Americans’ infatuation with technology such as cellphones, cable TV, and satellite radio isn’t helping them fatten their bank accounts, according to a survey conducted for the AICPA by Harris Interactive for National Financial Literacy Month.
Fifty-six percent of U.S. adults said they believe that technology has made it easier to spend money, and just 3% said it has made it easier to save. Thirty-seven percent said technology has made it easier to both spend and save, according to the national telephone poll, which consisted of 1,005 responses.
The survey found that Americans who subscribe to digital services spend an average of $166 monthly for cable TV, home internet access, mobile phone service, and digital subscriptions such as satellite radio or streaming video. That’s the equivalent of 17% of their average monthly rent or mortgage payment.
Respondents who download songs, mobile applications, and other products spend an additional $38 per month, on average, according to the survey.
Jordan Amin, chairman of the National CPA Financial Literacy Commission, said that in some respects, it’s difficult for Americans to discern between technology expenditures that are essential and those that are discretionary.
“Technology has become a necessity and a luxury all combined in one,” Amin said. “For instance, the smartphone—a cellphone really is a necessity, especially in business these days … to get your email and have people contact you all the time. But when you mix that with the ability to download music and ringtones and movies and FaceTime with your children and it blurs the lines between the necessity of it and the luxury of it.”
Forty-one percent of Americans surveyed said they download and pay for digital products or services. Those who reported downloading the following types of content said they purchase, on average, five digital songs, five movies or TV shows, two mobile apps, two games, and two e-books each month.
Amin said the ease with which digital items are purchased can lead consumers to lose track of how much they’re spending. He said that when people go to a store and pay cash for two CDs and a book, it is more difficult to forget how much they are spending.
“If you go to the App Store, it’s hooked up to a credit card and an account,” Amin said. “You buy it, and there’s no balance. There’s nothing to sign. It takes 12 seconds. You almost forget that there’s a monetary purchase behind it.”
The National CPA Financial Literacy Commission offers the following advice on managing digital expenses:
- Set a budget. Decide how much you are willing to spend each month on digital services, apps, and content. If you’re not sure where to start, look at how much you have spent on technology purchases in previous months and how that compares with your overall spending and saving.
- Set up an account. It can be difficult to keep track of spending because many digital purchases are automatically drafted from bank accounts or charged to credit cards. Setting up a separate checking account or credit card account with a low limit for digital purchases can help you keep track of what you spend. You can set email or text message alerts to inform you when your balance is near your budgeted threshold. If you use a credit card, pay off the balance each month.
- Evaluate. Regularly evaluate your spending on digital products, especially subscription services with recurring fees. Make sure you are using the services enough to justify the expense. Look at spending on technology such as cellphones and internet connections at least yearly to see if there are new features, bundles, or technologies that could lower your total bill.
The survey showed that 69% of adults with annual household incomes of $100,000 or more download and pay for digital products and services. About 28% of adults with incomes of less than $35,000 purchase such technology.
Amin said technology expenditures in some instances have become like recurring payments to health clubs that some people never use.
Cable TV bills, for example, often are loaded with extras for services that rarely get used, he said. “The same thing can be said for cellphone plans and other types of digital things,” Amin said. “Whether it’s your rental movie account, we sign up for something because it seems inexpensive. It seems like a good idea. But is it something we really use, and are we really getting a benefit from it?”
Americans aren’t so attached to their technology that they wouldn’t give it up in a financial pinch. Asked to choose the one action they would take in tight times, 20% said they would give up cable TV, 8% said they would end cellphone services, and 8% said they would stop downloading songs and digital products.
Cutting back on eating out at restaurants, cited by 41%, was the most popular action respondents said they would take during difficult financial times.
“No one is judging people’s spending habits,” Amin said. “What we’re saying is, let’s make sure we’re aware of what we’re spending, we’re getting good value for what we’re spending, and that it fits in with our overall savings plan.”
—Ken Tysiac (firstname.lastname@example.org) is a JofA senior editor.
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