Sometimes I read an advice column that advises people to save money by avoiding general or monthly fees in favor of a more pay-as-you-go approach. So, for example, as I understand it a lot of people who sign up for a gym at X dollars per month then use the gym less often than they expected, to the extent that they would have been better off financially paying per visit or something like that.
I think that often this is bad advice. It assumes several things that are certainly or maybe false: that the number of times you go to the gym doesn't depend on how you pay, that your goal is to get as much gym time for as few dollars as possible, and that you are a rational decision maker.
If you drop all those assumptions, you get a different perspective on the problem. What if you articulate your main goal as working out as much as possible without spending more than X dollars? Suddenly the monthly payment system starts to look pretty good, even if you could have saved money by doing it the other way.
The reason this difference arises, I think, is that having paid a monthly fee incentivizes you to work out, while paying per use incentivizes you not to work out. What's interesting about this is that strictly speaking, there's a sense in which being incentivized to work out by having paid a monthly fee is irrational. And yet, it's such a common and familiar feeling. And you can use it to your advantage.
The reason it's seen as irrational has to do with the "sunk cost" fallacy. According to one strand of decision-making theory, the only factors you should consider when evaluating what to do are factors that actually come into play in your decision. When it's time to decide whether to go to the gym or stay on the sofa, this system says, the only things you should be considering are the options you have and how well those options satisfy your current needs and desires. The fact that you paid a non-recoverable fee for a gym membership is irrelevant, because you can't change it: it's the same no matter what you choose.
But we know from behavioral economics and from life that this isn't how it works. Of course having paid a fixed fee, you feel you should go to the gym -- to "get your money's worth," whatever that means. You pay a fee and you don't use the gym, you feel like an idiot. So you feel you should get to the gym. The pay-per-use is almost the opposite, encouraging you to think, again, on every occasion, are these dollars maximally satisfying my happiness and well-being when I spend them on the gym? Or would ice cream be even better?
Of course, if you pay a flat fee, you may pay more than you would have paid per-use. But you may also work out more than you would have worked out had you paid-per-visit. So it really depends on what your goal is. If your goal is to go to the gym more, even though it costs a bit extra per time, then the flat fee makes total sense. You can think of it like a self-nudge: you structure your own environment to exploit your own systematic irrationalities for your own gain. A nudge without the creepier effects of being nudged by the other people, because you're doing the nudging yourself.
I do this all the time -- structuring my own environment to make my impulses draw me toward a more desirable rather than a less desirable conclusion. And I can tell you: there's a lot to be said for seeing the emotive force aspect of your self and the logical structure aspect of yourself as cooperating friends, rather than enemies at war.