Free service or subscription: how to calculate the annual cost

Short answer: add up the annual cost of each option (the subscription price times twelve, or the annual price), add indirect costs, such as add-ons, limits that force you to pay for other things and lost time, and compare it with the value the service brings. The best is not always the cheapest.

What helps before you start

• Knowing how often you use the service.
• A list of the features you really need.
• The current prices for each option, on the monthly and annual plans.

Steps

1. Calculate the subscription cost. Multiply the monthly price by twelve, or use the annual plan price, which is usually lower per month. Remember taxes and fees.
2. Identify the cost of the free option. Many free services have limits: space, number of uses, ads, locked features. If you have to buy something extra to work around them, add that amount.
3. Consider the cost in data and attention. Free services may be funded by ads or data use. This does not enter the money calculation, but it weighs on the decision.
4. Consider time. If the free version requires more steps or has fewer features, estimate how much time that takes per month.
5. Compare with value. How much does the service save or earn you? If a subscription of 20 a month saves two hours of work, it is worth revisiting the math.
6. Review by period. Do the calculation for one year and, if possible, two, considering price changes.

An example

Larissa uses an image editor. The free version has a watermark and a file limit, and she has already paid for an extra service to export. The subscription costs 30 a month, or 300 a year. Adding what she spends on extras, the free option ended up costing close to 360 a year and taking more time. She decided to take the annual plan. The values are illustrative.

Common mistakes

• Comparing only the monthly price: the annual price can change the math.
• Forgetting extras: add-ons and limits increase the cost.
• Subscribing without using: the cheapest service is the one you actually use.
• Not reviewing next year: prices and needs change.

Next step

Pick a service you pay for or use for free and do the annual math. If the difference is large, it is worth switching.