In plain words
A recurring charge shows its real size by the year: the monthly price × 12 is what the habit costs.
Two worked examples
UK
Four plans at £10.99, £8.99, £5.99 and £12.99 a month: £38.96 a month — £467.52 a year.
Japan
Four plans at ¥1,490, ¥990, ¥600 and ¥1,590 a month: ¥4,670 a month — ¥56,040 a year.
The common mistake
Small monthly charges, big yearly bill
The mistake: Judging a subscription by its small monthly price and never adding up what all of them cost in a year.
What’s true: Monthly prices are set to feel small; the yearly total is what the habit really costs.
Bigger packs aren't always cheaper
The price per unit — per kilo, per litre, per piece — is the price divided by the amount, not the price on the pack. Pack sizes and prices are set separately; only the unit price puts two packs on the same ruler.
UK
Rice: 500 g for £1.40 is £2.80 a kilo; 2 kg for £6.00 is £3.00 a kilo — the small pack is cheaper per kilo.
Japan
Rice: 2 kg for ¥1,800 is ¥900 a kilo; 5 kg for ¥4,800 is ¥960 a kilo — the small pack is cheaper per kilo.
Where you’ll meet it
- A yearly fee compounds against youEach year's fee also removes the growth that money would have earned in every year after.
- A need has a deadline; a want has a discountIf skipping it costs only comfort, it was a want wearing a need's clothes.
- The gotcha clause hides on page 3The headline is marketing; the clause is the contract — the expensive sentence is the quiet one.
Related terms
Subscription creepUnit priceImpulse buyingLifestyle creepOpportunity costDirect debitStanding orderAnnual fee
TRAIN IT
Play it in your browser.
Three quick rounds in your browser. No sign-up, nothing to download.
Education, not financial advice Source: Theorise lesson text