Financial education can change how you handle your money. This way, you could learn the importance of saving and investing.
One of the things you might learn is the concept of a repeat/recurrence economy. Sounds fancy, right?
Well, even if you’re not aware of the meaning of the term itself, you’ve probably run into it.
Let’s take streaming subscriptions for example. Be it Netflix, Disney Plus, or software subscriptions. These are all services you’re paying for on a time-defined basis. And it’s pretty easy to lose track of such payments.
If you want to understand how recurring payments, such as streaming subscriptions, affect your investments, this article will provide more information.
What are recurring payments?
Let’s start by talking about recurring payments.
It’s highly likely that you pay for a recurring service of sorts. This often applies to listening to music or watching movies and series. Payment for these types of services is usually done through plans, subscriptions, or monthly fees.
When you enter into an agreement like this, it typically involves committing to making recurring payments. And that goes for everything, such as your electricity bill, IPTU, and internet plans. These are payments that occur periodically.
However, this is just the tip of the iceberg, and there are loads more to learn.
What is a recurrence economy?
Recurrence economy is often referred to as the new global market phenomenon.
Movie streaming is a significant sector in the recurring economy and companies within this sector are considered a reference point due to their impact on revolutionizing the market.
Before streaming services, people went to the rental store to pick up DVDs, with only a few days to return them.
Trust me, it was a pain in the a**…
These platforms caused a revolution, changing the way companies relate to customers. It also helped shape the connection between the customer and the company.
Not to mention the convenience of doing everything from your cell phone, contracting, paying, playing content, and everything else. These are all the main characteristics of services that use the recurring payment model.
Types of companies that use the recurrence economy model
We singled out streaming for its popularity and business strength. But other companies use the recurring model as well!
– subscription gyms, which offer annual or half-yearly plans;
– educational institutions, schools, universities, and courses that charge monthly fees from students;
– parking lots that offer monthly packages;
– book or wine clubs, in which the subscriber receives a package of products in their mailbox every month;
– other monthly services, such as health plans and insurance.
There are a bunch of these services, but we still haven’t talked about investments and how this business model affects them!
You may want to keep reading if you feel like learning more about that.
How does the recurrence economy work in investments?
Well, after you’ve understood what the recurrence economy is, let’s move on to the next topic, which is investments.
Every investment also uses this exact business model. Think about it!
A definition of recurring investment is the attitude of making frequent contributions to a portfolio of assets. And it doesn’t matter what type of investment it is, as it can be CDBs and Debentures, shares, or EOBI.
As long as the investor continues making new investments, the amount applied is accumulated with the sum of the other contributions, and interest is added.
Therefore, the value continues to increase over time until the investor chooses to liquidate the asset.
The recurrence of investments causes your equity to increase in an orderly way with the power of compound interest (interest on interest). The more discipline and financial organization you have, the more you can benefit from a recurring model.
Why is it important to keep recurring?
A private pension plan is a good way to demonstrate exactly why this is so important.
When you take out a pension plan, you can schedule a monthly investment via automatic debit or bank slip. This makes it a recurring payment.
But what do you get out of it?
What’s important is to take things one step at a time. By gathering experience in the market, you’re learning to collect money one tiny bit at a time.
This makes the investment more accessible to different audiences and profiles. Over time, with compound interest, your investment might grow exponentially.