who is more of an expert than I am, I will seek an answer from a professional.

It’s a win-win situation, as corporate motivational speakers might say. Questions provide me with great ideas for new articles, and readers receive advice for overcoming their financial obstacles or for making better financial decisions. When it comes to writing for a wider audience, however, I feel I have the responsibility not to tell people what to do, expecting them to blindly follow these suggestions. Being an adult in a society where education is valued is all about thinking for yourself, consulting experts when necessary, and making the best decisions, on your own, that are best for you.

This can certainly be difficult when salespeople are disguised as experts. When you don’t have a lot of friends who understand the mortgage industry, for example, you rely on the bank’s advice for making decisions. If the bank says you qualify for an expensive mortgage and they show you some calculations, however flawed, to prove their point, you trust them. Then you might find yourself in financial trouble when interest rates increase, tax rates increase, or your home loses its market value.

You want to blame the bank, and in some cases, you were misled and you can, but for the most part you have to own your decisions. You can better own those decisions if you are willing to exercise the mental capacity to analyze your situation and the choices confronting you. That’s why I don’t often prescribe a course of action.

There are guidelines, however, that tend to work well regardless of specific situations. Start saving and investing as early as possible. Minimize expenses and maximize income. Spend less than you earn. These are just guidelines, though, and not very specific. Once you start getting into the details, how you go about changing your actions and attitude depend on your individual situation.

People may be looking for a simple answer to questions like, “With some of my extra cash flow, should I invest more or pay off my mortgage.” I can give a simple answer. I could say that the best choice is always to invest more, and I can cite enough supporting evidence to back that statement up with facts, statistics, and reasoning. I could advise readers to pay off the mortgage and have other facts, statistics, and reasoning to support that answer. There are other details you need to know to give informed advice to any household considering this question, however. If you really want the best answer to this question, you would need to share more information, starting with the following:

  • What is the interest rate on the mortgage?
  • What is your preferred investment?
  • How much time do you have left to pay off the mortgage?
  • How averse are you to risk?
  • What type of return are you expecting on the investment, and do your expectations have a good chance of being accurate?
  • What other financial obligations do you have?
  • How much time do you have left before you’d like to retire?

I don’t see how anyone can offer solid advice without answers to these questions to start, yet people are looking for a quick answer, such as, “It’s always better to pay off your mortgage faster rather than invest when you have extra cash available.” Financial writers can say that, or they say the opposite, but it really doesn’t help anyone in the long run.

To everyone who has come to Consumerism Commentary looking for a quick answer to a complex financial question, I apologize. I may take that approach sometimes, and when readers offer specific questions with enough detail I might entertain one-on-one advice, but when it comes to larger issues affecting a group I am much more likely to consider all sides and encourage readers to analyze their own situations with a little more perspective. With the expanded perspective, readers are better prepared for making their own decisions and taking responsibility for their actions.

As an aside, I don’t always temper my opinions. I’ve been very outspoken about the Debt Avalanche (which as far as I know, is a term coined by me, though the concept certainly existed before) method of paying off credit card debt. I’ve pressed this issue because a strong opinion is necessary to counter the massive marketing machine behind what is known as Dave Ramsey’s Debt Snowball approach. I don’t intend to get into the details here; visit those articles for discussions about why.

Photo: A Roger Davies

{ 9 comments }

Podcast 153: Life Happens

This article was written by in Podcast. 1 comment.

Today on the Consumerism Commentary Podcast, Bryan J Busch talks with Mitch Weiss, author of Life Happens: A Practical Guide to Personal Finance from College to Career (available from Amazon.com on the Kindle).

They discuss many of the topics young people need to know in order to avoid the pitfalls of personal finance.

Consumerism Commentary Podcast
Life Happens: S06E23 / 153

DownloadRSSiTunes

Table of contents

Life Happens on Amazon[00:00] Introduction from Bryan J Busch
[00:34] Interview with Mitch Weiss
[00:45] What are young people not being taught about finances?
[02:13] Student loans are a big problem right now
[04:10] A reasonable amount to borrow for college
[06:59] We should learn and teach more about acquiring and protecting credit
[09:16] What young people need to know about checking accounts, ATMs, and fraud
[17:56] Smart choices about health insurance
[21:26] Be open minded and polite when asking for discounts or a higher salary
[25:18] Employees shouldn’t be distracted by money worries
[27:03] End

We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.

Theme music by Mindcube.

{ 1 comment }

Amazon.com Retail Stores: Another Threat to Small Businesses?

by Luke Landes
Books

I was torn when Amazon.com, the online-only retailer for books, music, and movies, became popular. I liked the convenience, but it was clear that local brick-and-mortar bookstores would have difficulty competing with Amazon’s prices in the long term. I was swayed enough to the side against Amazon when I participated in a boycott of the ... Continue reading this article…

20 comments Read the full article →

20+ Christmas Gift Ideas Under $100

by Luke Landes

While I’ve already offered my suggestions for this year’s best holiday toys, not everyone on your Christmas or gift-giving list is a child. You may have a special adult someone on your list who would appreciate something more useful. Although it’s early in the holiday shopping season, at least for me, some of the best ... Continue reading this article…

20 comments Read the full article →

About Consumerism Commentary

by Luke Landes

Welcome to Consumerism Commentary! This website was one of the first blogs to focus on money from a personal finance perspective, and Luke Landes (also known as Flexo) was the first blogger to share monthly financial updates, such as his net worth statement, with no restrictions. Consumerism Commentary is now a premier personal finance blog ... Continue reading this article…

0 comments Read the full article →

Win a Free Kindle: May 20 Only!

by Luke Landes

It wouldn’t be a weekday in May without another giveaway. This month is Giveaway May at Consumerism Commentary. Each day, I’ll have some to reward readers valued $50 or more. Today’s a good day for the winner; thanks to a partnership with personal finance blog Beating Broke, I am able to offer Amazon.com’s reading device, ... Continue reading this article…

12 comments Read the full article →
Page 1 of 212