Should I Take the Yearly or the Monthly Plan?

Have you ever heard the saying, “You can’t save without spending money”?
It’s true. Rarely is there ever an opportunity to save money without an equal necessity to spend more than you expect. Whether it’s at the supermarket (“buy two bottles of juice and save 50%”); at the gym (“Sign up for 12 months and get 4 months free”); or in your business (“Take the 1-payment-option and save $200”).

As a Finance professional, I often see Entrepreneurs let their greed get the better of them by making buying decisions without thinking ahead. However, without taking the time to consider your options carefully, taking a discount might lose money when you think you’re saving.
Here are just a few reasons why you might want to think twice before taking a “discount” option:


Entrepreneurs are constantly changing their minds about their purchases. We tend to be indecisive and have short attention spans. What excites us and seems a great idea today might bore us tomorrow.
Sometimes, we don’t change our mind at all, but there’s something really wrong with the product or service and we don’t find out until it’s too late.
For example, suppose you want to buy Tom’s Latest Money Making Secrets. It costs $2,000 one-time—or $550 over 4-monthly installments. A little simple math tells us that the one-time option saves $200.
Should you take it?
If it’s a service you’ve never before tried or a product you’ve never before bought, the answer is “NO! Don’t take the discount!”
After you pay, you might find out that Tom’s customer support is horrible and you’re not able to get answer to your questions. Maybe the product has a major flaw that makes it impossible for you to use. Maybe you simply lose interest.
In this case, there is no $200 saving; there is a $2,000 loss on a product you can’t use.
The worst mistake is not checking the cancellation/refund policy carefully ahead of time. Discounted prices are almost always disclaimed with fine-print that says “no refunds”.
Always check the cancellation policy before you grab a “big discount”.


Another saying you might have heard is, “A bird in the hand is worth two in the bush”.
This is an important business principle. Money that you have in your hands right now has more value to you than money you “theoretically” save (or make) down the line.
Opportunity Cost is a measurement of how much you lose in other buying opportunities when your cash-money is tied up.
Consider this scenario.
Suppose you’re about to buy an important membership that costs $4,000/year or $400/month. Simple math says you save $800 when you take the yearly option. Should you take it?
Businesses tell you the yearly saving so you’ll compare oranges to apples. You compare how much you save over a year to the value of the saving to you right now. To undo their mischief, divide the yearly saving over 12 months and find out how much you save today. This is what counts.
In the example, if you compare what you save TODAY…you could save $66 or save $3,600.
Which do you choose?
Do you have more use for $3,600 or $66 today?
Perhaps you’d like to pay off part of your mortgage some other loan (and lower interest charges to your lender). Perhaps you pay another expense. Perhaps you purchase more equipment. Or, perhaps you try an alternative membership and compare the two.
Remember, once the $4,000 leaves your bank account, it’s gone.
Just because there’s a discount you don’t have to always take it—discounts cost opportunity. You have a choice where you spend your money. Choose wisely.


A gym owner once told me that when a company entices you with a really attractive offer for lump sum upfront payment, it may be because that company has cash flow problems.
In other words, the business needs cash.
Many of the businesses that perform launch after launch and give deal after deal are struggling to stay afloat. If the company you are dealing with is indeed in financial trouble, their expenses outweigh their revenue on a regular basis.
The company is likely to declare bankruptcy, shut down, and disappear with any lump sum you give them.
In general, you can minimise your risk by taking installment options.
Don’t be tempted by big or frequent discounts. Always check the credibility of the company that you are dealing with. Does the company frequently launch products and services to you? Are they very aggressive in their promotions?
Is the company certified by an authority known in the industry? Has the company been in existence for a reasonable period of time? Do your due diligence.

Minimise Your Risk

There are many more reasons why a discount deal may be more costly than the alternative—for you.
In general, when in doubt choose to minimise your risk by taking the safer option; even if it appears to cost slightly more money. Remember that businesses specialise in coming up with tactics to appeal to your greed and tempt you to spend more money than you’re willing.
The discount is nothing but a temptation to make you spend 🙂

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