Cash Flow: Keeping Cable TV Optional

The other day a salesman knocked on our door. He was selling satellite systems. He talked about why his product was the best on the market for ten minutes. He showed me how the monthly costs were better than cable for the first 12 months. Finally, he told me they'd install the system for free. Everything pointed to this being a better deal than my current cable.


The biggest question in my mind was, will I have a contract? I can turn my current cable solution on or off whenever I want with no cost. The salesman bounced around on features and savings, but didn't answer my question. Finally, after I asked again, he told me I had to sign a 24 month contract and the early termination fee was $180 for the first 12 months then it went to $60.

I did some quick mental math and came up with the result below.


After 12 months the satellite bill would increase to about the same as my current cable TV. By then I would have saved enough to make an early termination fee a non-issue and my monthly cost would be a wash.

From a long-term financial standpoint, switching was probably the best solution. One of my rules for finance is avoid obligating myself to future payments when possible.

I asked myself the following questions:

1. Are we likely to have cable TV for the next 7.2 months? Most likely.
2. Could I get my cable company to match the satellite offer? Worth a shot.

I took the satellite guy's information and told him I'd call if I decided to switch. Then I called my cable company. Within 10 minutes they reduced my monthly cost by $20. My new breakeven was beyond around 24 months, so I stayed with cable. More importantly, I avoided adding a fixed expense in case I ever need to minimize my monthly cash outflow.

What examples do you have of keeping fixed costs variable and optional?