WP-01 · WORKING PAPER
The Value-to-Cost Ratio: A Unit-Economics Test for Recurring Charges
Sep 2026 · 7 min read · Last reviewed 2026-09-18
01 · Question
Which recurring charges earn their place on the household ledger, and which should be cancelled?
02 · Assumptions
The value of a service to a household can be estimated in dollars per month, even though the estimate is subjective.
Cost is the posted recurring price, taken from the latest statement.
The test is applied per charge, before any bundle-level reasoning.
03 · Method
Define V: the monthly value of the service to the household, in dollars. One line of judgment — what would you pay for it if you had to buy it again today at today's price.
Define C: the monthly cost in dollars. For annual or quarterly plans, divide the price by the number of months it covers.
Compute the ratio VCR = V ÷ C and read it against fixed thresholds.
VCR = V ÷ C
VCR > 1.5 → keep · 1.0 ≤ VCR ≤ 1.5 → downgrade or negotiate · VCR < 1.0 → cancel
04 · Result
Worked example — illustrative household, four recurring charges. All figures are illustrative; none are measured data.
The two cancellations and one downgrade in the example would remove an estimated $63.00 per month from the ledger. The estimate depends entirely on the value inputs: two households scoring the same services can reach different verdicts.
| Service | C ($/mo) | V ($/mo) | VCR | Verdict |
|---|---|---|---|---|
| Streaming (A) | 15.00 | 8.00 | 8 ÷ 15 = 0.53 | Cancel |
| Music (B) | 10.99 | 12.00 | 12 ÷ 10.99 = 1.09 | Downgrade or negotiate |
| Cloud storage (C) | 2.99 | 6.00 | 6 ÷ 2.99 = 2.01 | Keep |
| Gym (D) | 45.00 | 30.00 | 30 ÷ 45 = 0.67 | Cancel |
Monthly cost, all four: 15.00 + 10.99 + 2.99 + 45.00 = 73.98
Cancel A and D: 15.00 + 45.00 = 60.00 per month → 60.00 × 12 = 720.00 per year
Downgrade B to the 7.99 tier: 10.99 − 7.99 = 3.00 per month → 3.00 × 12 = 36.00 per year
Estimated potential total: 60.00 + 3.00 = 63.00 per month → 63.00 × 12 = 756.00 per year
05 · Limitations
V is self-assessed. The model does not observe usage, so a service used nightly and one forgotten last year are scored only as honestly as the household scores them.
The thresholds (1.5 and 1.0) are conventions of this model, not empirical findings.
The test is per charge. It does not price bundles, family plans, or switching costs.
Results are estimates. Actual savings vary and are not guaranteed.
06 · Decision rule
“If you would not buy it again today at today's price, cancel it.”
07 · Tool
Model M-01 below computes the ratio in the browser. The member portal scores every recurring charge with the same formula.
Last reviewed 2026-09-18. Corrections are logged in the corrections log.
Report an error: sgk@scgk.com. Educational content, not financial advice.