Downgrading, Free Tiers and Smarter Plans

Cancelling is not the only way to pay less. Many of the subscriptions you marked "downgrade" in chapter 3 can keep doing the job at a lower price: on a cheaper tier, on a free version, on an annual plan, or shared with the people you live with. This chapter explains each option, what it costs you in convenience or flexibility, and how to tell whether it is a real saving or just a different way of paying the same.

Find the tier you actually use

Subscription pricing is usually built as a ladder. The bottom rung covers what most people need, and each higher rung adds features that some people need and many people pay for without using: more storage, more users, higher video quality, advanced reports, priority support.

To check whether you are on the right rung:

1. List the features you used in the last month. Not the ones you might use, the ones you did use.
2. Open the plan comparison page and find the cheapest tier that includes all of them.
3. Check what happens when you move down. This is the step people skip. Dropping a storage plan may require you to delete or move files first; dropping a team plan may remove shared projects or history. Export anything you need before you change plans.
4. Ask before you downgrade. Some companies offer a discount on the higher tier to people who start to downgrade. That is fine if the discounted higher tier is what you want; it is not a saving if a lower tier covers you.

Watch for feature creep too. Software companies regularly add features and advertise them to existing customers to justify an upgrade. A new feature is worth paying for only if it solves a problem you actually have.

Free versions and open-source alternatives

Many paid tools have a free version or a free alternative that covers most everyday needs.

• Free tiers of paid services. Many productivity, note-taking, storage and project tools offer a free tier with limits on storage, users or features. If you stay within the limits, it may be all you need.
• Ad-supported tiers. Several music and video services offer a lower price, or no price, in exchange for advertising.
• Open-source software. Programs whose code is published and free to use: LibreOffice for documents, spreadsheets and presentations; GIMP for image editing; Audacity for audio editing. DaVinci Resolve, which is not open source, also has a capable free version for video editing.
• Your public library, which chapter 3 mentioned, for books, audiobooks, courses and news.

Free is not costless. Before you switch, check four things: whether it opens and saves the file formats you exchange with others; how long it will take you to learn; whether it is actively maintained, with recent updates and an active user community; and what happens to your data if the project ends. For personal use, the trade is usually worth making. For work you are paid for, the hours of learning and any compatibility problems count as part of the price.

Annual or monthly: the break-even month

Most services offer a lower effective price for paying a year in advance. Whether that is a saving depends on one number: how many months of the monthly price the annual price equals.

If the annual price equals ten monthly payments, the annual plan is the cheaper choice only if you would have kept paying monthly for more than ten months. If you might cancel, change tools or lose interest before then, the monthly plan is cheaper despite its higher sticker price, because you can stop it.

A common way of describing this discount is "two months free", which is a discount of about 17% on the monthly price over a year. Larger annual discounts, of 30% or more, move the break-even earlier and make the annual plan attractive for anything you are confident you will keep.

A sensible order is to start monthly, confirm over two or three months that you really use the service, and then switch to annual. Before you do, check the refund terms: some services refund the unused part of an annual plan if you cancel, many do not. And put the renewal date in your inventory, because an annual renewal is exactly the kind of charge chapter 2 found people forget.

Family and group plans

Many services offer a family or household plan that covers several people for a price well below the cost of separate accounts.

For example, three people in one household paying separately at a combined $36 a month spend $432 a year. A family plan at $20 a month costs $240 a year for all three. The more people who share, the lower the cost per person, up to the plan's limit.

Three things to settle first:

• The rules. Many family plans require every member to live at the same address and may check. Sharing with people outside the household may break the terms and can lead to the account being restricted.
• Who pays and who manages. One person's card is billed. Agree how the cost is split, and who can add or remove members.
• Leaving. If someone moves out, their history, playlists or files may stay with the account. Know how they would take them with them.

Bundles: only a saving if you would buy the parts

A bundle combines several services at one price that is lower than the sum of the separate prices. It is a real saving only if you would otherwise pay for most of the services in it. A bundle that includes two services you want and one you would never buy can cost more than the two on their own.

Bundles offered through an internet or phone provider deserve one extra check: whether the included service is a promotion that ends, after which it renews at full price on your bill.

What the downgrades add up to

Individually, a downgrade may save only a few dollars a month. Together, they add up. If a round of downgrades frees $25 a month and that money is invested for 10 years at about 3.9% a year after inflation, it grows to about $3,645 in today's dollars, with nothing given up that you were actually using.