Category Archives: Intelligent Consumerism

Travel Hacking: Round Five

The year is quickly coming to an end.  It has been an exciting year for me.  From a financial standpoint, it was my first year as a dedicated travel hacker.  Travel hacking is a great way for people to be rewarded for spending money in the form of lucrative sign-on bonuses.  Most of these bonuses are paid in the form of points.

In the past, I would just use my bank point’s card.  That would provide me with about $500 back at the end of the year.  While it was nice to use that extra cash for holiday gifts, it was peanuts compared to what is available if you are an active travel hacker.

Travel hacking is not for everyone.  If you have bad credit, this series is not for you.  To be a successful travel hacker, you have to have good credit (above 750 credit score), be well organized, and be able to pay your credit card balance in full every month.  If the cardholder cannot strictly follow those rules, the credit card company will hack them in the form of high-interest rates.

The last card that I opened in 2018 was the Capital One Spark Miles for Business.  The main focus of my travel hacking is to continue to stay within the Chase 5/24 Rule.  The Capital One Spark Miles for Business is a business card and does not count towards the 5/24 rule.  It is a good card to earn points if you are close to exceeding the Chase 5/24 rule. 

The Capital One Spark Miles for Business Card offers some nice rewards.  Like with all of my previous cards, the main reason why I opened this card was for the sign-on bonus.  This card offers a one-time bonus of 50,000 miles once a cardholder spends $4,500 within 3 months from opening the card.

Redeeming the points is a simple process.  Capital One cardholders can book their travel directly on the Capital One website.  The other option is to call and do so over the phone.  Their customer service department was very helpful when I had to call them with a question.

At this point, I have enough points earned to cover all of my planned trips that are coming up in 2019.  I cover those upcoming trips in my post Travel Hacking: Round Four. My plan for these points is to use them to pay for my hotel when I attend FinCon19 in Washington D.C. next September.  Washington D.C. is only about 190 miles from where I live, so I will be driving to that event.  Otherwise, I would have used these points for airfare.

The Capital One Spark Miles for Business Card has many other benefits for cardholders.  A big selling point for me beyond the sign-on bonus is that there is a $0 introductory fee for the first year.  After that, the annual fee is just $95 per year.

For every $1 in spending, cardholders earn 2 miles.  There are not any limits on the number of miles that can be earned.  The miles will not expire as long as the cardholder keeps the card open.

While I am using the card for travel, there are other options for redeeming points.  Cardholders have the option of receiving cash back.  There is also the option to redeem points for gift cards.  Like with most premium rewards cards, the sweet spot in terms of value is when the points are redeemed for travel.

The Capital One Spark Miles for Business Card does not come with foreign transaction fees.  That is a wonderful benefit for those who travel internationally.  Cardholders can fly on any airline.  There are not any blackout dates.  Points can be redeemed for flights during the busy holiday seasons.  There are also not any restrictions on seating.  

If you are more into earning cash back instead of points, Capital One has a sister card for those people.  The Capital One Sparke Cash for Business is similar to the Miles Card, but instead of having a sign-on bonus of 50,000 points, the Cash Card has a sign-on bonus of $500 after $4,500 in spend within the first three months.  This is a card that I am planning on opening in the future.

Since I started travel hacking, I have truly come to believe that if I am going to spend money, I want to be rewarded.  My wife and I enjoy traveling.  We normally take at least two trips per year.  Travel hacking allows us to travel for free. 

If you are super frugal like me and are mature about credit, travel hacking might be a great option for you too.  I see it as low hanging fruit in the world for personal finance.  I take the money that I otherwise would spend on travel and add it to savings.

If you are interested in reading about my first year as a travel hacker, start with Travel Hacking: Round One.  That is the first post in this series and a good place to start.  The next post in this series will be available in the coming months in Travel Hacking: Round Six.

Do you take advantage of travel rewards cards?  I have only been travel hacking for one year and am just a beginner.  There is a whole universe of optimizing the value of these points.  If you have experience with the Capital One Business Cards or other premium rewards cards, please share your experience in the comments section below.

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Opportunity Costs

When it comes to getting the most value for your money, it makes sense to measure the opportunity costs linked to where your money is being dispensed.  Opportunity costs are based on a theory from microeconomics.  It is based on making decisions that provide the best value for your money.

Many economic theories are just theories to the average person.  They are discussed in the classroom or in the financial media, but the average individual investor does not receive too much practical application from most of these theories.  They can be discussed, but not really applied to everyday life.  The theory of opportunity costs does not fall into the category of academic mumbo-jumbo.   It can easily be applied to the management of your personal finances.  Paying attention to opportunity costs can totally change how you think about money.

Total Cost

What do you think about before you buy something?  Most people only look at the direct cost.  When most people decide to buy something, they just look in their wallet to see if they have enough money to pay for it.  Some people don’t think at all and make the purchase with credit and just take on more debt to make the purchase. 

The only time people tend to give any serious thought to what they are buying is when they are making major purchases.  A good example of this is when someone decides to purchase a house.  The potential home buyer will have their credit score checked, shop for the best interest rate, analyze how much they can afford in monthly payments, as well as many other considerations. 

This type of thinking is not the most prudent form of financial management.  Managing the finances around major purchases is important.  Getting the big purchases right can make or break your financial situation. 

Death from 1,000 cuts

The lesser financial decisions are also important.  Not thinking about day-to-day spending can equally jeopardize a financial plan.  The little costs add up quickly if a person is not mindful about their spending.  They are like death from 1,000 cuts.

It is easy for small amounts of spending to get out of control.  A couple of lunches out per week can add up to $100.  Watching a movie at the cinema with snacks can cost $25 per person.  Taking your kids to an indoor water park on the weekends can add up to hundreds of dollars.  Without being mindful, the wasted spend can add up quickly and so do the wasted opportunities for that money to be put to use in a more prudent way.

When money is spent without thought, that is a sure way to not get the most value for the energy that you are exerting to earn it.  To be successful with your personal finances, a consumer needs to be intentional.  Otherwise, they are missing out on maximizing the opportunities that are available.   

Always run the numbers

When making a financial decision, opportunity costs are based on weighing the pros and cons of how money is utilized.  An example would be when you decide to buy a new car.  When you establish the budget do you decide on buying a $30,000 car or a $20,000 car?  If you decide on the $20,000 car, the additional $10,000 that you decided not to spend can be used to pay off debt or to be added to savings?  Buying the $30,000 car would have $10,000 in wasted opportunity costs.

Being mindful of opportunity costs is a great way to maximize the value of your money.  If you are trying to reach financial independence, getting the most bang for your buck needs to be front and center whenever you must spend money.  By always evaluating the opportunity cost of a purchase helps to develop a savers mindset.

Investing

Tracking opportunity costs also have a role when it comes to managing investments.  There is an opportunity cost involved with being too conservative with your selection of investments.  If an investor kept all their savings in a money market account from 2007 until 2017, they would have earned less than 1%.  If that investor put their money in an S&P 500 index fund, they would have earned almost 10% during that same time period.  If an investor was not comfortable investing 100% in equities and wanted to invest in a more moderate allocation, they would have still earned 7.3% in the Vanguard Star Fund (VGSTX) that has an allocation of 60% in stocks and 40% in bonds.

Conclusion

If reaching financial independence is your goal, measuring the opportunity costs of all your purchases will help you get there.  After you start to practice measuring the opportunity cost of every financial transaction for some time, it becomes like second nature.  It is useful no matter where you are in the journey toward financial independence.  If you are new to this way of life and working on paying off debt, it will help to curb your spending.  If you are in the saving and investing phase, being mindful of opportunity costs will help you to free up more money to be used to build wealth.  If you are entering retirement, keeping track of opportunity costs will help you to spend less and preserve your wealth.

Whenever I must spend money, I think about the opportunity cost tied to that purchase.  I credit that thought process as helping to establish a high savings rate.  It is a fun mental game to play.  By being aware of how I am spending my money, it helps me to not miss out on all the better opportunities that are available for my money.

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Travel Hacking: Round Four

Time goes by fast when you are having fun.  It seems to go by faster when you are having fun travel hacking.  This is my fourth post on travel hacking in 2018.

In Travel Hacking: Round Three, I wrote about the American Express Business Gold Card. This post is a little bit different.  In round four, I am going to cover two cards.  As you will see, there is a special reason for that.

The two cards that I recently hacked are two of the Chase Southwest Airlines cards.  The first card I opened was the Chase Southwest Rapid Rewards Premier Business Credit Card.  The second card was the Chase Southwest Rapid Rewards Premier Credit Card.

The Chase Southwest Rapid Rewards Premier Business Credit Card has a generous sign-on bonus.  This card allows cardholders to earn 60,000 points when you spend $3,000 in the first three months.  Some other benefits include 6,000 points every year on the card member’s anniversary.  There is a $99 annual fee that will appear on the first billing statement.  Cardholders will earn 2 points for every $1 in spend on Southwest and Rapid Rewards hotel and car rental partner purchases.  Other purchases will allow cardholders to earn 1 point for every $1 in spending.  Please keep in mind that this card cannot be opened if the applicant has exceeded the Chase 5/24 Rule.

The Chase Southwest Rapid Rewards Premier Credit Card also has a great sign on bonus.  The Southwest Rapid Rewards Premier Credit card has a sign on bonus of 40,000 points based on spending $1,000 in the first three months.  This card has a $69 annual fee that is applied to the first billing statement.  Additional points are accrued in the same way as the Premier Business Credit Card.  Cardholders who keep this card open for one year will receive 3,000 points on their one year anniversary.

The reason that I opened these two cards together was to earn the sought-after Southwest Airlines Companion Pass.  The Southwest Airlines Companion Pass is obtained when a cardholder reaches 110,000 in Rapid Rewards points.  Since I earned 100,000 in sign on bonus points, the other 10,000 had to be earned by way of additional spending.

Many travel reward experts refer to the Southwest Companion Pass as the Holy Grail of Travel Hacking.  This top-level status is the highest tier that a Southwest Rapid Rewards loyalty program member can achieve.  The required spend to reach this status is a challenge for some cardholders.

What makes the Companion Pass so awesome?  The Companion Pass allows cardholders to book an additional ticket for free when they book a flight. The only additional costs that are due are taxes and fees.

There are no limits on the number of flights that a cardholder can use the Companion Pass for.  The Companion Pass is valid for the year that it is earned as well as the following year.  The cardholder can use accrued points to book their flight or pay for their flight.

For me, I travel with my wife.  The Companion Pass is an ideal program for both of us.  We will be using both our points and companion pass in 2019.

In 2019, I have ambitious goals for my travel hacking. My wife and I normally only take one or two vacations per year.  My plan is to get at least three flights out of my 110,000 points and Companion Pass.  That should not be an issue based on the total amount of points that I have.

Our last two big vacations were to Europe.  Next year, I want to stay in the USA and take a trip out to the West Coast.  We were talking about going to California but decided on taking a trip to Seattle, Washington.  We love California, but both of us have been there a few times.  We have never been to Seattle and my wife just binged Gray’s Anatomy, so Seattle it is.  While in Seattle, we are planning on taking a trip to Mount Rainier as well as visiting Victoria, British Columbia. 

The second tip that we are going to take in 2019 will be to South Bend, Indiana in the fall.  Why South Bend, Indiana?  The same reason why most people go to South Bend, Indiana in the fall, to watch a Notre Dame Football game.  I have not decided on what game, but it will most likely be one of their first home games.  Southwest Airlines does not fly into South Bend, Indiana.  We are planning on Flying out of Philadelphia and flying into Chicago, Illinois. South Bend from Chicago is less than a two-hour drive.  We will fly in on Friday and fly home on Sunday morning.

The third trip that I am planning on taking advantage of the Companion Pass is for is to visit Key West for some tarpon fishing.  The only difference is that my wife will not be attending.  A nice feature of the Companion Pass is that it is not limited to one person.  It can be changed up to three times per year.  My friend Tim is going to be accompanying me on this adventure.  We will be flying out of Newark to Miami and will drive to Key West.  Tim was the guy who set-up my blog, so bringing him with me is my thank you gift to him.

Next year is shaping up to be a fun year for traveling.  While traveling is fun, it is even more exciting when you are travel hacking and traveling for free.  If you have a high credit score and are responsible for paying off your balance every month, travel hacking is a great way to travel for free.

Thanks for taking the time to read about my fourth round of travel hacking.  If you want to learn more about travel hacking, keep an eye out for Travel Hacking: Round Five.  It will be published in the next few months.

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Travel Hacking: Round Three

This post is the third post in my new series on Travel Hacking.  In Travel Hacking: Round Two, I was expecting the third round to be about using the Chase Southwest Rapid Rewards Card.  Life happened and I had to amend those plans.

The change in plans was due to an unexpected expense that recently occurred.  When you own a house, unexpected bills occur.  When you own an older house, they tend to pop up more frequently because things get old, wear out, and break.

These unexpected repairs always seem to occur at inopportune times.  Our most recent major repair came when we returned from vacation.  We came home and noticed that we did not have hot water.

The lack of hot water was due to our oil furnace not working.  It was installed in 1992 and I knew it was on its last leg.  Over the years, I replaced valves that wore out, but I was aware that the boiler was getting old and that I was going to have to buy a new furnace soon.

The benefit of having an emergency fund is to cover unexpected expenses.  Some people debate that, but I am not one to split hairs about when an emergency fund should be used.  In my opinion, if your house does not have heat or hot water, that is an emergency. 

The cost to replace my furnace was $6,300.  Talk about tossing six grand out the window.  The benefit of my new furnace is that it is more efficient.  I swapped out a 150 BTU furnace for a smaller 118 BTU furnace.  I live in a rural area, so switching to a lower cost heating option like natural gas is not available. 

The cash for the repair was sitting in the bank.  There was not any panic about this repair.  I just did not want to spend that much money without being rewarded. 

The next set of credit cards that I was planning on using were the Chase Southwest Rapid Rewards Card and the Southwest Rapid Rewards Premier Business Credit Card.  Those two cards are set-up for all of my household bills.  It is forecasted that I will have enough points to earn the sought-after companion pass soon.

Since I had this large unexpected bill, I wanted to pay for it on a premium credit card.  This single purchase was large enough to cover more than the required three month’s worth of spending to qualify for bonus points on a top card.  Most of these premium cards reward bonus points are earned when a new cardholder spends $5,000 in three months.  I was more than covered.

Another aspect that I had to consider was that I am following a plan similar to the Chase Gauntlet that was made popular by the guys over at the ChooseFI Podcast.  As part of the Chase Gauntlet, the Chase 5/24 rule is a major aspect.  The Chase 5/24 rule restricts people from opening fewer than 5 credit cards in the past 24 months.

The way that I was able to open another card that did not apply to the Chase 5/24 rule was to open a business card.  I was able to open a business card because of this blog.  It was created as a business.

The business card that I decided to open was the American Express Business Gold Card.  This card had a $0 introductory annual fee for the first year and then $175 per year after that.  The welcome offer was 50,000 points with $5,000 of qualifying spend in 3-months (I had more than that with one purchase).

The American Express Business Gold Card had impressive featured benefits.  Cardholders have many options to earn 3X points.  3X points can be earned when flights are purchased directly from airlines, on advertising with select media, at U.S. gas stations, U.S. purchases for shipping, and other business expenses including U.S. computer-based purchases from specific providers. 1X points are earned on every other purchase.

Premium Roadside Assistance is a great benefit for cardholders.  I will not have to renew my AAA membership this year ($100 in my pocket).  The American Express Business Gold Card offers roadside assistance in case of a breakdown or flat time.  They will pay for emergency services up to four times per year.  They will even come to your home if it is for a jumpstart or flat time.

This card includes some nice travel benefits.  It includes car rental and damage insurance.  You can receive baggage insurance.  Travel insurance is a benefit.  There is also a Global Assist Hotline that provides medical, legal, financial, and other emergency assistance services when a cardholder travels more than 100 miles from home.

The American Express Business Gold Card offers shopping benefits.  Cardholders can shop with confidence when they use this credit card.  Some benefits shoppers receive are extended warranties on eligible purchases, purchase protection, return protection, and entertainment access for presale tickets.

While all of those benefits are nice, the main reason that I signed up for the card was to earn points.  How much are those 50,000 points worth?  According to the Points Guy, they are worth about $950 in travel rewards.  Those points will come in handy when it is time to book next year’s vacation. 

As a personal finance blogger, I enjoy saving money and building wealth more than spending money.  When I do spend money, I like to do so on things that I enjoy.  While I do enjoy hot showers and a warm house in winter, buying a furnace is not an enjoyable purchase.  Being able to score over $900 in points reduced the pain of having to replace my furnace.

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Travel Hacking: Round Two

Travel hacking is a great way to travel for free.  Travel Hacking is the practice of opening premium rewards credit cards to capture the generous initial bonus points that these credit cards offer to new cardholders.  The hack is based on getting the bonus points, closing the card before the annual fee is due, and never paying interest or carrying a monthly balance.

I first learned about travel hacking from reading The Millionaire Educator.  It sounded interesting.  It was not until I attended a Rockstar Finance Meet-Up in New York City that I really got turned on to this practice of traveling for free.

In my post Travel Hacking: Round One, I wrote about my first experience with Travel Hacking.  The first card that my wife and I opened was the Chase Sapphire Preferred Card.  We used the bonus points from this card to buy two round-trip tickets from Newark, NJ to Dublin, Ireland.

As the result of my first experience, I have decided that travel hacking will be a major part of my financial plan.  My wife and I take at least two vacations per year.  Even though I am frugal, we still have the monthly household spending to earn enough points to pay for two trips per year.

The second card that I opened was the Chase Preferred Ink Business Card.  Unlike the Chase Sapphire, the Chase Preferred Ink Business Card is a business card.  In order to qualify, having a small business like a blog or an Etsy store would qualify.  For sole proprietors who do not have a tax id, they could use their Social Security number when signing up for business credit cards.

Another benefit that the Chase Preferred Ink Business Card offers is that it does not count against the  Chase 5/24 rule that Chase has for opening new cards.  Chase only allows individuals to open 5 cards in a 24 month period from any issuing bank, you will not be approved for new Chase credit card.  That also applies for anyone who is an authorized user.  Since it is a business card, it is not counted as being part of the 5/24 rule.

The Chase Preferred Ink Business card offers a very rich benefits program.  After the cardholder spends $5,000 in 3 months, they receive 80,000 bonus points.  When you redeem those points through Chase Ultimate Rewards, 80,000 points are equal to about $1,000 towards travel.

When you open the Chase Preferred Ink Business Card, there is a $95 annual fee.  Unlike the Chase Sapphire Preferred card, that fee is not waved for the first year.  Based on the value of those 80,000 travel points, it is easy to justify the $95 for one year.

On additional spend, cardholders earn 3 points for every $1 in spending.  The 3 points for every $1 in money spent is good for up to the first $150,000 charged.  After that, cardholders earn 1 point for every $1 in spending.

My wife and I used this card for all of our monthly expenses.  We try to put all of our monthly reoccurring bills on the card.  We also use it when we go out to eat at a restaurant or fill up our car at the gas station.  It took us two months to reach the $5,000 in spend to equal the 80,000 points.

So, how did we use these points?  My wife’s birthday is in December.  She does not know it, but I booked a Western Caribbean Cruise.  While going on a cruise is exciting by itself, this cruise departs on December 23rd.  What makes that exciting is that winter is in full swing in Pennsylvania at that point, so we will even appreciate the cruise more.

I wish that I was able to report that I was able to book the cruise for free.  Unfortunately, that was not the case.  Hopefully, I will be able to share a post about taking a free cruise with you in the future.  I have not reached that level of travel hacking success yet.

What I did apply the points towards was our flight.  I have never booked a flight from Pennsylvania to Florida in December.  When I went to book this trip, I was shocked to find out how inflated the prices are this time of year.  After giving it a little bit of thought, it makes sense due to the holiday traffic and snowbirds who are flying south for winter.

The normal cost for a ticket from the Scranton International Airport to Tampa is around $300.  This flight cost $625 per person.  Our flight to Ireland was less expensive.

The total amount of points that were required to cover our two tickets were 112,000 in Chase Points.  At this point, I had 88,000 in chase points from the Chase Preferred Ink Business Card.  My wife and I also had 30,000 in points from our spending on the Chase Sapphire Preferred Card.  By combining the points from the two cards we were able to cover the airfare.

With the remainder of our points, we booked our hotel.  The cruise departs on Sunday, December 23.  We are flying down the day before.  I was surprised, but we were able to pay for one night at a 3-star hotel for only 6,000 points.  That was the only value that I have found so far on this trip.

Even though the flight was expensive, it ended up being free for us since we took advantage of our points from the Chase Preferred Ink Business Card.  Otherwise, we would have had to shell out over $1,200 for a 3-hour flight from Pennsylvania to Tampa, Florida.  It might seem expensive, but I am sure that I will be happy to be cruising the Western Caribbean instead of dealing with at best a wintery mix at home in Pennsylvania.

I am excited about the money that I will be saving on travel as the result of travel hacking.  Even though it sounds fun, be warned that travel hacking is not for everyone.  Travel hacking is only for those who are ridged and hyper-focused when it comes to managing their personal finances.

If you struggle with paying off your credit card bills every month, travel hacking is not for you.  If you do not have enough in normal monthly spend, travel hacking is not for you.  If you have to try to generate artificial spend to try to earn points, travel hacking is not for you.

Please keep your eye out for my next post in this series on travel hacking.  The next post will be about the Chase Southwest Rapid Rewards Premier Business Card.  I look forward to sharing about how I am getting free flights and to share with you about where we are planning on visiting next.

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