That’s right – cable TV is a want. You would have a very hard time winning a debate on the argument that satellite or cable TV is a need.
However, most of us have justified the expense. Partly, because it comes conveniently wrapped in a monthly payment plan.
According to CNN, the average cable bill is $75 per month and has been rising by 5% annually, outpacing inflation due to content provider negotiations for more money per subscriber (which providers then pass along to customers).
Taking a look at Comcast’s prices,
- Digital starter, their lowest-tier digital cable plan costs $60.98 per month
- Adding HD DVR is another $15.95 per month
- Total: $76.93 (before taxes)
That may not seem like a lot, but when you compound it over many years and look at the opportunity cost, you start to see just how expensive cable TV really is…
The Lifetime Cost of Cable
What if, instead of purchasing cable, you were to get rid of cable and add your monthly savings to your investment portfolio?
What would you theoretically be missing out on, or paying over your lifetime?
To calculate, let’s assume:
- You start paying for cable at age 23.
- The starting price is the average price quoted earlier, $75, and there is inflation on the price of 5% annually (real cable inflation percentage).
- You continue paying for cable until the age of 80.
- We are using after tax dollars (which is what you pay for cable) that grow tax free in a Roth IRA.
We’ll then figure out the lifetime cost of cable at different investment return levels using the AARP investment calculator:
- 4%: $634,970
- 6%: $1,102,950
- 8%: $2,081,549
- 10%: $4,209,990
We’re looking at anywhere from $634K on the low end to $4.2 million on the high end! Considering that the average retirement savings per household in the United States is $18,000, the alarm bells should be going off.
This, of course, does not take into account that the average American watches 81 hours of TV per month, 972 hours per year, or over 55,000 hours per the 57 years we used in this post. What additional return in skill development, work, networking, or exercising could you gain from having an another 55,000 hours of life?
That’s only one common expense. Kind of scary.
- Does this view of cable costs change your outlook on justifying it as an expense?
- How much are you paying per month for cable?
- Why do you keep paying for cable?