Annualising: turning monthly charges into a yearly figure

Subscriptions are priced monthly for a reason: a small number is easier to accept. The same charge, seen as a yearly figure, can feel very different. Annualising is the habit of always looking at that yearly figure before deciding.

The method

Multiply the monthly price by twelve. For weekly charges, multiply by 52. For quarterly, by four.

Four modest subscriptions add up to over $500 a year.

Why it changes decisions

• Comparing with one-off purchases: would you buy a $186 item for what that video service gives you over a year?
• Comparing with yearly plans: a yearly plan's discount is easier to judge against the annualised monthly price.
• Prioritising: the subscriptions with the largest yearly figure deserve the most scrutiny.

Annualise new subscriptions too

Before starting a new subscription, say the yearly number out loud. "This is $156 a year" makes the decision more deliberate than "it's only $13 a month".

Combine with cost per use

A yearly figure tells you the price; cost per use tells you the value. Our guide to cost per use shows how to combine them.

Use the yearly total for planning

The yearly total of all your subscriptions, divided by twelve, is the monthly amount your subscriptions card needs. Add yearly plans to it and you have a realistic budget. See your monthly online total.

A worked example

You are about to add a meal-planning app at $7.99 a month. Annualised, that is $95.88. You already pay for a recipe site at $4.99 a month, $59.88 a year, which you open once a week. Seen side by side, the two services cost over $155 a year for overlapping jobs. You decide to try the new app for one month and cancel the recipe site if it replaces it. The decision took two minutes, and it was made on the yearly figure rather than the small monthly one.

Common mistakes

• Annualising only new subscriptions. The ones you have had for years deserve the same look.
• Forgetting price rises. Use the current price, not the one you signed up at.
• Counting free months as savings. A discounted first month does not change what the next eleven will cost.

Frequently asked questions

Should I always choose yearly billing if I annualise?

No. Annualising shows the size of the commitment. Whether to pay yearly depends on how sure you are that you will keep the service.

What about charges that change every month?

Use an average of the last three months, multiplied by twelve. It is an estimate, which is enough to judge whether a service is worth it.

Summary

Multiply monthly charges by twelve, look at the yearly figure before starting or renewing a subscription, focus on the largest yearly amounts first, and use the yearly total to set your monthly budget.